APA Refund Reduces Taxable Royalty, No PE in India: Bombay HC

Advertisement HC Applies Real Income Doctrine; Holds Excess Royalty Refunded Pursuant to AE’s APA Not Taxable Summary: The Bombay High Court in Pr Commissioner Of Income Tax vs Gemological Institute Of America Inc on 16 June, 2026 held that only the royalty ultimately retained by the US parent company after implementation of an Advance Pricing Agreement (APA) could be taxed in India, applying the doctrine of real income. The Court observed that the APA determined the arm’s length royalty payable by the Indian subsidiary, requiring the excess royalty already received by the f...