Teva Pharmaceuticals USA Inc. Vs DCIT (Delhi High Court)
Indian Payer’s Location Alone Cannot Create Tax Nexus for Foreign Income; No Concept of Protective Recovery: Delhi HC Directs Refund of ₹783 Crore TDS
Summary: The Delhi High Court has held that a payment made by an Indian resident to a non-resident does not, merely because of the payer’s location, constitute income accruing or arising in India. A real and substantive nexus must exist between India and the income-producing activity or right. The Court consequently quashed the reassessment proceedings against Teva Pharmaceuticals USA Inc., set aside the ruling of the Authority for Advance Rulings and directed refund of approximately ₹783 crore of TDS, along with applicable interest.
Facts of the Case
The dispute arose from agreements relating to the commercial exploitation of Atorvastatin, the generic version of Pfizer’s drug Lipitor, in the United States.
Ranbaxy was the first applicant for approval under the US Abbreviated New Drug Application regime and was consequently eligible for a 180-day sole first-to-file exclusivity period. However, uncertainty arose over its ability to obtain regulatory approval and launch the drug. Ranbaxy India, Ranbaxy USA & Teva USA therefore executed an agreement dated 07.12.2010 under which Ranbaxy’s exclusivity rights could be relinquished in favour of Teva USA if specified conditions were fulfilled.
