A licence to use a trademark was granted to Indian company by Australian Company. The question arose before the Delhi High Court in CUB Pty Ltd v. UOI [388 ITR 617] whether transfer of a trademark would be taxable in India?
The Court held that in terms of section 9(1)(i) of the Act, all income accruing or arising, directly or indirectly inter-alia through the transfer of capital asset situate in India, shall be deemed to have accrued or arisen in India. The issue of situs of an intangible asset, such as the intellectual property rights in trademarks, brands, logos etc. is indeed a tricky one. In so far as the tangible assets are concerned, there is absolutely no difficulty. They exist in physical form and their existence is at specific location. Thus fixing their situs does not pose any problem. An intangible capital asset, by its very nature, does not have any physical form. Therefore, it does not exist in a physical form at any particular location. The legislature, where it wanted to specifically provide for a particular situation, as in the case of shares, where the share derives directly or indirectly, its value substantially from asset located in India, it did so. There is no such provision with regard to intangible assets, such as trademark, brands, logos i.e. intellectual property rights. Therefore, the well accepted principle of “Imobilia Sequntur personam” would have to be followed. Thus the situs of owner of an intangible assets would be the closet approximation of the situs of an intangible asset. This an internationally accepted rule, unless it is altered by local legislation. There is no such alternation in Indian context.
Thus, reading the above judgment, it is clear that when the intangible asset is transferred the situs of the owner is to be considered.

Source: AIFTP Journal August 23