CUB Pty Limited v. UOI & Ors - (High Court of Delhi) (25 Jul 2016)

Provisions of Income Tax Act are not applicable, when situs of trademarks and intellectual property rights and owners thereof are not located in India

MANU/DE/1745/2016

Intellectual Property Rights

Situs of the owner of an intangible asset would be the closest approximation of the situs of an intangible asset

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. An agreement, known as ‘India sale purchase agreement’ (ISPA), was executed in Melbourne between Dismin, the petitioner, Foster's Group Limited, SABMiller (A & A2) and SABMiller Africa & Asia B.V. As a result of the ISPA, SABMiller (A & A2) became the owner of FBG Mauritius and thereby the owner of Foster’s India Limited. Petitioner submitted that as the trademarks were originally adopted by the petitioner in Australia, admittedly the intellectual property rights therein vested in the petitioner and the situs of those rights was clearly Australia.

Petitioner is aggrieved by conclusion of AAR holding 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 under the Income Tax Act, 1961.

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. There is no such provision with regard to intangible assets, such as trademarks, brands, logos, i.e., intellectual property rights. Therefore, the well accepted principle of ‘mobilia sequuntur personam’ would have to be followed. The situs of the owner of an intangible asset would be the closest approximation of the situs of an intangible asset, an internationally accepted rule, unless it is altered by local legislation. Situs of the trademarks and intellectual property rights, which were assigned pursuant to the ISPA, would not be in India as owner thereof was not located in India at the time of the transaction.

Delhi High Court ruled that, Income accruing to the petitioner from the transfer of its right, title or interest in and to the trademarks in Foster’s brand intellectual property is not taxable in India under the Income Tax Act, 1961.

Relevant : Mobilia sequuntur personam

Tags : SITUS INTANGIBLE ASSETS LEVY