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Unit 2: Residential Status and Taxation

business or profession, will not be deemed to accrue or arise in India. Thus, if a non- Notes
resident ‘A’ borrows money from a non-resident ‘13’ and invests the same in shares
of an Indian company, interest payable by ‘A’ to ‘13’ will not be deemed to accrue or
arise in India.
7. Royalty: Royalty will be deemed to accrue or arise in India when it is payable by:
(i) the Government; or
(ii) a person who is a resident in India except in cases where it is payable for the transfer
of any right or the use of any property or information or for the utilisation of services
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
(iii) a non-resident only when the royalty is payable in respect of any right, property or
information used or services utilised for purposes of a business or profession carried
on in India or for the purposes of making or earning any income from any source in
India.
Lump sum royalty payments made by a resident for the transfer of all or any rights
including the granting of a license in respect of computer software supplied by a
non-resident manufacturer along with computer hardware under any scheme approved by
the Government under the Policy on Computer Software Export, Software Development
and Training, 1986 shall not be deemed to accrue or arise in India.

Did u know? Computer software means any computer programme recorded on any
disc, tape, perforated media or other information storage device and includes any such
programme or any customised electronic data.
The term ‘royalty’ means consideration also including any lump sum consideration but
excluding any consideration which would be the income of the recipient chargeable under
the head ‘Capital gains’ for:
(i) the transfer of all or any rights including the granting of license, 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 use or right to use any industrial, commercial or scientific equipment but not
including the amounts referred to in section 441313;
(vi) the transfer of all or any rights including the granting of license, 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
fi lms;
(vii) the rendering of any service in connection with the activities listed above.

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