NEW DELHI, Sept. 18 -- Payments made by Indian companies to overseas entities are not automatically taxable in India, the Delhi High Court has ruled in a case involving Israeli drugmaker Teva and erstwhile Ranbaxy Laboratories.

The ruling may give multinational companies greater certainty on the tax treatment of payments from Indian entities, particularly where the underlying transaction and income-generating activity are overseas. It may also help foreign companies challenge similar tax demands and seek refunds where no Indian tax liability exists.In a 15 September judgment, a bench comprising Justices Dinesh Mehta and Vinod Kumar held that Teva Israel was entitled to a refund of about Rs.783 crore, along with applicable interest. The c...