Transfer of trade mark cannot be considered as transfer of goodwill as they are two separate assets
The Bangalore Income Tax Appellate Tribunal (the Tribunal) held that transfer of trade mark is not transfer of goodwill as the goodwill of a business cannot be sold without selling business itself. Thus, the trade mark and goodwill are two different assets. Further, since the capital gains on sale of trade mark came into effect from 1 April 2002 there was no capital gain on sale of trade mark for the year under consideration.
Facts of the case
- The taxpayer company was engaged in the manufacture and marketing of electrical appliances under the name “Sharp”.
- The trade mark “Sharp” was registered on 7 December 1961 and about 21 items were being manufactured by the taxpayer under the said name.
- However, conflict arises between the M/s. Sharp Corporation of Japan, (SC) internationally acclaimed leading manufacturer of electric and electronic items and the taxpayer over using of same brand name “Sharp”.
- Consequently, a tripartite agreement was entered on 20 June 1995, between the taxpayer, the SC and one of the directors of the taxpayer company.
Some of the important clauses of the settlement agreement are as follows:
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