8th floor, Vikrikar Bhavan, Mazgaon, Mumbai-400010<\/p>\n
TRADE CIRCULAR To,<\/p>\n No.VAT\/2015-16\/0SD-VP\/B- Mumbai, dt. 13.07.2015<\/p>\n Trade Circular No. 11Tof 2015<\/p>\n Sub: Bombay High Court judgment in the case of Tata Sons 20.01.2015.<\/p>\n Recently The High Court, upon a perusal of the provisions and the It …Upon perusal of the entire Act and reading these Further, “We The High Court distinguished the remarks of the Supreme Sd\/-<\/p>\n
\n<\/strong>(U\/s.10
\n(10)<\/strong>of the MVAT Act, 2002)<\/strong><\/p>\n
\nLtd, Writ Petition No.2818 of 2012
\ndecided on<\/p>\n
\nthe Bombay High Court in the case of Tata Sons had an occasion to decide as to whether the agreement executed by Tata Sons with
\nthe Tata Companies providing detailed guidelines
\nfor use of the Tata name and the trade mark will attract tax under the Transfer
\nof Right to use goods for any purposes Act, 1985. In the course of the
\nargument the petitioner had relied upon the
\njudgment of the Hon. Supreme Court in the case of BSNL, especially upon Para 79
\nand 98 of the judgment. As per the
\npetitioner, the trade mark were assigned to multiple companies which meant that
\nthere is no transfer within the meaning of the Act. On the other hand, it was
\nargued by the department that the Act of 1985 dealt with the right to
\nuse any goods and the words ‘exclusive’ and ‘unconditional’ which are being
\nread into this Act by the petitioner are totally absent therein. If the right to use the trade mark is transferred
\nthen the Act applies and it does not necessarily mean that the trade mark is itself transferred or
\nassigned. It was also argued there could be multiple transfers of right to use and in such
\ncircumstances also when the Act does not contemplate cession of user by the transfer or, then, levy cannot be
\navoided.<\/p>\n
\nagreement observed that in case of intangible
\ngoods the right to use them is capable of being transferred and if transferred
\nit may be subjected to tax, The Act does not
\ngiven any indication that right to use the incorporeal goods should
\nbe exclusive transfer in favor of the transferee.<\/p>\n
\nobserved,”<\/p>\n
\nprovisions together and harmoniously,
\nwe are in agreement with Mr. Kumbhakoni that the deal or transaction
\nbetween the petitioners and the subscribers envisage that a transfer of a right to use the goods and which could be said to
\nbe the marks as well. Upon a conjoint
\nreading of the provisions of the Act we are of the opinion that in the case of
\nintangible\/incorporeal goods the right to use them is capable of being
\ntransferred and ir transferred it may,<\/sup>
\nbe subjected to tax. The Act does not give any indication as is rightly
\nurged before us that the right to use the incorporeal \/intangible goods should be exclusively transferred in favour of the
\ntransferee. The nature of the transfer
\nor the nomenclature assigned to the act of will therefore not necessarily be decisive.<\/p>\n
\nit observed.<\/p>\n
\nhave referred to the clauses in the agreement between the petitioner NO.1 petitioners that the right to use is not transferred.
\nHowever their argument is that it is not
\nexclusive but conditional. Secondly, it is clear from the clauses of the agreement that the proprietor continues to control
\neven the limited right conferred by
\nthe above clauses in favour of the subscribers. We are of the opinion that so long as the agreement transfers the right
\nto use intangible goods which are the
\ntrade marks in this case, then, there is no question of the petitioners
\nescaping the consequences of the enactment. The enactment and the definitions which we have referred together with
\nthe substantive provisions does not
\nenvisage exclusive and unconditional transfer to the above right.\u201d<\/sup><\/p>\n
\nCourt in the case of BSNL. The observation of one of the three judges bench of
\nthe Supreme Court in the case of BSNL was that in order to attract levy under transfer of right to use
\ngoods, the transfer has to be to the exclusion of the transferer and once the right to use the goods is
\ntransferred the owner again cannot transfer the right to others. This observation led to the conclusion that
\nthere cannot be transfer of right to use trade mark, copy rights and technical know how and other
\nintangibles to multiple users. However, the High
\nCourt has put to rest the controversy and has comprehensively held that even
\nwhen there is transfer of right to use goods to multiple users it would attract
\ntax under the MVAT Act It further held that
\nBombay High Court judgment in the case of Dukes and Sons Ltd is still good law.
\nThe law is therefore now settled that VAT can be
\nlevied on transfer of right to use goods of intangible nature i.e. trade mark, technical know how, copy right and
\nother intangibles etc even if it is transfered to multiple users.<\/p>\n