9911796707
TMI Blog2016 (7) TMI 1094X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, whether the receipt arising to the applicant, from the transfer of its right, title and interest in and to the trademarks, Foster's Brand Intellectual Property and grant of exclusive perpetual licence of Foster Brewing Intellectual Property is taxable in India, having regard to the provisions of the Income Tax Act, 1961 and the Double Taxation Avoidance Agreement between India and Australia? 2. By virtue of its order dated 14.05.2008, the AAR has answered the said question by holding that the income 'accrued' to the applicant, from the transfer of its right, title and interest in and to the trademarks and Foster's Brand Intellectual Property is taxable in India under the Income Tax Act, 1961. Insofar as the income attributable to the grant of perpetual and irrevocable licence in relation to Brewing Intellectual Property rights is concerned, the same is not liable to be taxed under the Income Tax Act, 1961. 3. The petitioner is aggrieved by the fact that the AAR has observed that the income 'accrued' to the petitioner from the transfer of its right, title and interest in and to the trademarks and the Foster's Brand Intellectual Property is taxable in India un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, they were clearly assets which were located in India. FACTS: 5. It would be necessary to set down the factual backdrop in which the question has arisen for our consideration. The petitioner (CUB Pty. Limited, formerly known as Foster's Australia Limited) had a 100% subsidiary - Dismin India Private Limited (Dismin). In turn, Dismin held 100% shares of FBG, Mauritius, which, in turn, held 100% shares of Foster's India Limited. The latter company, namely, Foster's India Limited was incorporated on 26.09.1995. On 13.10.1997, a brand licence agreement (BLA) was executed between the petitioner and Foster's India Limited. By virtue of the BLA, Foster's India Limited was licensed to use in India four of the trademarks owned by the petitioner. They were:- (i) FORSTER's & F logo (ii) F logo (iii) FORSTER's (iv) Kangaroo Device In consideration of this licence, the petitioner received royalty and was subjected to withholding tax in India. It is pertinent to note that the BLA permitted Foster's India Limited to use the said licensed trademarks in India. The BLA did not transfer any other right to Foster's India Limited. In other words, the licensed trademarks continued to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the former had licensed four trademarks to the latter for use in India. 8. On 12.09.2006, a deed of termination of the BLA was executed in Australia. On the very same day, that is, on 12.09.2006, a deed of assignment was executed in Australia, whereby the petitioner assigned the said 16 trademarks to Skol Breweries Limited [nominee of SABMiller (A & A2)]. 9. On 22.09.2006, the petitioner moved an application before the AAR under Section 245-Q of the Income Tax Act, 1961, seeking an advance ruling on, inter alia, the question extracted earlier in this judgment. By the impugned order dated 09.05.2008, the AAR held the income arising from the transaction of the transfer of the 16 trademarks to be deemed income accruing in India on the basis of its finding that the said intellectual property rights were capital assets situate in India. Being aggrieved by the said ruling, the petitioner had initially filed a Special Leave Petition, being SLP (Civil) No. 21519/2008 before the Supreme Court of India. But, on 08.09.2008, the same was withdrawn by the petitioner with liberty to move the High Court. And, that is how the present petition has been filed challenging the ruling given by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternal Revenue: 1934 BTA Lexis 1344, wherein it was observed as under:- "Rights in trade-marks are of common law origin, General Baking Co. v. Gorman, 3 Fed.(2d) 891; certiorari denied, 268 U.S. 705. The right to a trade-mark exists at common law, L. H. Harris Drug Co. v. Stucky, 46 Fed. 624, and has long been protected thereby, Piggly Wiggly Corp. v. Saunders, 1 Fed.(2d) 572; affd., 30 Fed.(2d) 385. A trade-mark does not derive its existence from any statute, state or Federal, but exists independent of statutes, and is protected even in the absence thereof. Trade-marks are not created by the trade-mark statutes. Such statutes merely fortify the common law right to a trademark by conferring the statutory title on the owner. Authorities cited, supra, and La Croix v. May, 15 Fed. 236." 11. The learned counsel for the petitioner submitted that the location of a trademark is governed by the common law maxim of 'mobilia sequuntur personam'. According to this principle or doctrine, the personal property held by a person is governed by the same laws that govern that person. This principle has been applied to determine the situs of intangibles which entails that the situs of intangible a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided for to it, which we do not concede, the fact remains that they were attributable to the transferred trademark and attached goodwill of the corporation whose business was located in this state. That fixes the situs of the taxable property." xxxx xxxx xxxx xxxx "The term "mobilia sequuntur personam" is a maxim defined as meaning, "Movables follow the [law of the] person." (58 C.J.S. 837.) In Miller v. McColgan, 17 Cal.2d 432 [110 P.2d 419, 134 A.L.R. 1424], it is said at page 443: "The doctrine of mobilia sequuntur personam has been repeatedly and consistently maintained in determining the taxable situs of intangible property, and as recently as the 1938-1939 term the Supreme Court of the United States recognized it in Curry v. McCanless, 307 U.S. 357 [59 Sup.Ct. 900, 906, 83 L.Ed. 1339, 123 A.L.R. 162], . . ." (Quoting with approval, to that effect, from the last cited authority.)" (underlining added) 12. It was further submitted on behalf of the petitioner that the common law rule of 'mobilia sequuntur personam' continues to operate and be applicable in the absence of any contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tured in India by the reason of coordinated efforts of the petitioner and Foster's India Private Limited till the date of the ISPA in 2006. The AAR was, therefore, of the view that it was reasonable to hold that the marketing intangibles comprising the Foster's trademarks and brand, which were in use for nearly a decade, had their abode in India by the crucial date of transfer of the said capital assets. The AAR was also of the view that even assuming that some of the trademarks were used elsewhere also, their existence in India could not be denied. The AAR used the expression that intellectual property belonging to the petitioner had its "tangible presence' in India at the time of the transfer. The AAR also took the view that the registration of the petitioner's trademark was one of the relevant factors pointing to the roots that the trademarks had taken and the recognition they had gained in India. The AAR also took the view that the termination of the BLA was not antecedent to the deed of assignment. This observation was straightaway criticized by Mr Ganesh as being wrong inasmuch as the termination of the BLA was a condition precedent to the assignment as noted in Clause 5.3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that there was a fallacy in the arguments made on behalf of the petitioner placing reliance on the maxim of 'mobilia sequuntur personam'. As an example, he submitted that suppose an Australian had registered trademarks and had spent and promoted the said trademarks only in India, could it still be said that since the said Australian was a resident of Australia, the situs of the trademark could also lie in Australia. A further question was posed that if the Australian migrated to another country, would the situs shift to that country? These questions were answered by Mr Sahni himself, obviously as - 'no'. According to Mr Sahni, these were business intangibles and the situs of the same would be where the business is carried out and where the intangibles would be protected under the local law. It was submitted by Mr Sahni that the trademarks and other intellectual property rights, to the extent they related to India, would have to be deemed to be located in India and it did not matter as to where the owner was located. Consequently, it was submitted that the principle of 'mobilia sequuntur personam' would not apply in the present case and, therefore, no interference with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
