Crocin Trademark Sale to UK Company Constitutes Export, Exempt from Sales Tax: Bombay HC [Read Order]
The court concluded that upon assignment, the trademark's rights and location effectively transferred to the UK-based entity, constituting an 'export' under the CST Act.
The Bombay High Court has addressed a sales tax reference concerning the 1996 sale of the 'Crocin' trademark by M/s. Duphar Interfran Ltd. to SKB Play PLC, a UK-based company.
The court held that the Brand Acquisition Agreement dated 18 January 1996 in respect of trademark- ‘Crocin’ is an Agreement to Sale and such sale is not a sale within the State of Maharashtra, but shall be deemed to have taken place in the course of export of the said trademark- ‘Crocin’ outside India, as contemplated under Section 5(1) of the Central Sales Tax Act, 1956.
The core issue was whether this transaction constituted a local sale within Maharashtra, attracting 4% sales tax, or a sale in the course of export, which would be exempt from such tax.
The Applicant, represented by Mr. Ishaan V. Patkar, contended that the sale should be treated as an export. They argued that a trademark is an intangible asset, and its legal location, or 'situs', follows its owner based on the internationally accepted principle of 'mobilia sequuntur personam'. Since the trademark was assigned to a company in the UK, its situs effectively moved outside India, qualifying the transaction as an export under Section 5(1) of the Central Sales Tax Act.
The Respondent, the State of Maharashtra, countered that the sale was taxable within the state. They argued that the situs of a trademark is determined by its place of registration in India, not by the location of its owner. They further pointed out that the agreement was governed by Indian laws and the consideration was paid in Indian rupees, reinforcing that the transaction was a local sale.
Justices M.S. Sonak and Advait M. Sethna ruled in favor of the Applicant. The court relied on its own precedent in Mahyco Monsanto v. Union of India and decisions of other High Courts, holding that for intangible assets like trademarks, the situs follows the owner. It was held that in the determination of situs of an intangible asset, which does not have a physical form, one needs to follow the internationally accepted legal principle of “mobilia sequuntur personam”.
The court concluded that upon assignment, the trademark's rights and location effectively transferred to the UK-based entity, constituting an 'export' under the CST Act. The court rejected the argument that registration determines situs, noting that registration is not compulsory and an assignee acquires title by the assignment itself, not by subsequent registration
The bench held that the Brand Acquisition Agreement dated 18 January 1996 in respect of trademark- ‘Crocin’ entered into between the parties is an Agreement to Sale and such sale is not a sale within the State of Maharashtra, but shall be deemed to have taken place in the course of export of the said trademark- ‘Crocin’ outside India, as contemplated under Section 5(1) of the Central Sales Tax Act, 1956.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
