TAXATION OF KNOW-HOW A CONTENTIOUS ISSUE

In a recent judgement, the Tribunal has held that in case the agreement relating to transfer of technical know-how is a composite one and speaks of both licensing rights in the “know-how” and also the provision of technical assistance to be rendered in context thereof, the entire consideration relatable to the licensing of technical know-how will not be chargeable to service tax and only the consideration relatable to the provision of technical assistance will be chargeable. However, the new definition of Intellectual Property (IP) Services, as currently in force, holds that the taxable service consists of transferring, temporarily or permitting, the use or enjoyment of any intellectual property right. It can, therefore, be seen that the permanent transfers of IPR of any kind is not chargeable to service tax.