Tds on purchase of patent non resident

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Satyendra Kumar Pandey (Querist)
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02 November 2016 Dear Expert, I need your advise on a cross border transaction, kindly refer the below case
Case: An Indian company is buying a patent from a spain based Institute/College.Money will be paid from India directly to spain based institute/college and patent will be used for production in India.The total consideration is to be paid by Indian company is for patent, know how related to patent.

Question:My understanding is that patent is an intangible asset and does not come under the category of "Fee for Technical Services" or "Royalty", So Indian Company be required to deduct TDS on this payment ?

Rgds
S K Pandey

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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02 November 2016 In case buying the patent solely used (wholly transferred) by the buyer it is treated as buying a capital asset and such capital gain not taxable in India hence no TDS applicable. In case the patent is licensed retaining ownership such payments will be treated as royalty and TDS applicable on it.

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Satyendra Kumar Pandey

Satyendra Kumar Pandey (Querist)
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02 November 2016 Thanks a lot sir

One more question is also there, if the Indian company has to pay something to non resident in respect of know how i e how to use that patent for manufacturing of product in India in that case TDS is applicable ??

Rgds
S K Pandey

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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02 November 2016 Yes it will fall under Royalty hence TDS applicable.

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