TaxTMI 
TaxTMI 
2018 (12) TMI 611
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....el Sri.Joseph Markos, learned Counsel Sri.Anil D.Nair and the learned Senior Government Pleader Sri.V.K. Shamsudheen. 3. One Lal Products sold its trade mark "Chandrika", obtained for bath-soaps, to "Wipro Chandrika Ltd" and the agreement was executed in Ahmedabad in the assessment year 2004-05. The sale agreement having been executed in Ahmedabad, it was treated as a sale within the State of Gujarat and sales tax was paid in accordance with the tax enactment applicable to that State at 4% on the volition of the assessee. Admittedly, the registered office of the seller was in Kerala and the registered office of the purchaser was in Bangalore. The sales tax authorities initiated penalty proceedings and imposed penalty at twice the amount of tax sought to be evaded. The penalty order produced as Exhibit P7 and the notice of demand at Exhibit P8 are challenged in W.P(C) No.13408/2009. Consequent to the imposition of penalty, the Assessing Officer completed the assessment for the year 2004-05 which is produced as Ext. P-9 and challenged in W.P(C)No.6404/2010. As per the assessment order, the non-competition fee received by the petitioner-assessee based on an agreement entered into wit....
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.... was considering the issue insofar as the transfer of right to use; deemed to be sale of goods under Article 366(29A)(d) of the Constitution of India. Therein, it was categorically held that the situs of the goods; when the contract was entered into or the actual delivery of the goods pursuant to such contract, does not have any significance in deciding the situs of sale. The declaration in the majority decision was to the effect that since no fiction has been created insofar as the deemed sale being taxable in the State in which the goods are situated at the time of entering into the contract or subsequently delivered; the transfer of property in goods is in the State in which the contract is entered into. The learned Judges also held that situs of sale can only be fixed by the appropriate Legislature by creating a legal fiction, like the omitted Explanation to Article 286(1)(a), and there could be no situs fixed by mere analogy to Section 4 of the CST Act. The Parliament which is empowered in so far as an inter-State sale is considered, has not fixed the situs, nor is the fiction adopted under the CST Act, was the finding. 7. Later to the decision, the definition of "sale" in th....
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....ituated outside the State, then necessarily the contract entered into occasions the movement of the goods from one State to another, i.e., from the State in which the trademark holder has the principal place of business to the State in which the purchaser has its principal place of business. Then, under Section 3 of the CST Act, there would be inter-State sale and tax is payable under the CST Act within the State of Kerala. 10. It is argued that 2 0 t h Century Finance Corporation Ltd. never considered the aspect of inter-State sale and was concerned only with the issue of determination of situs of sale insofar as a transfer of right to use goods, when a contract is entered into within one State; the goods, at the time of execution of contract, existing in another State and delivery occasioned in one another State. The issue of a transaction occasioning the movement of goods from one State to another as provided under Section 3 of the CST Act never came up for consideration in 2 0 t h Century Finance Corporation Ltd., since the definition of "sale" as available in the CST Act did not take in, the transfer of right to use goods as available in Article 366(29A) of the Constitution. ....
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.... to be fastened on for the purpose of determining whether the sale was "inside" or "outside" the State. xxx xxx xxx "Where a party has entered into a formal contract and the goods are available for delivery irrespective of the place where they are located, the situs of such would be where the property in goods passes, namely, where the contract is entered into". "26. Next question that arises for consideration is, where is the taxable event on the transfer of the right to use any goods. Article 366(29A)(d) empowers the State legislature to enact law imposing sales tax on the transfer of the right to use goods. The various sub-clauses of Clause (29A) of Article 366 permit the imposition of....
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....the goods". 13. The levy of tax was held to be on the transfer of right to use goods and not on the use of goods itself. The un-amended definition of "sale" in the CST Act was also specifically referred to and it was held that "the transfer is sine qua non for the right to use any goods". The CST Act at that time did not include a fiction as to the right to transfer goods or the other transactions under Article 366(29A), being a sale of goods. We would also with emphasis, observe that here there is no transfer of right to use. The transactions under Article 366(29A) were transactions which were deemed to be sale of goods; which but for the 42nd amendment would not be termed as sale of goods. The fiction only applies to the said transactions and cannot be imported to others. Here there is transfer of property in goods and not mere transfer of right to use. 14. As pointed out by the learned Senior Government Pleader, the definition of "sale" now stands amended, bringing in the fiction insofar as a transfer of right to use goods, being deemed to be a sale of goods. However the amended definition of sale in the CST Act does not at all affect the subject transaction, that being a sal....
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.... goods which are covered by the definition of "goods: in the Sale of Goods Act, 1930 and the sales tax laws. The assumption was fallacious and the conclusion insofar as it was based on this erroneous perception equally wrong". A later three-Judge Bench decision in Yasha Overseas v. CST [(2008) 8 SCC 681] found that Vikas Sales Corporation was doubted only to the extent it had given free marketability of REP as an additional reason in support of its conclusion. Yasha Overseas, held that this did not in any way change the legal position regarding sale of REP licence as concluded by Vikas Sales Corporation. Hence, Vikas Sales Corporation holds the field on all other respects. 16. Associate Cement Companies Ltd. Vs Commissioner of Customs [2001 (124) STC 59] and Tata Consultancy Services Vs. State Of Andhra Pradesh [2004 (137) STC 620] found that technological advice or information put on media and software programmes have an intrinsic value, not confined to the value of the media in which it is abstracted. Intellectual property when put in media was held to be goods. Whether the amounts received as royalty for transfer of technological know-how, by deputing suitable personnel, would....
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....ded to follow the view of the Division Bench of the Gujarat High Court in Ambalal Sarabhai Enterprises Ltd. In the present case, there is no fiction created so as to bring within the concept of sales, a transaction which ordinarily would not have been termed to be sale of goods. In this context, the submission of the assessee that they had been using the trademark or patent rights in their products which could be sold all over India has to be dealt with. It was also pointed out that, just as the transferor, the transferee also gets the right to use the trademark or patent rights on specified goods which could be marketed and sold anywhere in the country. However, we are not inclined to think that the use of the trademark or patent rights, being widely possible, all over the country, would lead to the position of such trademark or patent rights being available as goods for sale within any of the States where there is a sale of the product effected. Again, succumbing to the view of repetition, by the sale effected, there is no transfer of right to use but a transfer of property in goods proper. The right to use the trade mark in the manufactured products or the right to carry on a pr....
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....ectual property rights such as logos, brands, trade marks, which are capital assets, but intangible in nature. Whether the income accrued to the petitioner, who was not situated in India, for transfer of a trade mark, could be assessed to income tax, as income accrued by way of transfer of capital asset under Section 9(1)(i), finding the situs of the capital asset within India was the issue arising. We extract the operative portion, herein below: "19. The issue of situs of an intangible asset, such as the intellectual property rights in trademarks, brands, logos etc. is indeed a tricky one. Insofar as the tangible assets are concerned, there is absolutely no difficulty. They exist in physical form and their existence is at specific locations. Thus, fixing their situs does not pose any problem. An intangible capital asset, by its very nature, does not have any physical form. Therefore, it does not exist in a physical form at any particular location. The legislature could have, through a deeming fiction, provided for the location of an intangible capital asset, such as intellectual property rights, but, it has not done so insofar as India is concerned. With regard to a share or int....
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....o another and, hence, would be an inter-State sale assessable to tax under the CST Act. The transferor's principal place of business being within the State of Kerala, the sale would be an inter-State sale. We, at the shame of repetition, reiterate that the transfer is not a transfer of right to use, but a transfer of property in goods, vesting the complete rights with the transferee and the transferor having no subsisting right thereafter. 23. Section 3 of the CST Act, applies on all fours and the agreement of transfer of the intangible, incorporeal rights; nay goods, occasions the movement of the said goods from Kerala to that other State where the transferee has their principal place of business. The agreement executed in Gujarat and Puducherry does not make the sale within that State or Union Territory, as Section 4 of the CST Act provides that sale of goods is deemed to take place in a State, only when the goods are within the State. Otherwise any goods could be taken by the seller to another State and delivered to the purchaser making it an intra-State sale. 24. As to the assessment of non-competition fee, at the hands of the assessee, it is to be observed that the fee i....