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Facts Case The petitioner, Ashok Malhotra, challenged the order dated 29.12.2010, whereby the Deputy Commissioner of Income Tax, Central Circle-3, New Delhi, directed a special audit to be conducted u...

Ashok Malhotra vs Commissioner of Income Tax & ANR – Special Audit under Section 142(2A), Income Tax Act, 1961 | W.P.(C) 1750/2011, Delhi High Court

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08/06/2026 | 0 COMMENTS | VISITOR'S COUNT: 16

Commissioner of Income Tax, Central-II, New Delhi vs D.C.M. Limited | Taxability of Technical Know-How Remittances under DTAA & Section 9(1)(vi) of Income Tax Act, 1961 Facts of the Case • The assessee, D.C.M. Limited, engaged in sugar manufacturing, entered into a Technical Collaboration Agreement (12.10.1983) with Tate & Lyle Process Technology, London, for acquiring the “TALO processes.” • Total consideration: £155,000 in four instalments for transfer of technical know-how, designs, and supply of equipment. • Initial payments required deduction of tax at source (TDS) at 20% per IAC certificates. • Assessee argued that payments were business profits, not royalties, under Article XIII(3) of the India-UK Double Taxation Avoidance Agreement (DTAA), as Tate had no permanent establishment in India. Issues Involved 1. Whether payments made by D.C.M. to Tate & Lyle constituted “royalty” under Article XIII(3) of the DTAA. 2. Whether TDS under Section 9(1)(vi) of the Income Tax Act, 1961 was applicable. 3. Interpretation of the scope of royalty under DTAA versus Section 9(1)(vi). Petitioner’s Arguments (Income Tax Department) • Claimed that assessee only had use of technology, not a transfer of know-how. • Payments made should be treated as royalties under DTAA. • Reliance on precedent cases: N.V. Philips vs CIT (1988) 172 ITR 521; Alembic Chemical Works Co. Ltd vs CIT (1989) 177 ITR 377; Shriram Pistons and Rings Ltd vs CIT (2008) 307 ITR 363; CIT vs J.K. Synthetics Ltd (2009) 309 ITR 371. Respondent’s Arguments (D.C.M. Limited) • Payments were for complete transfer of technical know-how, designs, and operational guidance (“TALO processes”) — a conditional sale, not mere use. • Payments constituted business profits of Tate & Lyle, not royalties. • Reliance on Tribunal judgment and CIT vs Davy Ashmore India Ltd. (1991) 190 ITR 626. • Highlighted that DTAA definitions of royalty were narrower than Section 9(1)(vi) of IT Act. Court Findings / Order • Tribunal’s interpretation accepted: o Consideration paid for transfer of designs, drawings, and know-how does not constitute royalty under DTAA. o DTAA provisions override Section 9(1)(vi) of the IT Act. o Payments are business profits of Tate & Lyle, not taxable in India, as there was no permanent establishment. • Revenue’s reliance on broad interpretation of “payments of any kind” rejected. • Court dismissed references from the Department; parties bear their own costs. Important Clarifications • Distinction drawn between “use of technology” and “transfer of know-how/technology.” • DTAA definition of royalty is narrower than Section 9(1)(vi) — lump-sum transfers are not automatically royalties. • Conditional right to sub-license does not reduce the transaction to mere usage. • Payments to foreign enterprise without a permanent establishment in India cannot be taxed as business profits. Sections Involved • Section 9(1)(vi), Income Tax Act, 1961 – Definition and taxation of royalty. • Article XIII(3), India-UK DTAA – Definition of royalty and business profits. Blog Keywords (SEO-Optimized) #D.C.M.Limited, #CommissionerOfIncomeTax, #DTAA, #Section9, #TechnicalKnowHow, #Taxability, #IncomeTaxAct1961, #RoyaltyDefinition, #TDS, #HighCourtDelhi, #IndiaUKTaxAgreement, #BusinessProfits, #TALOProcess, #TechnicalCollaborationAgreement Blog Description (Meta Description) Explore the landmark Delhi High Court case Commissioner of Income Tax vs D.C.M. Limited (2011), clarifying the taxability of technical know-how payments under Section 9(1)(vi) of the Income Tax Act, 1961 and Article XIII(3) of the India-UK DTAA. Understand distinctions between royalties and business profits, Tribunal interpretation, and key precedents including N.V. Philips, Alembic Chemical Works, and Davy Ashmore India Ltd. Link to download the order – https://delhihighcourt.nic.in/app/case_number_pdf/2011:DHC:1482-DB/RAS10032011ITR871992.pdf Disclaimer This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.

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08/06/2026 | 0 COMMENTS | VISITOR'S COUNT: 33

Facts of the Case The assessee, D.C.M. Limited, engaged in sugar manufacturing, entered into a Technical Collaboration Agreement (12.10.1983) with Tate & Lyle Process Technology, London, for acquiring ...

Commissioner of Income Tax, Central-II, New Delhi vs. D.C.M. Limited – Interpretation of ‘Royalty’ under Section 9(1)(vi) of the Income Tax Act, 1961 vs. Article XIII of India–UK DTAA in Technical Know-How Transfer Agreements

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08/06/2026 | 0 COMMENTS | VISITOR'S COUNT: 33

Facts of the Case: The assessee, D.C.M. Limited, engaged in sugar manufacturing, entered into a Technical Collaboration Agreement dated 12.10.1983 with Tate & Lyle Process Technology, London, for the transfe...

Commissioner of Income Tax, Delhi-IV vs Jaypee DSC Ventures Ltd.: Treatment of Interest on Fixed Deposits as Capital Receipt vs Income from Other Sources under Section 260A of the Income Tax Act, 1961

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08/06/2026 | 0 COMMENTS | VISITOR'S COUNT: 38

Facts of the CaseThe respondent, Jaypee DSC Ventures Ltd., filed its income tax return for the assessment year 2003-04 declaring nil income. The Assessing Officer (AO) assessed income at ₹16,38,039/- by treat...

Commissioner of Income Tax vs. Late Shri C.R. Dass – Interpretation of Section 2(22)(e) of Income Tax Act on Deemed Dividend

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08/06/2026 | 0 COMMENTS | VISITOR'S COUNT: 31

Facts of the Case Assessment Year: 1998-99 Assessee: Late Shri C.R. Dass, Director of Pearey Lall & Sons (EP) Ltd. Assessee filed return declaring income of Rs. 1,14,000. The assessee leased property (...

Ashok Malhotra vs Commissioner of Income Tax & ANR – Special Audit under Section 142(2A), Income Tax Act, 1961 | W.P.(C) 1750/2011, Delhi High Court

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08/06/2026 | 0 COMMENTS | VISITOR'S COUNT: 33

Monica Miglani vs Commissioner of Income Tax and Anr – Writ Petition under Article 226 challenging Special Audit Direction under Section 142(2A) of the Income Tax Act, 1961

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08/06/2026 | 0 COMMENTS | VISITOR'S COUNT: 40

Facts of the Case Petitioner Monica Miglani faced a special audit directed by the Deputy Commissioner of Income Tax, Central Circle-3, New Delhi. The special audit concerned her assessee accounts and was direc...

M/s. A.K. Sikri vs. Income Tax Officer – Delhi High Court Decision on Section 148 Reassessment Proceedings

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08/06/2026 | 0 COMMENTS | VISITOR'S COUNT: 36

Facts of the Case:The present matter concerns the reassessment proceedings initiated by the Assessing Officer under Section 148 of the Income Tax Act in respect of the assessee for the financial year 2000-2001. The a...

CIT vs M/s XYZ Enterprises – Reassessment Proceedings under Section 148 of the Income Tax Act, 1961

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08/06/2026 | 0 COMMENTS | VISITOR'S COUNT: 33

Facts of the CaseThe Assessing Officer issued notices under Section 148 of the Income Tax Act, 1961, reopening the assessments for the assessment years 1999-2000 and 2000-2001. The assessee appealed against the...

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