TMI Blog2004 (4) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for a transfer of right to use the trademark and hence, the same is taxable. The assessing authority issued a notice as contemplated under law to the assessee to file his objections before revising the assessment, but however, the assessee did not respond. Thereupon, the assessing authority, viz., the Deputy Commercial Tax Officer, proceeded on the basis that there was a transfer of incorporeal goods, which is taxable under the Sales Tax Act and consequently, passed orders of revised assessment, holding that the sale consideration of Rs. 7,26,835 received by the assessee was taxable at 5 per cent and levied tax. The assessee preferred an appeal before the Appellate Assistant Commissioner, who accepted the claim of the assessee that the amount received was only a royalty which could not be called as sale consideration and held that the reassessment was not proper. The Joint Commissioner took up the matter under his purview in suo motu revision and, placing reliance on a ruling reported in [1986] 61 STC 165 (SC) (H. Anraj v. Government of Tamil Nadu), held that the transfer of trademark right is a sale of incorporeal goods for consideration and therefore, the amount received is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of the agreement, the licensor would also be at liberty to grant licence to any other individual person or company to use the trademarks of Gopal, Anjol and Jet notwithstanding the fact that the licence granted to the licensee still continues without being revoked. (5) Licensee hereby covenants with the licensor that all acts of infringement and passing off that may be observed by them of their trademarks would be promptly brought to the notice of the licensor for taking prompt legal action. 6.. Section 2(j) of the Tamil Nadu General Sales Tax Act defines the term goods as under: 'goods' means all kinds of movable property (other than newspapers, actionable claims, stocks and shares and securities) and includes all materials, commodities, and articles including the goods (as goods or in some other form) involved in the execution of works contract or those goods to be used in the fitting out, improvement or repair of movable property and all growing crops, grass or things attached to, or forming part of the land which are agreed to be severed before sale or under the contract of sale. While the word property has not been defined in the Tamil Nadu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder any restrictions and it had the absolute right to use the trademark during the period covered under the agreement. B. [1996] 102 STC 106 (SC) (Vikas Sales Corporation v. Commissioner of Commercial Taxes). In the above case, a question arose, whether the transfer of an import licence called REP licence/Exim scrip by the holder thereof to another person constitutes a sale of goods within the meaning of and for the purposes of the sales tax enactment of Tamil Nadu. The court, in that case, considered in extenso the terms goods , property , movable property and immovable property . After referring to the various definitions and also the dictionaries, the court observed that the wordings also commonly used to denote everything which is the subject of ownership, corporeal or incorporeal, tangible or intangible, visible or invisible, real or personal and everything that has an exchangeable value or which goes to make wealth or estate. Referring to the Jowitt's Dictionary of English Law (Sweet Maxwell Limited, 1977), the court observed as under: This definition also shows that the expression signifies 'things and rights considered as having a money val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to use the goods to the transferee would depend upon the nature of the goods. For transfer of right to use a trademark, permission in writing as required by law may be enough. In case of tangible property, handing over of the property to the transferee may be essential for the use thereof. All that will depend upon the nature of the goods. Take for instance, transfer of right to use machinery. The right to use the machinery cannot be transferred by transferor to the transferee without transfer of control over it. The case before the Andhra Pradesh High Court in Ras htriya Ispat Nigam Ltd. v. Commercial Tax Officer [1990] 77 STC 182 was a case of transfer of right to use machinery. It was in that context, the above decision came to be rendered. But the position in case of trademark is different. For transferring the right to use the trademark, it is not necessary to hand over the trademark to the transferee or give control or possession of trademark to him. It can be done merely by authorising the transferee to use the same in the manner required by the law as has been done in the present case. The right to use the trademark can be transferred simultaneously to any numb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, the court held that the hire-charges were taxable under the Act. The learned counsel for the Revenue has rightly placed reliance on this ruling. E. [2000] 119 STC 182 (SC) (20th Century Finance Corpn. Ltd. v. State of Maharashtra). In that case, the Supreme Court ruled that taxable event is the transfer of the right to use the goods regardless of when or whether the goods are delivered for use and what is required is that the goods should be in existence so that they may be used. The Supreme Court also held that, also of no relevance to the deemed sale is where the goods are delivered for use pursuant to the transfer of the right to use them, though it may be that in the case of an oral or implied transfer of the right to use goods, it is effected by the delivery of the goods. F. [2003] 130 STC 1 (SC) (State of Uttar Pradesh v. Union of India). In that case, the Supreme Court, pointing out the various rulings which are to the effect that electricity also falls within the meaning of goods , held that the Department of Telecommunications is a dealer , which collects rentals for the supply of transfer of use of telephonic connection, which is compen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od. Of course, it retained the liberty to make use of the trademark in the event of the licensor starting to manufacture the products. Equally, it retained the liberty to grant licence to any other individual person or company to use the trademarks. Trademark is the property right and it exclusively belongs to the party who has registered it. Such a right is an intangible or incorporeal goods, which can be merchandised by the registered owners. As pointed out by the Supreme Court, the word goods is defined in very wide terms so as to bring in both tangible and intangible objects. General Clauses Act would explain movable property as property of every description except immovable property. Trademark right is intangible goods, which can be subject-matter of transfer. As already pointed out, M/s. Muthu Agencies was granted permission to use the trademark without any restriction whatsoever for a particular period. Consequently, it can only be taken as transfer of a right to use and not a mere right to enjoy. Simply because the assessee retained the right for himself to use the trademark and reserved the right to grant permission to others to use the trademark, it would not take away ..... 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