Respondent: Commissioner concerned Commissioner of Income-tax and Director of Income-tax (International Taxation) For Appellant/Petitioner/Plaintiff: N. Venkataraman, Sr. Adv., K.Indira, Adv., Anagha Malear, C.A., Sr. Manager, Ernst & Young, Rajesh Dhume, C.A, for S.R. Batliboi & Co.
Income Tax Act, 1961 - Sections 2(14), 2(47), 9(1) and 55(2); Stamp Act - Section 51(1); Constitution of India - Article 13 and 13(6)CIT v. Finlay Mills Ltd. AIR 1951 SC 464; Geoffrey Inc. v. South Carolina Tax Commission; Kmart Properties Inc. v. Taxation and Revenue Department; Commissioners of Inland Revenue v. Muller & Co. (1901) AC 217; Star Industrial Co. Ltd. v. Yap Kwee Kor Trading; Associated Company Ltd. v. Commissioner of Custom; Anglo French Textile Co. Ltd., v. CIT; Union of India v. Azadi Bachao Andolan 1.1. The applicant is a non-resident foreign company incorporated in Australia in the year 1907 under the name of Carlton and United Breweries Ltd. It is a wholly owned subsidiary of Foster's Group Limited (for short 'Foster's Group), Australia which is a global multi-beverage group dealing in beer, wine etc. and also non-alcohol beverages. The business of the applicant - Foster's Australia Limited includes the brewing, processing, packaging, marketing, promoting and selling of beer products in Australia and abroad. The applicant states that it owns various brands including Foster's brand in relation to beer products which comprises of trade marks, logos, devices, brand guidelines, advertising material, technology and know-how including recipes and brewing specifications. The applicant grants licences in respect of Foster's brand to parties in three countries and, until recently, in India. By virtue of the licence, the licencee can sell, market and distribute and sometimes brew, process and package Foster's beer within a particular territory. The applicant also states that it holds certificates of registration of trade marks pertaining to Foster's Brand and it has been continuously using the Foster's Brand since its registration. In India, the applicant registered the Foster's trade mark and "F" logo on 15.7.1993.
1.2. The applicant states that it had entered into a Brand Licence Agreement with Foster's India Limited (hereinafter referred to as Foster's India) on 13.10.97. The Agreement which is placed on record grants to Foster's India an exclusive licence to brew, package, label, and sell Foster's Lager (beer) and an exclusive right of user of the trade-marks specified in Schedule 'A' within the territory of India. It is seen from the said agreement that Foster's India was also authorized to use the Mark (Foster's) as part of its corporate name. Pursuant to this Agreement, Foster's India utilized the rights aforementioned for a consideration and on such consideration received, the applicant had been paying income tax in India, treating the same as royalty income.
It is the case of applicant that the said licence was terminated before completion of the transactions specified in Sale and Purchase Agreement dated 4-8-2006.
1.3. It must be clarified that B. L. Agreement was entered into between Carlton & United Breweries Ltd. and Raly Beverages Ltd. In the agreement it is mentioned that Raly Beverages Ltd. intends to change its name to Foster's India Ltd. Accordingly, the change did take place.
Carlton and United Breweries Ltd. changed its name on 1st July, 2004 as Carlton & United Beverages Ltd. On 3rd July, 2006 again there was a change in the name of the company as Foster's Australia Ltd., (which is the applicant herein) - a public company limited by shares.
1.4. It is evident from the facts narrated by the applicant supported by the documents filed that the applicant entered into a contract for the transfer of shares and other intangible assets in the nature of intellectual property to SAB Miller, UK under an agreement styled as "India Sale and Purchase Agreement" (hereinafter referred to as S&P Agreement). The Agreement was executed in Australia on 4.8.2006. As a sequel to this Agreement, a Deed of Assignment dated 12.9.2006 came to be executed between the applicant and SKOL Breweries Ltd. SKOL Breweries Ltd which is an Indian company was nominated by SAB Miller, UK as the transferee in terms of the S&P Agreement. The relevant details of Agreement dated 4.8.2006 and the Deed of Assignment dated 12.9.2006 will be referred to later. However, it may be noted at this juncture that there were five parties to the Agreement, namely, Dismin Investments Pty Ltd (for short 'Dismin'), Foster's Australia Limited (applicant), Foster's Group Limited, SAB Miller (A&A2) Limited, SAB Miller Africa and Asia B.V. Dismin and the applicant are the group companies of Foster's Group Ltd., Australia. It was a composite Agreement for the sale of shares by Dismin and the sale by the applicant of (a) trade marks (b) Foster's Brand Intellectual Property and (c) the grant of exclusive and perpetual licence in relation to Foster's Brewing Intellectual Property, confined to the territory of India. For all these items of sale including the shares (sold by Dismin), a sum of US $ 120 million has been stipulated as total consideration.
1.5. In connection with the above transactions (other than sale of shares) evidenced by the S&P Agreement and the Deed of Assignment, the applicant seeks advance ruling from this Authority on the following questions framed by it: 1. On the facts and in the circumstances of the case, whether the receipt arising to the applicant, from the transfer of its right, title and interest in and to the Trade Marks, Foster's Brand Intellectual Property and grant of exclusive perpetual licence of Foster's Brewing Intellectual Property is taxable in India, having regard to the provisions of the Income-Tax Act, 1961 ("the Act") and the Double Taxation Avoidance Agreement between India and Australia ("the DTAA")? 2. Without prejudice to Question 1, if the abovementioned receipt is held taxable in India, then whether the applicant is justified in contending that tax should be computed based on the consideration as per the independent valuation obtained by the applicant? 1.6. At the outset, the applicant's counsel has made it clear that in the present application, the taxability of income arising from the sale of shares effected by Dismin Investments Pty Ltd. is not in issue here.
However, by way of narration, it may be mentioned that Dismin is the registered owner of the 'sale shares' comprising all of the issued shares in the capital of FBG India Holdings Ltd., Mauritius which is a subsidiary of Dismin. The said Mauritius company held 77.2% of shares in Foster's India and the remaining 22.8% were held by its related company Austindia Private Ltd. Broadly speaking, as per the S&P Agreement and the deed of assignment, the applicant - Foster's Australia has conveyed the proprietary rights and interests it had in trade marks, Brand Intellectual Property and Brewing Intellectual Property free from all encumbrances to the assignee of SAB Miller, UK for use within the territory of India. The licence of Foster's brewing I.P granted under the deed of assignment entitles the assignee to brew, package and market Foster's beer in India. Prior to the crucial agreement (dated 4.8.2006), the applicant had entered into a Brand Licence Agreement (hereinafter referred to as BL Agreement) on 13.10.97 with Foster's India granting brewing licence to the latter and also granting an exclusive right of user in the territory of India of the trade-marks on or in relation to 'CUB Beer' which means Foster's Lager and such other beer made in accordance with the Manual. The applicant has been paying taxes under the Indian Income Tax Act for the royalty amounts received under the said agreement from Foster's India. The applicant submits that the BL agreement was terminated in accordance with Clause 5.3 of the S&P Agreement read with Clause 20.1(e) of BL Agreement. Pursuant thereto, the exclusive rights over trade marks, Brand Intellectual Property and Brewing Intellectual Property vested back with the applicant situated in Melbourne, Australia. Subsequent to the hearing, the applicant filed a copy of the deed purportedly executed on 12.9.2006, terminating the B.L. agreement. The applicant and Foster's India are the parties to the deed.
2.1. The definitions of certain relevant terms as given in the S& P Agreement dated 4.8.2006 may be noticed: "Foster's Brand" means the word "Fosters", the Foster's Beer Logos, any of the trade marks* registered as Trade Marks and any combination of any of the foregoing....
"Foster's Brand Intellectual Property means all Intellectual Property Rights (other than the Trade Marks) relating to the Foster's Brand in India*....
"Foster's Brewing Intellectual Property means all Intellectual Property Rights relating to the brewing and the technical aspects of packaging Foster's Lager in India* as at the Completion Date including the Brewing Manual." Foster's Beer means the brand of beer known as "Foster's Lager" and any other brands brewed or sold under the name "Foster's" Subsidiaries means each of Foster's India, Linton Brewing and Austindia.
Trade Marks means the trade marks set out in Schedule 4 of this document including, the goodwill relating thereto, all rights arising or accrued relating to such rights and all rights to sue and seek and recover damages and other remedies for past infringement of any such rights.
In Schedule 4, there are 16 Marks. Most of them have already been registered in India and for some, applications for registration seem to be pending.
2.2. It is necessary to refer to the important features and clauses of the Sale and Purchase Agreement. Dismin Investment Pty. Ltd. which is a Foster's group company and a registered owner of the entire share capital of its subsidiary by name FBG India Holdings Limited (a Mauritius based company), agreed to sell the shares to SAB Miller (A & A2) Limited, UK. As stated in the Application, FBG India Holdings Ltd. directly or indirectly holds all the shares capital of Foster's India Private Ltd. By the same Agreement, Foster's Australia Limited - the applicant which is the legal and beneficial owner of the trade-marks agreed to sell the trade-marks and the Foster's Brand Intellectual Property and to licence the Foster's Brewing Intellectual Property to the purchaser, SAB Miller (A&A2) Limited, UK (vide Clauses 3.1 and 6.5 of the S&P Agreement). Under Clause 3.3, the purchaser can nominate any wholly owned subsidiary as the transferee or licensee (as the case may be) of the shares, trade-marks, the Foster's Brand and Brewing Intellectual Property free from all encumbrances. The price payable by the purchaser for the shares, trade-marks and Brand Intellectual Property is a consolidated sum of 120 million US dollars subject to certain working capital adjustments.
2.3. Clause 5.3 which deals with pre-completion transactions obligates the FGL/Dismin/Foster's Australia to whom so ever it is applicable to procure the termination of the B.L.Agreement and Technical Services Agreement (which were entered into between CUB and Foster's India).
Clause 6 of the Agreement bears the caption 'Completion'. The completion will take place at 9.00 am on the Completion Date at the office of Dismin, unless otherwise agreed to by the parties (vide last Clause 6.1). Completion is defined to mean "completion of the sale and purchase of the Sale shares, the Trade Marks, the Foster's Brand IP and the licence of the Foster's Brewing IP in accordance with Clauses 6 and 7". The 'Completion Date' is defined to mean as the third business day after the day on which the condition in Clause 2.1 has been satisfied subject to the stated exception. Clause 2.1 lays down that the obligations of the purchaser in respect of completion are conditional on the issue of a written notice by or on behalf of the Treasurer of the Commonwealth of Australia stating that the Government does not object to the parties entering into the contract. Clause 7 enjoins that the obligations of the parties in respect of Completion shall be interdependent and no delivery or payment will be deemed to have been made and completion will not occur until all deliveries and payments have been made. Clause 6.2, inter alia, spells out the obligation of Dismin and/or Foster's Australia (applicant) to deliver to the Purchaser duly executed counterparts of each of the trade marks and Foster's Brand IP assignments and the hard copies of brewing manual and other manuals within the possession of Foster's India. Similarly, under Clause 6.4, the purchaser has to deliver to Foster's Australia at the time of completion a duly executed counterpart of each of the trade mark and Foster's Brand IP assignments, the Deed of Adherence executed by the purchaser and the deed of guarantee executed by SAB Miller.
2.4. The applicant stated at page 7 of the written submissions that on the appointed date i.e. 4.8.2006, the delivery in terms of Clauses 6.1 and 6.3 took place and Foster's Australia (the applicant) had handed over to SAB Miller (Purchaser) duly executed counterparts of each of the trade mark and brand IP assignments and hard copies of brewing and other manuals used in the business. However, the applicant clarified in response to the query by this Authority that the transaction of sale and purchase of shares and intellectual property was completed on 12/9/2006.
2.5. Clause 6.5 provides for licensing of Foster's Brewing IP. With effect from Completion, the applicant granted to the purchaser an exclusive, perpetual and irrevocable licence relating to the Foster's Brewing IP so as to use and enjoy the same and adapt it, in accordance with the provisions of Brand Management Agreement, for the purpose of brewing, packaging and marketing Foster's beer within India, with a right to sub-licence such right to any licensees of Foster's brand in India (vide cl 6.5). It is made clear in the same clause that the purchase price includes consideration for the licence of the Foster's Brewing IP and no further royalty or fee will be payable in respect of such licence.
2.6. As already noted, under the terms of the S&P Agreement the purchaser had the right to appoint its nominee which will be entitled to receive the rights under the S&P Agreement and discharge all obligations of the purchaser. Accordingly, the purchaser nominated - SKOL Breweries, a company incorporated in India and a member of SAB Miller group. The applicant then entered into a Deed of Assignment with SKOL on 12th September, 2006. By this deed which was executed in Melbourne, Australia, the applicant (assignor) assigned and conveyed all its right, title and interest in the trade-marks, all intellectual property rights relating to the Foster's brand in India in favour of the assignee free from all encumbrances. The Assignor (applicant) also granted to the assignee an exclusive, perpetual and irrevocable licence relating to Foster's brewing intellectual property for the purpose of brewing, packaging and marketing of Foster's beer within the territory of India with a right to sub-licence such right to any licensees of Foster's brand. A nominal consideration of 100 US dollars is stated to be the consideration for assignment.
3.1. In the above factual scenario and the covenants between the applicant and the other parties concerned, the controversial question that arises broadly is whether the trade-marks and Foster's Brand and Brewing IP rights owned by the applicant - Foster's Australia and conveyed / assigned to SKOL Breweries can be said to be capital assets situate in India and the consideration received in connection therewith is liable to be treated as income that accrues or arises in India. That is how the applicant has framed the questions in the written submissions.
3.2. The contention of the applicant is that the transfer of trade-marks and other intellectual property rights amounts to transfer of capital assets and the situs of such assets being located outside India, the consideration relating to the transfer cannot be subjected to tax in India. The intangible assets, it is contended, have no geographical location and no situs apart from the domicile of the owner. Strongly relying on the decision of this Authority in Pfizer Corporation*, the applicant's counsel contends that the rights and interests in the trade-marks, Brand IP and Brewing IP got restored and vested with the applicant in Australia consequent upon the termination of the BL Agreement dated 13.10.1997 as a result of which the situs of the said assets on the date of sale cannot be said to be within India.
It is highlighted that in the present case, both the asset and the place of contract is outside India and, therefore, beyond the reach of Indian Income-tax Act. The counsel for the applicant also contends that trade-mark is a right which comes into existence not because of its registration but because of its usage. In other words, the trade-mark exists as an asset independent of the registration and the registration merely affords further protection under the Statute. Therefore, it is contended that the registration of trade-mark has no bearing on the aspect of situs or location.
4. In the comments furnished by the Director of Income-tax (International Taxation), Pune, on behalf of the Revenue, it is submitted that the income has arisen in India inasmuch as the physical assets used by the Foster's group to produce the Foster's Brand beer in India alongwith trade marks in relation to the business in India were sold under the S&P agreement. Apart from that, an exclusive and irrevocable licence relating to Brewing I.P. rights including packaging of Foster's lager beer in India was conferred on the transferee under the said agreement. It is pointed out that effectively, Foster's India is held by Foster's Group, Australia through the cobweb of its subsidiaries. Though the shares and trade-marks and Foster's Brand I.P.are shown to be sold by two different entities, in effect and in substance, Foster's Group, Australia has transferred the ownership of its Indian company i.e. Foster's India including its tangible as well as intangible assets. The Revenue then submits that the termination of the earlier Brand licence agreement was only after the sale of shares, trade-marks etc. under the said agreement and the exclusive rights over the trade-marks, Brand I.P. and Brewing I.P. did not revert back to the applicant before the sale. The termination followed the event of sale of shares trade-marks and brand I.P. It is on this ground that the decision in Pfizer Corporation case is sought to be distinguished. The fact that the trade-marks are registered in India indicates, according to the Revenue, that the rights in and over the trade-marks existed in India only. It is then submitted that the capital assets in intangible form viz. trade-mark and Brand I.P. in relation to Foster's India having been transferred by the applicant and the sale of shares being integrally connected with it, the income accruing on the transfer of such assets is exigible to capital gains tax in India as per the provisions of Section 9(1) of the Act in the hands of the applicant.
Regarding the alternative submission of the applicant that it is only such part of the consideration as is reasonably attributable to India that is liable to the taxed, it is submitted that the whole of business in India is being transferred and that the entire consideration is liable to be taxed in India only. The absence of independent valuation report has also been commented upon by the Revenue. The inter-relationship between various Companies of Foster's Group Ltd. has been set out in the form of a diagram.
5.1. Having regard to the nature of the transaction and on the basis of rival contentions the only point to be examined under question No. 1 is whether the income shall be deemed to accrue or arise in India within the meaning of Section 9(1)(i) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). Under Section 9(1), the income specified in various sub-clauses thereof "shall be deemed to accrue or arise in India". We are concerned with Sub-clause (i), which reads as under: 9. (1) The following incomes shall be deemed to accrue or arise in India: (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or from any asset or source of income in India or through the transfer of capital asset situate in India.
The income arising from the transfer of capital assets situate in India shall be deemed to be taxable income by reason of the said provision.
5.2. In order to obviate any controversy based on the situs of the transfer, the deeming fiction has been introduced so as to bring within the net of taxation the income arising from transfer of capital assets if they are situate in India. Thus, the question of situation of capital assets in India assume importance in the context of Section 9(1)(i) of the Act. If the transfer is of a capital asset situate in India, the charge to tax is attracted by virtue of Section 9(1)(i) of the Act. It is immaterial in such a case that the actual process of transfer such as the execution of transfer documents had taken place outside India. Even under the Treaty no benefit can be claimed by the applicant if the transfer is in respect of the capital assets situated in India; that is why no argument has been addressed before us with reference to Treaty (DTAA with Australia). We may also note that the applicability of any other clause of Section 9(1) is not an issue in the present case. As far as income arising from the transfer of assets is concerned, the appropriate provision is Clause (i) of Section 9(1).
It is on the interpretation of this provision that contentions on both sides are advanced.
6.1. The term 'capital asset' has been defined under Section 2(14) of the Act to mean property of any kind held by an assessee whether or not connected with his business or profession. The definition of 'capital assets' clearly reveals that the said expression has been assigned a wide meaning. 'Property of any kind' undoubtedly includes intellectual property which is but a species of intangible property. Trade marks, brand, goodwill, technical know-how relating to the manufacture of goods would all qualify to be treated as capital assets within in the meaning of Section 2(14) of the Act.
6.2. As observed by the Division bench of Kerala High Court in the case of Haji Abdul Kader*, the definition of capital asset is of such wide amplitude as to take in an intangible asset such as goodwill of business. In Devidas and Vithaldas v. CIT Bombay City the Supreme Court also expressed the view that the acquisition of goodwill of the business amounts to acquisition of capital asset. This Authority held in the case of Pfizer Corporation** that the transfer of technology information in the form of dossier was a transfer of capital asset. The technology information therein related to the manufacture of certain nutritional products. Section 55(2) which deals with cost of acquisition of capital asset makes it clear that goodwill, trade-marks or brand name associated with a business and other incorporeal rights mentioned therein are treated as capital assets under the Act for the purpose of capital gains. Thus, the items falling broadly under the description of intellectual property which are the subject matter of transfer under the S&P Agreement are to be treated as capital assets.
In fact, there is no dispute on this point. So also, there is no dispute that there was transfer. "Transfer" in relation to a capital asset includes sale, relinquishment of the asset and the extinguishment of any rights therein [vide Section 2(47)].
7. The crucial question that needs to be addressed is whether the capital assets transferred by and through the S&P Agreement read with the deed of assignment are "situate in India" - an expression that is employed in Section 9(1)(i) of the Act. Income arising from the transfer of capital asset situated in India by a non-resident is deemed to be his income liable to be taxed in India as per the explicit mandate of Section 9(1).
8.1. The argument put forward by the applicant in Attachment 3 to the application is that the items of intellectual property covered by the Sale & Purchase Agreement have no location in India and the situs in the case of such intangible assets would be the place of fiscal residence of the owner. In the course of arguments and in the written submissions, it is contended, relying on the decision of Supreme Court in 20th Century Finance Corporation*, that the place where the contract is executed and put into effect is the situs of an intangible in the nature of goods. An allied argument repeatedly stressed was that with the termination of the B.L. agreement by the applicant, the exclusive rights relating to the brand and brewing i.p. conferred on Foster's India ceased and by the date of effective transfer the applicant stationed in Australia became the sole repository of all these assets.
It is submitted that the transferred assets cannot be said to be located in India when they got divested from the Indian business and vested with the applicant in Australia prior to the crucial Agreement dated 4-8-2006 taking effect. Thus, from whatever angle the issue is examined, the learned Sr. Counsel for the applicant submits that the situs or location of the capital assets transferred in the instant case was in Australia and therefore Section 9(1)(i) of the Act is not attracted.
8.2. We are of the view that the applicant's contention that the capital assets in question were not located in India on the relevant date of transfer is liable to be rejected. The applicant's contention that the intangible assets transferred by the applicant have no particular geographical location and that they have no situs apart from the domicile of the owner does not merit acceptance. We find no legal principle to support such a broad proposition. Equally untenable is the contention of the applicant that the place of execution of contract determines the situs. We are inclined to hold that the intellectual property comprising of Foster's trade-marks and brand I.P. can be said to be located in India where the business of Foster's India was being carried on in conjunction with the applicant. After the 1997 Agreement (Brand Licence Agreement), the said intellectual property was being put to use in India. In July 1993, Foster's F. logo was registered in India. Under the B.L.Agreement, four trade-marks including Foster's F.logo alongwith the Foster's brand were permitted to be used by Foster's India by virtue of an exclusive licence granted as per the said agreement. In addition, an exclusive licence to brew, package, label and sell Foster's lager beer in Indian territory was granted. It is recited in the Agreement that CUB Ltd. (previous name of applicant-Company) is the owner of certain trade marks in the Indian territory comprising or including the word "Foster's." In course of time, some other Foster's trade-marks were also registered in India. It is not, however, clear whether those other trade-marks were also being used by Foster's India in terms of the provision made in the B.L.Agreement. The applicant has, on the one hand, retained its proprietary rights in the goodwill associated with the trade-marks (vide para 4.1(b) of 1997 agreement). At the same time, by means of appropriate stipulations introduced in the Agreement, the applicant ensured that the Foster's beer propped up by its trade-marks and brand and the brewing technology offered by it acquired its value in the form of reputation and goodwill. In para 16.1 of the B.L.agreement, it was provided that Foster's India must use reasonable endeavour to promote and develop the sales and reputation of CUB Beer (Foster's Lager beer etc.) as high quality product and to preserve the brand image of CUB Beer. There are other clauses in the agreement by reason of which the applicant had its say in respect of advertising, marketing and distribution, quality control etc. The applicant's (CUB's) approvals in respect of various matters, viz. the brewing and packaging plants, labelling and packaging of containers etc. are required under Clause 14. Restriction on the sale of other Australian Beer is also imposed.
These are all meant to ensure that the Foster's brand beer marketed with the applicant's trade-marks, and logos acquire high reputation in the market and build-up considerable goodwill. The trade-marks registered in India together with the other features of Foster's brand had undoubtedly generated appreciable goodwill in Indian market and such goodwill has been nurtured in India by reason of coordinated efforts of the applicant and Foster's India till the date of the agreement entered into in 2006. Thus, the applicant's business presence in India manifested itself with the tie-up it had with Foster's India which made use of the intellectual property rights granted by the applicant. Keeping this background in view, it is reasonable to hold that the marketing intangibles comprising the Foster's trade-marks and brand which were in use for nearly a decade had their abode in India by the crucial date of transfer of the said capital assets. Even assuming that some of these trade-marks were used elsewhere also, their existence in India cannot be denied. Irrespective of the fact whether the location of Foster's trade-marks could be traced to the place of domicile of the owner, it can also be said that the trade-mark/brand I.P. had its location in India as well where it had perceivable impact on the business being carried out in India by Foster's India with the exclusive license granted by the applicant. To use a metaphor, the intellectual property belonging to the applicant had its "tangible presence" in India at the crucial point of time. As a result of transfer, the intangible property that was being used by Foster's India till the date of transfer will now be used and enjoyed by SKOL Breweries. The location had never shifted.
8.3. The very argument of the applicant's counsel that with the termination of B.L.Agreement on account of execution of S&P Agreement and the deed of assignment, the trade-mark and brand intellectual property got restored to and vested back with the applicant in Australia presupposes that on the date of S.P. Agreement, they were located in India, but their situs got shifted to Australia by reason of termination of B.L.Agreement. Such a plea has no factual or legal basis. The shifting of situs cannot be established by mere symbolic delivery of 'counter-parts' of trade-marks outside India in terms of S&P Agreement. As seen already, the termination of B-L Agreement took place not earlier to the completion date of S&P Agreement and the act of assignment. The predominant component of trade-mark and brand is good-will associated with them. In concrete terms, that goodwill cannot be said to have perished in India and shifted its location, lock, stock and barrel at the very moment at which the events of 'completion' and 'assignment' took place in Australia.
8.4. A word about the registration of trade-mark. No doubt, the registration of trade-mark has no bearing on the ownership. As pointed out by the Supreme Court in CIT v. Finlay Mills Ltd. ), the registration of trade-mark does not create an asset. Registration confers statutory remedies for its effective protection. Yet, registration of the applicant's trade-mark in India is one of the relevant factors pointing to the roots it had taken and the recognition it has gained in India.
8.5. The trade-mark of Foster, as noted earlier, set its foot for the first time in India in 1993 by virtue of its registration and it gained its vigour under the aegis of 1997 agreement. Foster's trade-marks and brand were being used by Foster's India for about a decade pursuant to the licence granted by the applicant in 1997. They became inextricable components of the business of manufacture and marketing of Foster's lager beer in India by the group Company of the applicant. The applicant was apparently interested in promoting and preserving the goodwill for its branded product in India and every clause in the B.L.agreement emphasizes this fact. The applicant, by entering into the B.L. agreement, for all practical purposes, became a collaborator with Foster's India in its business. It was even receiving royalty from Foster's India for the licence granted to the latter for making use of Foster's trade-marks as well as the brewing Manual, while retaining its proprietary rights over the goodwill "associated with the Mark and the device". By reason of such collaborative effort and the circulation of product (beer) bearing the imprint of applicant's trade-mark and brand over a length of time and the undoubted goodwill it generated in Indian market, the applicant's trade-mark and brand established their presence, rather predominant presence, on the Indian soil and it continued to hold its sway in India on the date of transfer. The commercial exploitation of the trade-marks and brand by the applicant, aided by the marketing and advertising efforts of Foster's India thus resulted in creation of valuable intangible asset in India. In the circumstances, it is reasonable to hold that the assets in the form of trade-mark and brand together with the goodwill they generated were situated in India when the transfer in question took place in 2006. The fact that the ownership of the intellectual property assets, viz., trade-marks, brand and goodwill had always remained with the applicant does not really undermine this inference. There is no legal principle that the situs of intangible assets such as trade-mark and goodwill would always go with ownership and they have no situs other than the country of fiscal residence of the owner. The acceptance of such proposition would be at the risk of going against commonsense and stark realities. On the other hand, there is sufficient authority for the proposition that the intangible assets or incorporeal property can have more than one situs. The decided cases in U.S.A. and U.K. also point to the principle that goodwill is territorial in the sense that it exists at a place where the related business exists. As trade-mark and goodwill are intertwined, the same principle would apply to both.
8.6. The situs of intangible or incorporeal property viz. trade-mark and goodwill was the subject matter of disquisition in American courts, when the issue of territorial nexus of a particular State to tax the subject was to be tested on the anvil of due process clause of the U.S.constitution. The case of Geoffrey Inc. v. South Carolina Tax Commission* decided by the Supreme Court of South Carolina was one such. Geoffrey - wholly owned subsidiary of Toys R. Us. Inc. (for short 'Toys R') incorporated in Delaware became the owner of several valuable trade-marks and trade names including 'Toys R.' Geoffrey then executed license agreement that allowed Toys R to use the "Toys R. Us". trade name as well as said trade-marks and names in many of the State. The agreement also granted Toys R a right to use Geoffrey's merchandising skills and know-how in connection with the marketing and sale of products covered by the agreement. As consideration for the licence granted, Geoffrey received royalty at a certain percentage on the net sales by Toys R. Toys R began its business in South Carolina and made royalty payments to Geoffrey based on South Carolina sales. Toys R deducted the royalty payment made to Geoffrey from its South Carolina taxable income. The Tax Commissioner of that State took the position that Toys R was entitled to deduct tax and Geoffrey was required to pay South Carolina tax on the royalty income. The Trial Judge upheld the Commissioner's assessment of taxes against Geoffrey. Geoffrey appealed to the Supreme Court of South Carolina and contended that due process clause and the commerce clause of the U.S. Constitution prohibited the taxation of its royalty income by South Carolina inasmuch the nexus requirement was not satisfied. Geoffrey contended that the situs of intangibles was its corporate headquarters in Delaware, not South Carolina.
8.7. The Supreme Court after citing certain decisions which laid down the proposition "intangibles may acquire a situs for taxation other than at the domicile of the owner if they have become integral parts of some local business", rejected Geoffrey's claim that its intangible assets were located exclusively in its corporate headquarters in Delaware.
8.8. Another decision worth noticing is that of Court of Appeals of New Mexico in the case of Kmart Properties Inc. v. Taxation and Revenue Department$. Kmart Properties Inc. (KPI), a Michigan subsidiary of Kmart Corporation owned and managed trade-marks previously developed by Kmart Corporation. Kmart Corporation created KPI for the purpose of holding little to and managing the trade-marks and trade names that Kmart Corporation had developed and used in the U.S. Shortly thereafter, Kmart Corporation transferred ownership of the marks to KPI and the two Corporations entered into a licensing agreement wholly granted the exclusive right to use the marks in the U.S. in consideration of Kmart Corporation paying royalty to KPI at a percentage of gross sales. KPI challenged New Mexico State income-tax laid upon royalties paid by Kmart Corporation to KPI. KPI based its challenge on the ground that New Mexico's assertion of jurisdiction violated the due process clause as well as the Commerce clause of the U.S. Constitution. KPI's challenge was repelled by the Court of Appeals. The Court pointed out that the licensing agreement 'ties KPI to New Mexico and to other States outside of Michigan where Kmart had its stores". The agreement granted Kmart the exclusive right and license to use the marks in the United States and as a consideration for that Kmart made royalty payments from time to time on the basis of its gross sales from all Kmart stores in the United States. The following observations made by the Court of Appeals are pertinent: 35: Being intangible property, a trademark can only have "physical presence beyond" the state of its creation, in those locales where it is put to tangible use, See Geofrey, 437 S.E. 2d at 17-18. When Kmart Corporation uses KPI's marks in a highly visible and commercially purposeful fashion in New Mexico, it logically follows that those marks are physically present during their period of use.
Otherwise, trademarks could never be physically present anywhere other than where the tax payer designates for its own tax purposes.... The Constitution does not impose such a tax-payer driven restriction on New Mexico's taxing policy.
38: The case before us presents far more than just merchandise bearing out-of-state trademarks for sale in New Mexico stores. An extensive apparatus of Kmart stores, signs, and employees are also physically present in New Mexico to work on behalf of KPI's goodwill and associated interests. That apparatus represents KPI's property interests in New Mexico, pursuant to a licensing agreement that requires Kmart Corporation to act on KPI's behalf.
8.9. The opinion of House of Lords of U.K. in the case of Commissioners of Inland Revenue v. Muller & Co. (1901) AC 217 is also relevant to the present case. The question that arose in that case was whether goodwill attached to the business which lay abroad fell within the exception provided by Section 51(1) of the Stamp Act in respect of the property "locally situate out of United Kingdom". The majority opinion of Law Lords was that the goodwill was property locally situated out of United Kingdom and therefore no stamp duty was chargeable on the agreement made in England. The following observations and the exposition of law deserve reference: It was argued that if goodwill be property, it is property having no local situation. It is very difficult, as it seems to me, to say that goodwill is not property. Goodwill is bought and sold every day. It may be acquired, I think, in any of the different ways in which property is usually acquired. Then comes the question, Can it be said that goodwill has a local situation within the meaning of the Act? I am disposed to agree with an observation thrown out in the course of the argument, that it is not easy to form a conception of property having no legal situation. What is goodwill? It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation and connection of a business.... The goodwill of a business must emanate from a particular centre or source. However, widely extended or diffused its influence may be, goodwill is worth nothing unless it has power of attraction sufficient to bring customers home to the source from which it emanates.
For my part, I think that if there is one attribute common to all cases of goodwill, it is the attributable of locality. For goodwill has no independent existence. It cannot subsist by itself. It must be attached to a business. Destroy the business, and the goodwill perishes with it, though elements remain which may perhaps be gathered up and be revived again. (per Lord Macnaghten) I entirely dissent from the view that the goodwill of a business, either wholesale or retail, cannot be locally situated. On the contrary, I should say that the goodwill of most businesses is locally situated. (per Lord James) Goodwill regarded as property has no meaning except in connection with some trade, business, or calling. In that connection I understand the word to include whatever adds value to a business by reason of situation, name and reputation, connection, introduction to old customers, and agreed absence from competition, or any of these things, and there may be others which do not occur to me. In this wide sense, goodwill is inseparable form the business to which its adds value, and, in my opinion, exists where the business is carried on. Such business may be carried on in one place or country or in several, and if in several there may be several businesses, each having a goodwill of its own.
But, even if the goodwill in the case before us can be properly regarded as to some extent separable from the factory, I still think it must be treated as locally situate abroad.
Goodwill is only taxable as property; and the legal conception of property appears to me to involve the legal conception of existence somewhere. Incorporeal property has no existence in nature and has, physically speaking, no locality at all. We, however, are dealing not with anything which in fact fills a portion of space, but with a legal conception, or in other words, with rights regarded as property. But to talk of property as existing nowhere is to use language, which to me is unintelligible.
I am not aware of any case in which goodwill, as property, has been treated as having no locality for legal purposes. (per Lord Lindley) 8.10. In Star Industrial Co. Ltd. v. Yap Kwee Kor Trading, the Privy Council speaking through Lord Diplock observed thus - Goodwill, as the subject of proprietary rights, is incapable of subsisting by itself. It has no independent existence apart from the business to which it is attached. It is local in character and divisible; if the business is carried on in several countries a separate goodwill attaches to it in each.
9.1. In order to invoke the ratio of this Authority's ruling in Pfizer case, the learned Counsel for the applicant strenuously urged that the brand licence agreement of 1997 stood terminated as a result and by virtue of the S & P Agreement and the Deed of Assignment entered into in 2006 and in pursuance of the same, the exclusive rights over the trade-marks, brand and brewing intellectual property got vested back with the applicant - Foster Australia, which facilitated the conveyance of the rights and interests therein to the nominee of the purchaser (SAB Miller) free from all encumbrances. It is, therefore, contended that the assets in the form of trade-marks, brand and brewing I.P. were outside India on the date of transfer. As already noticed, reliance was placed on the Pfizer ruling. That was a case in which technical information in the form of dossier for the manufacture of certain food supplement products by the group company of Pfizer in India was transferred to another company, namely, EAC Denmark, and the transfer of dossier took place in Bangkok. Before the event of transfer took place, EAC Denmark paid a substantial amount as consideration for the early termination of the licence granted to the Indian company to manufacture the product with the trade-marks registered in India. This Authority held thus: As regards the situs of the asset which is the subject matter of transfer, it is admitted that the said asset was available in India, both in tangible as well as intangible form before the transfer to EAC (Denmark). It is also not disputed that for a very long time the said information was almost exclusively used in India and improvements and improvisations in the said information were made in India. However, it is also not disputed that the Indian company was only a licensee and the original technical know-how was always available with the owner, i.e. the applicant. Once the Indian company entered into an agreement with EAC Denmark for early termination of licence to manufacture these products the technical know-how reverted back to the owner and there was extinguishment of the right to manufacture for which consideration has been paid to the Indian company. As a result no asset related to technical know-how was located in India either in tangible or intangible form after termination of the licence granted to the Indian company. The subsequent agreements between EAC Trading Ltd., an Indian affiliate of EAC Denmark and Pfizer India to have business support during the initial period of EAC Trading's operations in India do not affect the situs of the asset which is the subject matter of transfer. We are of the view that the situs of the technical information which is the subject matter of the sale agreement was not in India in any form after early termination of the licence.
9.2. The said ruling is distinguishable on facts. The agreement similar to the one entered into between EAC Denmark and Pfizer India to procure the early termination of the license for valuable consideration is absent in the present case. That apart, we find that in the instant case, the termination of the brand license agreement by the applicant was not antecedent to the S&P agreement. That is so, even according to the applicant who filed a document claimed to be the deed of termination of B.L.Agreement bearing the date 12.9.2006. Even if we accept this document evidencing termination brought on record subsequent to the oral and written submissions, the termination was on the completion date of S&P Agreement. Though the applicant stated at page 7, para (i) of written submissions that "in terms of Clause 6.1 and 6.3 of the Agreement, the delivery took place on the appointed date i.e. 4.8.2006". In the earlier part of the written submissions, it is stated that the licence under BL Agreement "was terminated upon completion of the transactions referred to in Section B below". In response to a specific query, the applicant clarified on 15th April 2008 that "the transactions of sale and purchase of shares and intellectual properties was completed on September 12, 2006". However, in the written submissions, page 9, para (e), the applicant also took the stand that in view of Clause 20.1(e) of B.L.Agreement providing for termination if any other person acquires or becomes able to control more than 10 per cent of the ownership of shares in the capital of Foster's India, the said agreement got terminated on account of execution of S&P Agreement dated 4.8.2006 and the deed of assignment dated 12.9.2006. But, it may be noticed that Clause 20.1(e) of the BL Agreement contemplated termination by written notice in the event of transfer of controlling interest in Foster's India. It is not the case of the applicant that any such written notice was given. Clause 20.1 cannot, therefore, be pressed into service by the applicant. Be that as it may, irrespective of the apparent inconsistencies in the stand of the applicant, it can be said with certitude that the termination of B.L.Agreement had taken place simultaneous with the effective transfer of shares and intellectual property items, that is to say, on 12/9/2006 which is the completion date of the S&P Agreement. There was no hiatus between the two. The termination and transfer were simultaneous. There is no basis to hold that B.L.Agreement stood terminated sometime prior to the S&P Agreement and the rights were extinguished prior to the completion date of S&P Agreement. Hence, the theory of reverting back of intellectual property assets to the applicant sometime prior to the said two agreements does not arise. It is on this premise that the applicant wants to derive support from the Pfizer case. In the light of what we have said above, such a premise is not correct. Moreover, in the case of Pfizer, what was involved was the transfer of dossier containing the technical information regarding the manufacture of product (very similar to the Brewing Manual in the present case).
Transfer of other intellectual property rights was not involved. Hence, for more than one reason, the applicant cannot draw support from Pfizer case in all respects.
9.3. Applicant's counsel also places reliance on the Constitution Bench decision of the Supreme Court in the case of Twentieth Century Finance Corporation(supra). The following passages at paragraphs 25 and 28 (of STC) were relied upon in particular: Where the party has entered into a formal contract and the goods are available for delivery, irrespective of the place where they are located, the situs of such would be where the property in goods passes, i.e. where the contract is entered into.(para 25) No authority of this Court has been shown on bhalf of respondents that there would be no completed transfer of right to use goods unless the goods are delivered. Thus, the delivery of goods cannot constitute a basis for levy of tax on the transfer of right to use any goods. We are, therefore, of the view that where the goods are in existence, the taxable event on the transfer of the right to use goods occurs when a contract is executed between the lessor and the lessee and situs of sale of such a deemed sale would be the place where the contract in respect thereof is executed. (Para 28) 9.4. The learned Counsel submits that the above decision settles the issue as regards the situs and as per the law laid down in that case, the situs of intangible goods gets located at the place where the contract is executed which, in the instant case, is Australia. In order to press into service the ratio of that decision, the learned Counsel would say that the trade-marks and brand and brewing intellectual properties involved in the present case are not merely intangible properties but also goods. It is, therefore, submitted that in the instant case both the goods and the place of contract were outside India and not liable to be taxed under the Income-tax Act, 1961. We cannot agree. The question with which the Constitution Bench was concerned is quite different from the issue that falls for consideration in the present case. The Supreme Court had to address the question as the State in which the transfer of right to use the goods within the meaning of the relevant sales-tax law took place. In that context, the Supreme Court expressed the view that situs would be where property in specific goods in deliverable state passes. The Court then observed that irrespective of the location of goods, the property passes at the place where the contract is executed. The question arising in the present case cannot be answered by applying the test of passing of property. The concept of transfer of right to use the goods or passing of property in goods are alien to the present case. We are primarily concerned here with the question of location of capital assets in the form of intellectual property. Assuming that trade-mark and brand are goods - which itself is a debatable issue, we are of the view that 20th Century case cannot be called in aid by the applicant for the reasons stated supra.
10. In the light of above discussion, we are of the considered view that the Intellectual property in the form of Foster's trade-marks and brand which were an integral part of the business of Foster's India that was being carried on with the licence granted by the applicant company together with the goodwill they generated by reason of such user, can be said to be situated in India within the meaning of the Explanation to Section 9(1). The situs of these intellectual property assets, in our view, should not be traced and confined only to the place where the contract (India S&P Agreement) was entered into and acted upon by the parties. On the relevant date of transfer, they were very much present in India and the transfer of such assets took place concurrent with the transfer of controlling interest in Foster's India to SAB Miller. At best, their location in Australia is only notional or fictional. The fact that the trade-marks and names originated in Australia and initially registered there does not make material difference.
11.1 In so far as brewing intellectual property is concerned, different considerations arise. The ratio in Pfizer case would, in our view, squarely apply. The core of brewing intellectual property, in ultimate analysis, is the Brewing Manual which is the product of research and development efforts of the applicant. It contained formula and technical aspects relating to the brewing and packaging of Foster's lager Beer. The Brewing Manual, though in one sense is a trade intangible, it is also in the nature of goods going by the ratio of the decision in Associated Cement company case (infra). With the applicant severing its business ties with its group company - Foster's India as a sequel to the S&P Agreement, the situs of brewing Intellectual property in the form of Brewing Manual shifted to the applicant's corporate headquarters in Australia. Clause 6.2 (f) of S&P Agreement casts the obligation on the applicant to deliver to the purchaser "all hard copies of Brewing Manual and other manuals within the possession of Foster's India". The applicant's licencee was thus divested of its custody and use and the Brewing manual was physically made available to the nominee of the purchaser on the completion date stipulated in the S&P Agreement. We are, therefore, of the view that the Brewing Intellectual property cannot be considered to be situated in India as it reverted back to the applicant in Australia by the effective date of transfer and the same was made over the purchaser's nominee-SKOL Breweries which acquired the controlling interest over Foster's India.
11.2. In coming to this conclusion, we seek support from the decision of the Supreme Court in Associated Company Ltd. v. Commissioner of Custom as well as ruling of this Authority in the case of Pfizer Corporation#.
It is true that what the appellants had wanted was technical advice on information technology. Payment was to be made for this intangible asset. But the moment the information or advice is put on a media, whether paper or diskettes or any other thing, that what is supplied becomes chattel." It is in respect of the drawings, designs etc. which are received that payment is made to the foreign collaborators. It is these papers or diskettes etc. containing technological advice which are paid for and used.... It is therefore paid by them as chatted for use by the Indian importer.
Reliance was placed on the observations made in an American decision, which said....
Now coming to the ruling in Pfizer case which we have adverted to earlier in a different context. We may recall that the asset which was the subject matter of the transfer in that case was technical information in the form of dossier in regard to the manufacture of nutritional food supplements. This Authority while recording a finding that the transfer of technical information in the form of dossier amounted to transfer of a capital asset while relying on the dicta in AAC case referred to supra proceeded to consider the question of situs of the asset and held as follows: It is admitted that the said asset was available in India both in tangible as well as intangible form before the transfer to EAC (Denmark).... It is also not disputed that the Indian company was only a licensee and the original technical know-how was always available with the owner i.e. applicant. Once the Indian company entered into an agreement with EAC Denmark for early termination of licence to manufacture the products, the technical know-how reverted back to the owner and there was extinguishment of the right to manufacture for which consideration has been paid to the Indian Company. As a result no asset related to technical know-how was located in India either in tangible or intangible form after termination of the licence granted to the Indian company.
Earlier, the Authority noted that handing over of the dossier containing technical know-how took place in Bangkok.
11.3. The Brewing Manual with which we are concerned stands on the same footing as "dossier" in the case of Pfizer. It being intellectual property having physical identity has obviously been removed from India, that is to say, from the custody of Foster's India and handed over to the purchaser within Australia on the completion date of SP Agreement. We are, therefore, of the view that this particular capital asset in the form of Brewing Manual and the intellectual property rights associated with it cannot be said to be situate in India on the effective date of transfer and hence cannot be subjected to tax under the Income-tax Act, 1961.
12. An alternative submission was made by the learned Sr. counsel for the applicant which has been reiterated in the written submissions.
Assuming that the consideration received by the applicant under S&P Agreement attracts tax, "it is only such part of the income reasonably attributable to India that is liable to tax". In other words, it is contended that as the property is situated simultaneously in more than one jurisdiction, a reasonable allocation needs to be made. In the light of the finding we have arrived at that the transfer of capital assets comprising of trade-marks and other brand intellectual property can be subjected to tax in India, obviously, the tax liability could only be in respect of the said two items. The assessing authority will have to quantify the consideration that is attributable to these two items. However, we find no legal basis for apportionment on the ground that the situs of the property transferred is fictionally at another place. When once the income is deemed to accrue or arise in India on account of transfer of capital assets situated in India, the entirety of consideration received in respect of such transfer shall be treated as gross income. It is irrespective of the fact that the property could be notionally treated to be existing also at the place where the owner resides. The decision of Supreme Court in Anglo French Textile Co.
Ltd., v. CIT relied upon by the applicant turns on a different fact situation and a different legal provision and has no application to the present case. We do not therefore find force in the alternative contention advanced.
13. Though a reference is made to the DTAA in question No. (1), no arguments have been raised and no provision of the DTAA has been referred to. The applicable provision in the DTAA between India and Australia is Article 13 relating to alienation of property. Article 13(6) lays down, that "nothing in this Agreement affects the application of a law of a Contracting State relating to the taxation of gains of a capital nature deriving from the alienation of property other than that to which any of the paragraphs (1), (2),(3),(4) and (5) apply." Paragraph (1) to (5) have no application here. Hence, going by Clause (6) of Article 13, the domestic law provisions will hold good in the instant case. No benefit can possibly be invoked by taking resort to Article 13 or any other provisions of the treaty.
The income arising to the applicant from the transfer of its right, title and interest in and to the trade-marks and Foster's brand Intellectual Property is taxable in India under the Income-tax Act, 1961. As far as income attributable to the grant of perpetual and irrevocable licence in relation to Brewing I.P. is concerned, the same is not liable to be taxed under the Income-tax Act, 1961.
If the above mentioned receipt is held taxable in India, then whether the applicant is justified in contending the tax should be computed based on the consideration as per the independent valuation obtained by the applicant? 15.1. It is the case of the applicant that it has obtained an independent valuation report relating to trade-marks and Foster's brand i.p. as on 30th April, 2006. The values are set out in the penultimate para at Attachment (2). However, the report has not been filed.
15.2. We can only answer this question by observing that 'independent valuation report' can certainly be relied upon by the applicant. It is for the concerned Income-tax Authority to examine whether it represents true and correct value and apply such relevant factors that have material bearing on quantification of the consideration related to the taxable items.
16. Before parting with the case, a contention on behalf of the Revenue urging this Authority to go behind the apparent tenor of the transaction and to give effect to its substance may be noticed.
According to the Revenue, effectively, Foster's India is owned by Foster's Group Limited through the cobweb of its subsidiaries. In the Annual Report of the year 2006, Foster's Group Limited claimed to have 100 per cent ownership interest in Foster's India Pvt.Ltd. The Audit Reports of FBG India Ltd., Mauritius (the shares of which were purportedly sold by Dismin Investments Pvt.Ltd.) reveal that it is a company without any substance created to perform merely the role of conduit in the transactions to be effected by Foster's Group Ltd. The announcements made on the official web site of Foster's Group Limited reveal that it was selling its brewing business in Aurangabad, India including the Foster's brand to SAB Miller for 120 million dollars. On 13th September, 2006 Foster's Group Ltd. announced the completion of sale of breweries in India and Vietnam. The Revenue contends that if one looks at the substance, it is clear that Foster's Group Ltd. really transferred the entire ownership of its Indian company - Foster's India including its tangible as well as intangible assets to another Indian company SKOL Breweries and as a result of the transfer, the said assets continued to be used in India. It goes to prove that the situs of the capital assets transferred were in India only. The Revenue submits that though the shares and trade-marks and Foster's brand IP were ostensibly sold by two different entities, it is in fact "a stapled transaction".
It is, therefore, submitted that the income accruing from the sale of these assets is clearly liable to capital gains tax in India in view of Section 9(1) of the Income-tax Act.
16.1. It is not possible, on the material placed before the Authority, to come to a definite conclusion whether in reality and substance, the entirety of Foster's India's business in India including shares and intellectual property rights were transferred by Foster's Group Limited as an integrated transaction. The question whether any subterfuge or colorable device was adopted in routing the deal through the media of various group companies of Foster's Group Limited and whether it is legally permissible at all to get behind the smoke screen and unravel the true state of affairs in view of the ruling of the Supreme Court in Union of India v. Azadi Bachao Andolan* case which virtually de-recognized the principle enunciated in McDowell case$ are larger issues which do not call for an answer in this matter for more than one reason. First of all, any disquisition or probe into this aspect may incidentally involve going into the nuances of transfer of shares, which is not an issue before us. Secondly, sufficient material is not available with us on the aspects relating to formation of Company which transferred the shares and its subsidiary. Having regard to the fact that the legal and beneficial ownership of the trade-marks and the brand and brewing Intellectual Property remained with the applicant company for years together, it cannot be lightly assumed, without a complete picture of various factual aspects, that the transaction was really something different from what its apparent tenor and stipulations suggest. Further, in view of our finding that the trade-marks and Brand Intellectual Property belonging to the applicant were situate in India on the date of transfer, perhaps, it may be unnecessary to answer this larger question raised.
The answers to the two questions are as set out in paragraph 14 and 15.2.