India: Payments related to drugs manufactured and marketed in United States not taxable in India (High Court decision)
Underlying contractual rights, marketing rights, litigation, regulatory framework, and economic activities generating the income were located outside India.
In a batch of five cases brought by Teva Pharmaceuticals USA (“Teva USA”) and Teva Pharmaceuticals Industries Limited (“Teva Israel”), the Delhi High Court held that payments related to generic drugs manufactured and marketed in the United States, which were received by Teva Israel from another Indian company, were not taxable in India because the underlying contractual rights, marketing rights, litigation, regulatory framework, and economic activities generating the income were located outside India.
The court also found that the Authority for Advance Rulings (AAR) exceeded its statutory mandate by trying to assign taxable income to Teva USA, a non-applicant that was not before it. In addition, the court held that the AAR’s sweeping findings on collusion, sham arrangements, and tax avoidance, based largely on conjecture, were untenable.
Read a September 2026 report prepared by the KPMG member firm in India