Case Law Details
Soktas Tekstil Sanayi Ve Ticaret AS Vs ACIT (ITAT Delhi)
ITAT Delhi held that consideration for permitting the licensee the right to use of brand name or trademark has to be treated as Royalty in terms of section 9(1)(vi) of the Act read with Article 12 of the tax treaty. Accordingly, the same will be taxable.
Facts- The core issue arising for consideration is whether the amount received by the assessee on account of transfer of trademark and brand name can be treated as royalty under Article 12 of India – Turkey Double Taxation Avoidance Agreement (DTAA), instead of capital gains under Article 13 of the DTAA.
Conclusion- In the facts of the present appeal, the factual position emerging on record clearly indicates that the assessee has not alienated its ownership rights over the brand names and trademarks, either fully or partially but has simply permitted the licensee the right to use of brand name and trademark in a particular geographical territory.
Thus, in terms of section 9(1)(vi) of the Act read with Article 12 of the tax treaty, it can be concluded that as per the terms of Trademark Licence Agreement (TLA), the assessee has received the consideration for the use of or the right to use of trademark/brand names. Therefore, the consideration received by the assessee has to be treated as royalty.
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