CIT Vs Zydus Lifesciences Ltd (Gujarat High Court)
Transfer of Trademark Not Business Goodwill Reason Rs.29.10 Crore Receipt Held Not Taxable; Prospective Section 55 Amendment Reason Self-Generated Trademark Transfer Escapes Capital Gains Tax for Earlier Years; No Transfer of Entire Business Goodwill Reason Assignment of Trademarks Alone Not Chargeable to Tax; DCF Valuation Method Not Reason to Treat Trademark Transfer as Goodwill Sale, Court Holds; Section 28(iv) and Section 41(1) Not Applicable Reason Trademark Assignment Receipt Not Business Benefit; Trademark and Business Goodwill Are Distinct Reason Receipt on Assignment of Self-Generated Brand Not Taxable
The Gujarat High Court examined appeals arising from a Tribunal order concerning the taxability of Rs.29.10 crore received by the assessee on assignment of 22 veterinary trademarks / brand names to a joint venture company under a Deed of Assignment dated 15 June 2000, along with a connected issue relating to short-term capital loss.
The respondent assessee, along with Ambalal Sarabhai Enterprise Ltd., had formed a 50:50 joint venture company named Sarabhai Zydus Animal Health Ltd. The assessee transferred 22 veterinary trademarks / brand names to the joint venture for Rs.29.10 crore under an assignment deed. The deed recorded that the trademarks were assigned “along with goodwill of the business concerned in the goods for which the said trademarks are registered and/or being used.” The assessee treated the consideration as a capital receipt not chargeable to tax, contending that the trademarks were self-generated assets and that no ascertainable cost of acquisition existed. It also relied on Section 55(2)(a), arguing that the amendment bringing trademarks / brand names into the cost-of-acquisition framework applied prospectively from 1 April 2002 and therefore did not govern AY 2001–02.
