Assessee covered:

The patentee should be an individual resident ofIndia(non – residents not covered).

Conditions to be fulfilled:

• Deduction available to a patentee or co–owner of patent.
• Income should be received in consideration for transfer of all or any rights (including the granting of license) in a patent and any services in connection with it. However, it does not include any consideration for the sale of product manufactured with the use of patented process or patented article for commercial use.
• A certificate in form 10CCE is required .This certificate is to be verified from the person making payments to author.
• The income should be earned in exercise of his profession.

Extent of Deduction:

Deduction is available to the extent of Rs.3lacs or income received, whichever is less.

Points to be noted:

• If the income is earned from outside India – Only that much amount which is brought in India in convertible foreign exchange within six months from the end of previous years or within extended time by RBI.
• Where a compulsory license is granted – the income by way of royalty shall not exceed the amount of royalty settled by the controller under the terms of license.

Illustration for Clarity:

Royalty fee received – Rs. 90000 (it is earned from abroad).

Royalty settled under the terms of license – Rs.60000.

Amount remitted toIndiain convertible foreign exchange within six months – Rs.70000.

Solution:

(a) Amount remitted toIndiain convertible foreign exchange within six months – Rs.70000

(b) Royalty settled under the terms of license – Rs.60000.

Income received – Amount received in India subject to terms of license: Rs.60000

Hence, amount deductible subject to a maximum of Rs.300000 – Rs.60000.

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