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INTRODUCTIONUnder the scheme of taxation across all jurisdictions income is necessary for chargeability of Income Tax Whenever an income is earned and that income falls within the confines of the definition chargeable to income tax or for that matter any tax a necessary tax liability is logically attractedOne such income is income by way of royalty which may loosely be described as a consideration for transfer of rights in respect of or for use of intellectual property viz patent invention model design secret formula process or trade mark and similar property It includes consideration for imparting of information concerning the working or use of those properties and also for imparting of information concerning technical industrial commercial or scientific knowledge or skillThis paper aims to understand the concept of income by way of royalty and study the principles involved in taxation of income arising from such a consideration This paper also aims to study and understand various national and international difficulties related to taxation of royalty Consequently this paper aims to study the various legislative measures and judicial pronouncements taken to overcome the difficulties and to make the taxation much more transparent and logicalWe shall study the impact of the legislative amendments and judicial pronouncements on the taxation of royalty both in national sphere as well as in relation to international treatiesWe shall study the amendments made through Finance Act 2012 and its consequences while understanding the stance of the judiciary in relation to these amendmentsTHE CONCEPT OF ROYALTYThe term royalty has been subject to much speculation judicial uncertainity and legislative amendments in the taxation jurisprudence in IndiaThe term royalty has its origins in the Latin terms Jura Regalitates Jura Regia etc These denoted historically the revenues due to the Crown from the subjects for enjoying the right of cultivation etc of the land or water bodies belonging to the King Subsequently it also came to denote the payment to the Crown or owner of
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