2014 (8) TMI 616 - HC - VAT and Sales Tax

Tribunal ruling on tech sublicense tax liability under Maharashtra Lease Tax Act

The Additional Commissioner of Sales Tax Versus M/s. Mahyco Monsanto Biotech (India) Ltd.

The Tribunal held that transactions involving the sublicense of technology were covered by entry 22 of the Maharashtra Lease Tax Act. The Tribunal ... Commissioner held that the sale of the technical knowhow was covered by entry 22 of the Lease Act but rejected the prayer for prospective effect - tribunal reversed the decision - Transfer of the right to use Goods for any Purposes Act 1985 (the Lease Act) read with section 52 of the Bombay Sales Tax Act 1959 (the BST Act) - Held that:- One of the reasons for exercising power under section 52(2) of the BST Act was that it is doubtful whether the transaction constituted a sale at all or not. However, that issue was not even determined. It is in this background that it is necessary to ascertain whether the exercise of powers under section 52(2) of the BST Act was valid or perverse - The Tribunal is therefore directed to draw up a statement of the case, frame the question of law and refer it to this Court. It is clarified however that in the event of the question being determined against the respondent, the respondent's rights under section 52(1) would stand revived - Application disposed of. Issues:Interpretation of applicability of Maharashtra Lease Tax Act 1985 on sublicense of technology under Bombay Sales Tax Act 1959.Analysis:The respondent raised three questions under section 52 of the Bombay Sales Tax Act 1959 regarding the applicability of the Maharashtra Lease Tax Act 1985. The first question was whether the sublicense of technology amounted to a 'sale' under the Maharashtra Lease Tax Act. The second question was about the coverage of the transaction under any entries in the Schedule to the Maharashtra Lease Tax Act. The third question inquired about the liability for registration under the Maharashtra Lease Tax Act. However, questions one and three were not pressed during the proceedings. The Commissioner held that the technical know-how sale was covered by entry 22 of the Lease Act but rejected the prayer for prospective effect. The Tribunal, on appeal, directed that transactions up to 31st March 2005 would not be liable to tax under the Lease Act if no tax was collected by the Appellant.An important issue arose regarding the validity of exercising power under section 52(2) of the BST Act when the first and third questions were not pursued. The Tribunal's exercise of power under section 52(2) was based on doubts about whether the transaction constituted a sale, although this issue was not determined. The critical question that emerged was whether the Tribunal was justified in directing that the impugned transactions of technical know-how sales would not be liable to tax until 31st March 2005, considering the legality of these transactions as sales was not disputed during the proceedings before the Commissioner or the Tribunal.The Tribunal was directed to frame the question of law and refer it to the Court for determination. It was clarified that if the question was decided against the respondent, the respondent's rights under section 52(1) would be revived. The Sales Tax Application was disposed of accordingly, emphasizing the need for a clear statement of the case and framing of the legal question for further proceedings.