Case Law Details
MS. Lal Products Vs Intelligence Officer (High Court Kerala)
Conclusion: Transfer of patent rights would be subject to CST as while transferring of intangible rights obtained under a statute, to another entity having its place of business in another State; from where the transferee intended to exercise such rights thereafter, postulated a movement of the intangible, corporeal goods from one State to another and, hence, would be an inter-state sale assessable to tax.
Held: In the present case, assessee-company having registered office within the State of Kerala had transferred its patent rights on a bath-soap to a company having registered office at Bombay. The agreement of sale was executed at Pondicherry wherein the purchaser had a unit manufacturing soap for which the trademark registration was obtained. Department held that transfer of patent rights were subject to Central Sales Tax Act and the penalty was imposed along with demand. It was held the situs of the owner of an intangible asset, would be the closest approximation of the situs of an intangible asset. On the above reasoning, it had to be held that the exercise of the right to a trademark or a patent right; which had been obtained by the assessee, who had their principal places of business in the State of Kerala, was exercised from the principal place of business. When transferring their rights obtained under a statute, to another entity having its place of business in another State; from where the transferee intended to exercise such rights thereafter, postulated a movement of the intangible, corporeal goods from one State to another and, hence, would be an inter-State sale assessable to tax under the CST Act. The transferor’s principal place of business being within the State of Kerala, the sale would be an inter-State sale. Thus, the transfer was not a transfer of right to use, but a transfer of property in goods, vesting the complete rights with the transferee and the transferor having no subsisting right thereafter.
FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT
The revisions and writ petitions raise an identical issue as to where the situs of a sale is, when the sale is of a trade mark or patent, admittedly assessable to tax as a sale of intangible, incorporeal goods.
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