TaxTMI 
TaxTMI 
2010 (11) TMI 870
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....ght to use the trademark and the patent is sustainable in law? This formed question (b). On this, the learned Tribunal held that the consideration received by the petitioner from the other companies/concerns for transfer of the right to use its "Nutrine" trademark and "bunny" logo, is the amount realized in respect of the transfer of the right to use the goods and, therefore, it attracts levy of tax. This finding is put in issue in these two revision cases. Turning to the brief fact of the matter, it may be noticed that the petitioner, which is registered on the rolls of the Commercial Tax Officer II, Chittoor, is a company engaged in manufacturing and marketing of confectionery, i.e., chocolates, toffees, etc. It has a trademark "Nutrine" and a logo "bunny", which they use on the wrappers, pouches, containers, invoices, letterheads and advertising materials. The petitioner entered into four agreements on April 1, 1994 with M/s. BVR Confectionery Pvt. Ltd., and M/s. Nutrine Biscuits Ltd. The petitioner also entered into another agreement on June 1, 1997 with M/s. Nutrine Sweets Ltd. Under these five agreements, which contain similar clauses, the petitioner agreed to allow....
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....STC 474 (SC); [1972] 1 SCC 472; AIR 1972 SC 1131, Karthik Engineering Works v. State of Karnataka [2000] 119 STC 88 (Karn) and Bharat Sanchar Nigam Ltd. v. Union of India [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 3 SCC 1. The Special Counsel for Commercial Taxes submits that the petitioner failed to discharge the burden of proving that there is no transfer of right to use the trademark and logo and, therefore, at the stage of the revision, the petitioner cannot be permitted to raise the plea especially when they failed to produce relevant records. He would contend that when the goods transferred are incorporeal or intangible in nature, exclusivity of use is not possible as the same trademark with limited use or exclusive use can be utilized by the transferor and the transferee at the same time. He invites the attention of this court to sections 37 to 45 of the Trade Marks Act, 1999. The background of the case and the rival submissions throw up the only question for consideration as to whether the agreement between the petitioner and the assignee-company is in respect of the transfer of the right to use the petitioner's trademark and logo by the assignee. There i....
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.... lessee or licensee for cash, deferred payment or other valuable consideration in the course of the business. The use of the phrase ". . . for any purpose, whatsoever" is the key to understand and resolve the question raised in these revision cases. If the Legislature had intended that the exclusive transfer of right to use the goods alone is taxable without there being the transfer of technical knowhow, manufacturing process, etc., the Legislature must have said so. It is conspicuously absent. Even if there is transfer of right to use goods along with the transfer of other services and facilities even if it is for any limited period, the event is taxable. Either in relation to the taxable event or taxable person, the Legislature does not leave any ambiguity or doubt. There can be transfer of right to use goods under an agreement intended for that purpose or there could be such transfer of the right to use the goods under an agreement for different purposes to be acted upon by the parties as agreed different situations. The relevant clauses to which our attention has been invited in the agreement between the petitioner and the assignee are clauses 2, 4, 5, 7, 9 and 10, which rea....
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....use the trademark and logo. Clauses 4 and 5 are only incidental aspects and no transfer is involved therein. Clause 4 is to the effect that, "party of the first part agrees to suggest suitable items of confectionery products keeping in view the facilities available with the second party, provide formulas and recipes for such products and periodically suggest measures for cost reduction". Clause 5 also speaks of the petitioner making suggestions regarding locations for getting maximum advantage for those products. These are only add on services offered by the petitioner and they do not amount to transfer of trademark nor they are different services. When one understands the brand value of the trademark things would be clear. More often than not the brand value is result of the trademark of the company itself. By allowing the assignee to use trademark and logo, the petitioner only ensuring that brand value of "Nutrine" to get a competitive edge in the market. The facilitating use of technical knowhow, recipes and formulas are indeed related to the brand value and, therefore, the petitioner undertook the obligation of providing these services. This is made clear by reference to clause....
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..... . . On a careful reading and analysis of the various clauses contained in the agreement and, in particular, looking to clauses 1, 5, 7, 13 and 14, it becomes clear that the transaction did not involve transfer of right to use the machinery in favour of contractors. The High Court was right in arriving at such a conclusion. In the impugned order, it is stated and rightly so in our opinion, that the effective control of the machinery even while the machinery was in use of the contractor was that of the respondent-company, the contractor was not free to make use of the machinery for the works other than the project work of the respondent or move it out during the period the machinery was in his use; the condition that the contractor would be responsible for the custody of the machinery while it was on the site did not militate against respondent's possession and control of the machinery. . ." Applying the above tests, we are convinced that in the case on hand, the assignee is free to make use of the trademark and logo and has full control over such use. The petitioner does not in any manner regulate the use of trademark or logo although, "keeping in view the facilities available ....
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....ty, it is beyond the scope of the 'goods' as defined in the Act, as the machinery is attached and fixed in the building". These decisions do not in any manner support the contention. Bharat Sanchar Nigam Ltd. v. Union of India [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 3 SCC 1, inter alia, considered the question whether there is any transfer of right to use any goods by providing access or telephone connection by the telephone service provider to the subscriber and whether such transaction is a composite contract for service and sale. Five questions were considered and the conclusions by the Division Bench of the Supreme Court are as follows (pages 110 and 130 in 145 STC): "Question Answer (A) What are 'goods' in telecommunication for the purposes of article 366 (29A)(d)? (A) Goods do not include electromagnetic waves or radio frequencies for the purpose of article 366(29A)(d). The goods in telecommunication are limited to the handsets supplied by the service provider. As far as the SIM cards are concerned, the issue is left for determination by the assessing authorities. (B) Is there any transfer of any right to use any goods by providing access or teleph....