Trade mark royalty and right-to-use transfer treated as taxable consideration under sales tax law

Royalty paid for permitting franchisees to use a trade mark is treated as consideration for transfer of the right to use intangible goods, and is exigible to tax where the governing sales tax statute covers such transfers. The proprietor's retention of title, or the ability to license others, does not change the character of the transaction if the essential effect is a transfer of the right to use for consideration. Authorities cited under different statutory settings do not displace the applicable Kerala precedent on this point, and the royalty was therefore held taxable.

---

---

Issues: Whether royalty received for permitting franchisees to use a trade mark is exigible to tax under the Kerala General Sales Tax Act, 1963, and whether such receipt constitutes goods, turnover, and taxable turnover for sales tax purposes.

Analysis: The Court held that the issue was covered by earlier decisions which treated a trade mark as intangible property capable of being transferred for use and liable to tax where the transaction amounts to a transfer of the right to use. A trade mark may remain the proprietor's property, yet permission granted to others to use it for consideration constitutes a taxable transfer of the right to use, and the fact that the owner retains title or the ability to license others does not alter the character of the transaction. The authorities relied on by the assessee concerned different statutory settings and did not dislodge the binding effect of the Kerala decision already on the point.

Conclusion: Royalty received for the use of the trade mark was held exigible to tax, and the revision petitions were rejected.

Ratio Decidendi: Royalty paid for the grant of a right to use a trade mark constitutes consideration for transfer of the right to use intangible goods and is liable to sales tax where the governing statute taxes such transfers.

---