Taxing MNCs on Intangible Assets: The Achilles Heel of Taxation Regime in India

Brahm Sareen – [2022] 134 taxmann.com 128 (Article)

The multinational corporations operating under the franchise agreement in India started facing scrutiny by the Taxman over the royalty income which is a part of their intangible asset. These multinational corporations operate in India by allowing the Indian companies to operate their subsidiaries in their global brand name. The conundrum of whether to categorize intangible assets as a sale of goods or services and thereof defining the nature of the agreement remains unresolved.

Recently Subway was under the taxman’s scrutiny when the taxman had sent summonses over nonpayment of taxes. In this article, the author analysed the quandary between the applicable tax rates on right to use and transfer of right to use intellectual property rights on multinational corporations operating under franchisee models with micro-geographical based exclusivity.

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