Qualcomm Incorporated Vs DCIT (ITAT Delhi)
Assessee, a USA-resident corporate owning extensive CDMA/3G/4G/5G patent portfolios, received royalty from global OEMs for manufacture of subscriber units & infrastructure equipment outside India. For AYs 2018-19 & 2022-23, AO & DRP once again taxed royalty from non-resident OEMs u/s 9(1)(vi)(c) & Art.12(7)(b) of India-USA DTAA, following earlier assessments, despite a long line of consistent Tribunal rulings from AY 2000-01 to 2017-18 & AY 2021-22 holding such royalty as not taxable in India.
Assessee contended that manufacturing takes place outside India, patents are exploited outside India, OEMs do not carry on business in India for CDMA-based products, & Revenue has repeatedly failed to prove that OEMs earned any income from a source in India. Extensive reliance was placed on earlier Tribunal orders, including detailed reasoning in 58 SOT 97, 93 taxmann.com 80, 153 taxmann.com 146 & the 2024 order in ITA No.3742/Del/2023.
Tribunal noted that AO had merely repeated findings of earlier years without independent verification, had not established PE of foreign OEMs, had not produced evidence of OEMs using patented technology in any Indian business, & had ignored binding judicial discipline. Tribunal reaffirmed its earlier rulings that royalty payable by non-resident OEMs manufacturing outside India cannot be taxed u/s 9(1)(vi)(c) as the source of royalty is the manufacturing activity outside India. Once domestic law fails, examination under treaty becomes academic.
