Bombay High Court has held that the amount received by the assessee on transfer of right to use the trademark would be liable to be taxed under “Maharashtra Sales Tax on the Transfer of the Right to use any Goods for any Purposes Act, 1985”. The assessee (Tata Sons Ltd.) had entered into a ‘Brand Equity and Business Promotion Agreement’ which provided detailed guidelines for use of the TATA name and the trademarks in the course of business by the subscribing companies, i.e., the transferees. The issue before the High Court was whether the right to use the trademark would amount to “sale” within the meaning of Section 2(10) of the said Act.
The High Court observed that the right was transferred by an agreement with the transferee by which the transferee was allowed to use the trademark of the assessee on payment of consideration by way of royalty at the rate specified therein and that such transfer for consideration clearly fell within the provisions of the Act of 1985. The court distinguished the decision in the case of BSNL v. Union of India [(2006) STC Vol. 195] on facts and held that the Act of 1985 does not give any indication that the right to use the incorporeal/intangible goods should be exclusively transferred in favour of the transferee. The court held that there can be a transfer of the right to use these goods and it need not be exclusive and unconditional and that the transferor may simultaneously use it during the period of the agreement.