Income deemed to be accrue or

arise in India
Interest, Royalty, FTS
 Income by way of Interest sec. 9(1) (v)

• Income by way of interest payable by – 

(a) The Government; or
(b) A person who is a resident always except where the interest is paid on debt incurred or
on money borrowed and used for business or profession outside India or for earning any
income from any source outside India, it is not deemed to accrue or arise in India.
Accordingly, where a resident person borrows money outside India but uses the loan
money for earning income in India, interest payable or paid on such borrowing is
deemed to accrue or arise in India.
X(resident of India) - Y(Non-resident)
(c) A person who is non resident borrows money outside India and uses such loan money for
business purpose in India, interest payable on such loan is deemed to accrue or arise in
India.
X(Non-resident) - Y(Non-resident)
• Finance Act, 2015- Explanation has been inserted in Section
9(1)(v)
• Accordingly, in the case of a non-resident, being a person
engaged in the business of banking, any interest payable by the
PE in India of such non-resident to the head office or any PE or
any other part of such non-resident outside India, shall be
deemed to accrue or arise in India.
 Income by way of royalty sec. 9(1) (vi)
• Income by way of royalty payable by – 
(a) The Government; or
(b) A person who is a resident, except where the royalty is payable in respect of any right,
property or information used or services utilised for the purposes of a business or
profession carried on by such person outside India or for the purposes of making or
earning any income from any source outside India; or
X(resident of India) - Y(Non-resident)

(c) A person who is a non-resident, where the royalty is payable in respect of any right,
property or information used or services utilised for the purposes of a business or
profession carried on by such person in India, or for the purposes of making or earning any
income from any source in India .
X(Non-resident) - Y(Non-resident)
• Expln. 2 sec.9(1)(vi) – Royalty means-
• (i) The transfer of all or any rights (including the granting of a licence) in respect of
a patent, invention, model, design, secret formula or process or trade mark or
similar property;
• (ii) The imparting of any information concerning the working of or the use of, a
patent, invention, model, design, secret formula or process or trade mark or
similar property;
• (iii) The use of any patent, invention, model, design, secret formula or process or
trade mark or similar property;
•  (iv) The imparting of any information concerning technical, industrial, commercial
or scientific knowledge, experience or skill;
•  (v) The transfer of all or any rights (including the granting of a licence) in respect
of any copyright, literary, artistic or scientific work including films or video tapes
for use in connection with television or tapes for use in connection with radio
broadcasting, but not including consideration for the sale, distribution or
exhibition of cinematographic films; or
•  (vi) The rendering of any services in connection with the activities referred to in
sub-clauses (i) to (v);
• Qualcomm Incorporated v. ADIT(2013) 153 ITR Delhi.
‘X’ a US resident Company had licensed certain (IP) relating to the manufacture of Code
Division Multiple Access (CDMA) mobile hand sets and network equipment to ‘Y’ (Non-
resident) original equipment manufacturer.
The tax authority alleged that the royalty payment to the extent it related to equipment sold
to customers in India, was taxable in India as the IP that was licensed was utilized in a
business carried in India or was earning income from India sources
- The ITAT ruled that secondary source rule was not applicable in the present case as ‘Y’ did
not carry on a business in India nor did the customers who purchased the equipment
constitute the source of Income .
- Further ITAT ruled that onus on the tax authority to prove that royalty payable by NR for
the purpose of business carried in India
• XYZ In Re(1999) 238ITR 99
Royalty was paid by an NR company to another NR company for use of
trade mark in India by its Indian subsidiary.
The AAR observed that the trade mark in respect of which royalty was
payable was in effect used in India and therefore royalty must be
deemed to be sourced in India under secondary source rule
Google India(P) Ltd. v. Additional CIT(2017) 86 taxmann.com 237 Bang Trib
Assessee Google-India was appointed as a non exclusive authorized distributor of
Adword programs to advertisers in India by Google-Ireland. Google- Ireland’s
Adword program is a continuous targeted advertisement campaign making
available technology to Google India. Assessee had been provided access to IPR,
Google brand features, secret process embeded in Adwords Program as tool of
trade for generation of income. Assessee was also having right, title and interest
over IPR of Google standard advertisement with advertiser, which specifically
empowers assessee to delete, remove/ withdraw advertisement.
- Payment by Assessee to Google-Ireland = Royalty income not business income.
 Sec. 9(1) (vii)Income by way of fees for technical services
• Income by way of fees for technical services payable by – 
• (a) The Government; or

•  (b) A person who is a resident, except where the fees are payable in respect of services utilised in a business
or profession carried on by such person outside India or for the purposes of making or earning any income
from any source outside India; or
X(resident of India) - Y(Non-resident)
•  (c) A person who is a non-resident, where the fees are payable in respect of services utilised in a business or
profession carried on by such person in India or for the purposes of making or earning any income from any
source in India .
X(Non-resident) - Y(Non-resident)
• Provided that nothing contained in this clause shall apply in relation to any income by way of fees for
technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and
approved by the Central Government.
 Meaning of fees for technical services
• Sec.9(1)(vii) Explanation 2 : For the purposes of this
clause, “fees for technical services” means any
consideration (including any lump sum consideration)
for the rendering of any managerial, technical or
consultancy services (including the provision of
services of technical or other personnel) but does
not include consideration for any construction,
assembly, mining or like project undertaken by the
recipient or consideration which would be income of
the recipient chargeable under the head “Salaries”.
• ISRO v. CIT (2011) ITAT. Bangalore.

• Yash Raj Film Pvt. Ltd. V. CIT (2012) ITAT Mumbai.

• Endemol (P) Ltd. In Re (2013)40Taxmann.com 340 ( AAR New Delhi)

• CIT v. Indusind Bank Ltd.(2019) 415 ITR 115 Bom

- Amount paid by assessee to foreign bank for rendering financial services in
order to raise capital abroad through issuance of Global Depository
Receipts.
- Not liable to tax in India
Income not Deemed to Accrue or Arise in India[Expln. 1 to Sec. 9(1) ]

• Purchase of Goods in India by Non-resident for

Export is not Deemed to Accrue or Arise in India.
• Income from collection of News and views in
India by Non-resident for transmission out of
India is not Deemed to Accrue or Arise in India.
• Income from shooting of any Cinematograph
Film by any Non-resident in India is not Deemed
to Accrue or Arise in India.
• Ishikawajama-Harima Heavy Industries Ltd. v. Director of
Income Tax(2007)