TAX SOPS FOR FOREIGN R&D COs WITH NO BASE IN INDIA

Foreign companies without a permanent establishment in India and providing research facilities to Indian firms for developing new drugs are exempt from paying tax in the country. Further, the Authority for Advanced Rulings (Income Tax) has said unless there is a transfer of technology or know how to the recipient of the service, it cannot be classified as technical services. Anapharm had sought to know whether the fee it received from the pharmaceutical companies for undertaking clinical and bio analytical studies under the agreements would be subject to tax in India under DTAA between India and Canada. The AAR has ruled that its fees should be considered as business income, but since it does not have a permanent establishment in India, it is not liable to pay tax in the country under the Indo-Canadian DTAA