Excess Royalty Refunded Under APA Cannot Be Taxed as Only Retained Amount Is Taxable: Bombay HC

CIT Vs Gemological Institute of America Inc. (Bombay High Court) The Revenue filed multiple appeals before the Bombay High Court challenging orders of the Income Tax Appellate Tribunal (ITAT) for Assessment Years (AYs) 2010-11 to 2017-18. Two principal issues arose: (i) the quantum of royalty taxable in India after an Advance Pricing Agreement (APA) resulted in a refund of excess royalty by the US parent company to its Indian subsidiary, and (ii) whether the Indian subsidiary constituted a Permanent Establishment (PE) of the US company under the India-US Double Taxation Avoidance Agreement (DT...