The document discusses taxation of intellectual property rights (IPR) under Indian income tax law and GST. Key points include: 1) Income from IPR can be taxed as royalty income, capital gains, or business revenue depending on whether payment is lump sum or recurring. 2) Depreciation and tax deductions are allowed for expenditures related to know-how, copyrights, patents, and trademarks. 3) Double taxation avoidance agreements determine which country can tax different types of IPR income for non-residents. 4) GST applies to licensing and transfers of IPR, with rates of 6-12% depending on the type of intellectual property. The sale of branded goods is taxable

1. TAXATION OF IPR

2. INCOME TAX AND IPR
• Sec 9(1) (vi) provides for taxation of income by way of royalties.
• • Where the transfer is made for a lump sum consideration once for all - will
result in capital gains assessable to tax.
• Where the transfer is made for a limited period as recurring payments, based
on the trading results of the user of the intellectual property - revenue
receipts.

3. • Section 32 (1) (ii) - Depreciation of assets-Depreciations are allowed in the know
how, patents, copyrights, trademarks, licenses, franchises or any other business or
commercial rights of a similar nature, being intangible assets.
• Section 35 AB- Deduction on expenditure on know-how-Any lump sum
consideration for acquiring any know-how for the use of his business, one sixth of
the amount so paid shall be deducted in computing the profits and gains of the
business for that previous year, and the balance amount shall be deducted in equal
installments for each of the five immediately succeeding previous years.
• Section 80 QQA- Income from Copyrights: Any lump sum consideration for the
assignment or grant of any of his interests in the copyright of any book or of
royalties or copyright fees - a deduction to the amount of 25% will be allowed on
such amount.
• Section- 80 RRB - Royalty for patents: Deduction is allowed equal to the whole of
such income or three lakh rupees, whichever is less.

4. INTELLECTUAL PROPERTY AND
DOUBLE TAXATION
AVOIDANCE AGREEMENTS (DTAAS)
• Section 90 of the Income Tax Act has authorized Central Government to enter into DTAA with other
countries.
• The agreements give the right of taxation in respect of the income of the nature of interest, dividend,
royalty, and fees for technical services to the country of residence.
• The source country is given the right of taxation but such taxation in source country has to be limited to the
rates prescribed in the agreement.
• The income is taxable only when a non-resident assessee has a permanent establishment in India.
• Section 44 D and 115 A provide for special methods for calculating income by way of royalties or technical
services of foreign companies and non-resident Indians.
• Section 115 A - Income by way of royalty or fees for technical services is charged at the rate of 20%.

5. CASE STUDY:
• Ishikawajima Harima Heavy Industries Ltd. vs. Director of Income
Tax, Mumbai-Transfer of right or license in international scenario
• Sonata Information Technology Limited v. Addl. CIT- DTAA

6. GST AND IPR
• Intellectual Property is an Intangible right of its owner, which often creates
confusion as to its taxability whenever such right has to be transferred. Section 9 of
the CGST Act, 2017 states that CGST shall be levied on the value determined under
Section 15 of the same act on all Intra-state supply of Goods or Services or both at
such rates notified by the government with GST council’s recommendations.
• ‘Temporary or permanent transfer or permitting the use or enjoyment of
Intellectual Property (IP) right in respect of goods other than Information and
Technology software’ -6%
• Licensing services in relation to various Intellectual property are rated at 12%.

7. TRANSFER OF COPYRIGHT/TRADEMARKS/PATENT VS.
COPYRIGHTED/TRADEMARKED/PATENTED GOODS
• It is to be noted that there is a significant difference between transfer of
‘copyrights’ and that of ‘copyrighted work.’ Transfer of copyrights mean the
transfer of the inherent right of the ownership from the original author to
any other person which attracts a GST rate of 12% (18% in case of
trademarks) whereas, when such literary, dramatic, musical, artistic or film
work is produced into a CD and then sold, it results in the transfer of such
copyrighted work, but the rights of ownership still remains with the original
author. Such transfer attracts a rate mentioned in the HSN code for different
kinds of products.

8. SALE OF ‘BRANDED’ AND
‘UNBRANDED’ GOODS
• Various products like eatables, raw grains like barely, natural honey , paneer,
cereals like oats, pulses etc. if sold loosely without bearing any brand name
and unpackaged, do not attract any GST as they are exempted under the
exemption notification. However, when these commodities are put in
packaged containers and under the seal of a registered brand name, these are
liable to GST.

9. REVERSE CHARGE MECHANISM
APPLICABLE ON COPYRIGHTS
• As per Section 9(1) of CGST Act 2017, GST has to be deposited by the
person supplying the goods and/or services. However, Section 9(3) of the
CGST Act, 2017 embodies the principle of Reverse Charge Mechanism
(RCM) according to which, the tax liability has to be discharged not by the
supplier of goods and/or services, but by the recipient of such services. The
said sub-section gives Government the power on recommendations of the
GST council, to specify certain categories of supply of goods or services or
both on which, RCM shall be applicable.

10. CASE STUDY:
• M/s. XYZ receives service from M/s. ABC (US based company) towards
procurement of customer orders for business. M/s. ABC charges
commission of 10% on all payments received from the prospect for
services provided by M/s. XYZ to such customer.
• In the above case, M/s. ABC is acting as an agent between M/s. XYZ and
the customer. Service would fall within the meaning of ‘Intermediary
services’. Hence, the place of supply shall be location of the supplier of
service i.e. M/s. ABC as per section 13(8)(b) of IGST Act. Service
provider (M/s. ABC) and the place of supply (US) is located in non-
taxable territory, IGST is not required to be discharged under RCM.

11. THANK YOU