Sanjeev Sachdeva JUDGMENT
Badar Durrez Ahmed, J.
1. The question that arises for consideration in this writ petition pertains to the situs or location of intellectual property rights such as logos, brands, trademarks, which are capital assets, but intangible in nature. In terms of Section 9(1) (i) of the Income Tax Act, 1961, all income accruing or arising, directly or indirectly, inter alia, through the transfer of a capital asset situate in India, shall be deemed to have accrued or arisen in India. The petitioner had sought an advance ruling from the Authority for Advance Ruling (Income Tax), New Delhi (hereinafter referred to as 'the AAR) on, inter alia, the following question:-
(i) On the facts and circumstances of the case, whether the receipt arising to the applicant, from the transfer of its right, title and interest in and to the trademarks, Foster's Brand Intellectual Property and grant of exclusive perpetual licence of Foster Brewing Intellectual Property is taxable in India, having regard to the provisions of the Income Tax Act, 1961 and the Double Taxation Avoidance Agreement between India and Australia?
2. By virtue of its order dated 14.05.2008, the AAR has answered the said question by holding that the income 'accrued' to the applicant, from the transfer of its right, title and interest in and to the trademarks and Foster's Brand Intellectual Property is taxable in India under the Income Tax Act, 1961. Insofar as the income attributable to the grant of perpetual and irrevocable licence in relation to Brewing Intellectual Property rights is concerned, the same is not liable to be taxed under the Income Tax Act, 1961.
3. The petitioner is aggrieved by the fact that the AAR has observed that the income 'accrued' to the petitioner from the transfer of its right, title and interest in and to the trademarks and the Foster's Brand Intellectual Property is taxable in India under the Income Tax Act, 1961. The AAR arrived at its said ruling after holding that the said intellectual property rights of the petitioner, which were the subject matter of assignment/transfer, were situate in India. The plea of the petitioner is that in the case of intangible capital assets the situs thereof has to be determined by the situs of the owner. This is so because the assets, being intangible, do not exist in any physical form and, therefore, cannot be said to be located at any physical place, unlike a tangible capital asset which exists in physical form and has a specific physical location. It is the case of the petitioner that because of the nature of an intangible capital asset, the common law principle 'mobilia sequuntur personam' has been evolved, whereby a fiction is created to the effect that the situs of an intangible capital asset would be the situs of the owner of that asset. In this backdrop, it has been contended that since the owner of the intangible assets in question was located in Australia, the petitioner, being an Australian company, the intangible assets, which include the intellectual property rights of the petitioner, were also located in Australia. Therefore, the transfer of those assets would not result in any income deemed to have accrued in India and would not be exigible to tax in India.
4. On the other hand, the AAR was of the view that since the intellectual property rights, which are the subject matter of the present petition, pertain to India, in the sense that they were used in India, nurtured in India and some of them were registered in India, the same had taken roots in India and, therefore, were completely situate in India. In coming to this conclusion, the AAR did not accept the applicability of the 'mobilia sequuntur personam' principle to the facts of the present case and in doing so placed reliance, inter alia, (i) Geo........