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of <h1>High Court Rules Engineering Fees Not Taxed as Royalty; Tax Officers Advised on Pre-1976 Agreements, Section 9(1)(vii) Applies.</h1> An Indian company entered into a collaboration agreement with a non-resident company for technical assistance in manufacturing diesel engines, with the non-resident receiving engineering fees. Initially, 75% of these fees were deemed taxable in India, but an appeal reduced this to 25%. The High Court declined to consider the fees as royalty income, as this argument was introduced late. The Ministry of Law agreed with this decision. The instruction advises tax officers to properly assess whether payments are engineering fees or royalty income, especially for agreements predating April 1, 1976, which may be exempt under section 9(1)(vii).
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