2018 (3) TMI 856 - AT - Service Tax

Intellectual Property Right Services - the transfer of Intellectual Property Right by the respondent - whether gets covered under taxable service of Intellectual Property Right Services or not? - Held that - On going through the terms of the agreement dated 05 August, 2008, we find that the Intellectual Property Right sold by the respondent not shows the temporary transfer on right and Section 66(55b) of the Finance Act, 1994 are not effective to the fact in dispute - the transfer of right is absolutely in terms of the agreement, therefore, proviso Section 65(55)b) of the act are not applicable - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Whether the transfer of Intellectual Property Right by the respondent falls under taxable service of Intellectual Property Right Services as per Section 65(55b) of the Finance Act, 1994.

Analysis:
The Revenue appealed against an order where the Commissioner (Appeals) ruled that the transfer of Intellectual Property Right by the respondent does not constitute a taxable service. The respondent had transferred ownership of certain inventions and patents to an assignee under an agreement with M/s Dabur Pharma Ltd. The Revenue argued that the activity is taxable under Section 65(55b) of the Finance Act, 1994. The Adjudicating Authority confirmed the demand for service tax, but the Commissioner (Appeals) held that the transfer was absolute as per the agreement, thus not falling under the taxable service category. The Revenue contended that the transfer was temporary and not absolute. Upon reviewing the agreement and terms, the Tribunal found that the Intellectual Property Right sold by the respondent did not involve a temporary transfer of rights, rendering Section 65(55b) inapplicable. Consequently, the Tribunal upheld the Commissioner's decision and dismissed the Revenue's appeal.

This judgment clarifies the distinction between temporary and absolute transfers of Intellectual Property Rights concerning taxable services under the Finance Act, 1994. The Tribunal's analysis focused on the terms of the agreement between the respondent and the assignee, emphasizing the absolute nature of the transfer as stated in the agreement. By examining the specifics of the agreement, the Tribunal concluded that the transfer did not involve a temporary right transfer, thus not meeting the criteria for taxation under Section 65(55b) of the Finance Act, 1994. The decision underscores the importance of contractual terms in determining the taxability of Intellectual Property Right transfers and highlights the need for a clear delineation between temporary and absolute transfers to avoid ambiguity in tax assessments.

Overall, the judgment provides clarity on the tax treatment of Intellectual Property Right transfers and underscores the significance of contractual language in determining the tax implications of such transactions. The Tribunal's detailed analysis of the agreement's terms and the nature of the transfer helped in resolving the dispute regarding the applicability of Section 65(55b) of the Finance Act, 1994. By upholding the Commissioner's decision, the Tribunal reaffirmed the importance of contractual interpretation in tax matters and emphasized the need for precision in defining the scope of taxable services related to Intellectual Property Rights.