FOSTERS AUSTRALIA LIMITED Vs. COMMISSIONER CONCERNED COMMISSIONER OF INCOME TAX AND DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)

JUDGEMENT

(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.

(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?

(3.) 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.