The Supreme Court on Friday refused to make the central government a party in a Tata Sons appeal related to the levy of around R300 crore sales tax on use of the ‘Tata’ name by its subscribing companies.
A bench headed by Chief Justice H L Dattu refused to implead the Centre as a party as sought by the company on the grounds that such transactions cannot be subjected to both sales tax by the state governments and service tax by the central government. Senior counsel S Ganesh told the court that the dual tax policy will lead to multiplicity of litigation. Later, the company withdrew its application in this regard.
Tata Sons’ main appeal is likely to come up for hearing later this month. It has challenged a Bombay High Court judgment that upheld the Maharashtra government’s decision to levy around R300 crore sales tax over the use of the ‘Tata’ name by its subscribing companies.
The HC had held that transfer of rights to use goods of incorporeal or an intangible character such as trademarks, copyrights, patents, etc. is exigible to state value added tax and that there need not be any exclusive and unconditional transfer. The transaction should attract tax even if there may be multiple transferees and the transferor continues to use goods.
Challenging the levy of tax on the subscriptions received by it from subscribing companies, Tata Sons said that the trademarks were assigned to its group companies, which meant that there is no transfer within the meaning of the Right to use any Goods for any Purposes Act, 1985 (the Lease Tax Act). Besides, no right has been created and it is a mere permission for facilitating the use which would at best amount to a license, it stated.
Tata Sons in 1998 had entered into a brand equity and business promotion agreement with its various companies (subscribing companies) with a view to promote the ‘Tata’ name. The agreement granted to the subscribing companies the right to obtain a non-exclusive and non-assignable licence to use the Tata trademarks.
But the state’s sales tax department held that the transactions were covered under the provisions of the Lease Tax Act.