Trade mark licence versus transfer of right to use goods under trade tax law

Permission to use a trade mark was examined to determine whether it constituted a transfer of the right to use goods under Section 3F of the U.P. Trade Tax Act, 1948. The court noted that although a trade mark may be treated as goods, a taxable transfer requires satisfaction of the essential incidents of exclusive use, including availability of the goods, consensus on identity, transfer of the legal right to use, exclusion of the transferor during the period of use, and the owner's inability to grant the same right to others at the same time. As the arrangement permitted simultaneous use by multiple concerns and did not show exclusion of the owner, it was only a licence and not a transfer.

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Issues: Whether permission to use a trade mark amounted to a transfer of right to use goods so as to attract tax under Section 3F of the U.P. Trade Tax Act, 1948.

Analysis: A trade mark may be treated as goods, but a transaction falls within transfer of right to use only when the legal incidents of such transfer are satisfied, including availability of the goods, consensus on identity, transfer of a legal right to use, exclusion of the transferor during the period of use, and incapacity of the owner to transfer the same right to others for that period. The permission in question allowed use of the trade mark by multiple concerns at the same time, and there was no material to show that the assessee had excluded itself from using it. The essential requirements of exclusive transfer of the right to use were therefore not met.

Conclusion: The arrangement was only a licence and not a transfer of the right to use the trade mark, so Section 3F of the U.P. Trade Tax Act, 1948 was not attracted.

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