Assignment of Trademark Is a Deemed Export, Not Local Sale: Bombay High Court Exempts ‘Crocin’ Transfer from Sales Tax Liability

“Trademark, being intangible property, moves with the owner—when assigned to a UK entity, situs shifts abroad—transaction falls under export under Section 5(1) of CST Act,” In a landmark ruling with far-reaching consequences for cross-border intellectual property transactions, the Bombay High Court has held that the assignment of a registered trademark to a foreign entity constitutes a sale in the course of export under Section 5(1) of the Central Sales Tax Act, 1956, and cannot be taxed as a local sale under the Bombay Sales Tax Act, 1959.

Justice M.S. Sonak and Justice Advait M. Sethna answered a reference in Sales Tax Reference No. 9 of 2012, holding in favour of M/s. Duphar Interfran Ltd., the Indian assignor of the widely known ‘Crocin’ trademark, which was sold under a Brand Acquisition Agreement dated 18 January 1996 to SKB PLC, a United Kingdom-based company.

“The situs of an intangible like a trademark is determined not by its registration but by the location of its owner. By applying the principle of mobilia sequuntur personam, the situs of the Crocin trademark shifted to the UK upon its assignment,” observed Justice Sethna.

Rejecting the Revenue’s contention that the trademark remained within Maharashtra as it was registered in India and consideration was paid in Indian rupees, the Court categorically held that the assignment of intangible property to a foreign entity is a juridical movement of goods constituting export, even if there is no physical cross-border movement.

“Export Need Not Be Physical—Intangible Assets Can ‘Move’ Juridically Across Borders”

One of the key legal questions before the Court was whether the transfer of a trademark—which has no physical form—can qualify as an export under Section 5(1) of the CST Act. In a significant development for indirect tax law, the Court affirmed that:

“The word ‘goods’ under the CST Act includes intangibles, and the movement of such goods can be juridical. Upon assignment, the Crocin trademark ceased to remain with the Indian assignor and was fully vested in the UK-based assignee. This constitutes movement in the course of export.”

Referring to the Mahyco Monsanto and CUB Pty Ltd. decisions, the bench reiterated that in the absence of statutory fiction for situs, courts must fall back on the well-established legal doctrine that intangible movable property follows the person—mobilia sequuntur personam.

“Registration of Trademark Is Not Determinative of Situs—Ownership Is Key”

The Sales Tax Tribunal had earlier held that the situs of the trademark was India, since it was registered with the Indian Trademark Registry. However, the High Court flatly rejected that reasoning:

“The Tribunal committed a clear error by equating registration with situs. Registration is not mandatory for a valid assignment under the Trade and Merchandise Marks Act, 1958. Legal ownership passes upon execution of assignment, not upon registration.”

Citing the Bombay High Court ruling in Parksons Cartamundi v. Suresh Kumar Burad and the Delhi High Court decision in Sun Pharmaceuticals v. Cipla, the bench emphasized that registration of assignment is a procedural step and does not affect the substantive transfer of ownership.

“Once assignment is executed, all rights vest in the assignee. The assignor retains no title or proprietary interest thereafter. That the Registrar records the transfer later does not postpone the legal effect of the assignment.”

“State Cannot Tax Exports—Constitutional Bar Under Article 286(1)(b) Applies to Intangible Assets Too”

Invoking the constitutional bar on state taxation of export transactions under Article 286(1)(b), the Court harmonised the provisions of the CST Act with the constitutional framework. The bench noted:

“The CST Act, especially Sections 3 to 5, is a legislative response to Article 286. To interpret ‘goods’ under Section 5(1) as excluding intangibles would defeat the constitutional protection and legislative intent.”

In doing so, the Court also gave meaning to the Sixth Amendment of the Constitution, which removed the earlier limitation that export-related restrictions applied only to physical goods.

“Once Sale Is in the Course of Export, Its Situs Within State Becomes Irrelevant”

Relying extensively on the reasoning in Mahyco Monsanto, the High Court reiterated that once a transaction qualifies as an export, its location within India becomes irrelevant:

“Sales tax is a State subject. If the sale is in the course of export, no state—whether Maharashtra or any other—can levy tax. It is immaterial that the agreement was executed in London, or that consideration was received in India. What matters is the movement of ownership beyond India’s borders.”

The Court dismissed the Revenue’s argument that since the payment was made in Indian rupees and the agreement invoked Indian law, it could not be treated as an export. The Court clarified:

“Payment in rupees or foreign currency has no bearing on the situs or movement of intangible goods. What is crucial is that the trademark now belongs to a foreign entity and all rights have passed outside India.”

“Assignment of Trademark Is Not Mere Right to Use—It Is Transfer of Title in Property”

The Court drew a crucial distinction between license to use a trademark (which may not constitute sale of goods) and assignment of ownership, which is a transfer of title in the trademark as a good.

“This is not a franchise or usage license—it is an outright sale. The assignee acquires title to the trademark, including all goodwill, and the assignor relinquishes all rights. This is a classic sale of goods—albeit intangible—and qualifies as export.”

This clarification will be of particular importance in distinguishing royalty-based licensing models from full assignments in future tax assessments involving intellectual property rights.

Assignment Is an Export—No Local Sales Tax Payable

Answering the reference in favour of the assessee, the Court concluded:

“We hold that the Brand Acquisition Agreement dated 18 January 1996 in respect of the trademark ‘Crocin’ is an agreement to sale, but such sale did not take place within the State of Maharashtra. It occurred in the course of export under Section 5(1) of the CST Act and is thus exempt from state sales tax.”

The Sales Tax Reference No. 9 of 2012 was accordingly disposed of.

This judgment will have a profound impact on the taxation of cross-border transfers of IP and other intangible assets, offering clear judicial recognition that intangibles too can be exported, and that states cannot levy local tax merely because registration or consideration was in India.

For tax advocates, IP practitioners, and multinational companies, the decision draws a firm line in favour of constitutional protection for cross-border IP transfers, aligning domestic tax interpretation with global commercial realities.

Date of Decision: 21 November 2025