Photo of Reema Arya

Consultant in the Tax Practice at the New Delhi office of Cyril Amarchand Mangaldas. Reema specialises in providing advisory services on various aspects of direct tax viz. international taxation and corporate taxation. She is a member of the Institute of Chartered Accountants of India and can be reached at reema.arya@cyrilshroff.com

 

ITAT on the Taxability of Transfer of Know-how Under Development

Research and development (R&D) in all fields is a costly affair, but more so in bio-technology, where molecules are first evolved, developed and then subjected to arduous and expensive clinical trials. Till such time that the molecule reaches the final stage, it is simply work-in-progress (WIP), even though the idea and formulation are valuable.

Further development of the WIP is even more expensive and needs an even larger source of funding. To brave cash crunches and the inherent risk of uncertainty in R&D, a common and relevant modus operandi for many WIP technologies is to transfer such WIP into another group company or a joint venture company. Such transfer is intended to facilitate further fine-tuning of the WIP until eligible for commercial exploitation, through licensing, manufacturing, production or processing.
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