Temporary transfer or permitting use or enjoyment of any intellectual property rights - Service Tax Practice Manual / Ready Reckoner - Service Tax

Chapter 3 Temporary transfer or permitting use or enjoyment of any intellectual property rights Effective date: 1.7.2012 Scope of Declared Service - Section 66E (c) Temporary transfer or permitting the use or enjoyment of any intellectual property right (IPR) Analysis: There is no definition of intellectual property right in service tax. However in common trade parlance intellectual property right refers to rights existing in copyright, patent, trademark, design process etc. It is important to note here that only temporary transfers or permitting the use or enjoyment of IPRs are covered here. Such permission to use intellectual property rights are usually given by way of licensing of the trademarks or by way of a permission to use the trademark or patent etc. for a certain number of years for some consideration. Permanent transfer of Intellectual Property Rights: Mere ownership of the intellectual property in relation to patent, trade mark or designs does not attract service tax. The incidence of tax is attracted when there is a temporary transfer of the intellectual property rights in favour of other person. So, when there is a transfer permanently of any intellectual property right, that will not attract service tax. In Avit Chemicals P. Ltd. [2004 (6) TMI 2 - CESTAT, NEW DELHI] , it was held that sale of a trade mark represents merely a transaction in tangible property and no service tax is applicable for the consideration received for the sale of the trade mark. Technical know-how transfer: In Aorco Corporation [2004 (10) TMI 16 - CESTAT (BANGALORE)] , it was held that technical know-how under a license agreement transfer for a limited period is covered under intellectual property rights. Intellectual property put on a medium such as CD, Floppy etc.: Intellectual property put on a medium such as CD, floppy etc. has to be regarded as an article or goods. There is no scope for splitting the engineering, drawing and the medium on which it is recorded. So no service tax liability will be in this case. Refer case Associated Cement com. Ltd. [ 2001 (1) TMI 248 - Supreme court of India ]. Clarification by the Board (Taxation Guide - Guidance Note -6 - Exemptions dated 20.06.2012) 6.3.1 What is the scope of the term intellectual property right ? Intellectual property right has not been defined in the Act. The phrase has to be understood as in normal trade parlance as per which intellectual property right includes the following:- Copyright Patents Trademarks Designs Any other similar right to an intangible property 6.3.2 Is the IPR required to be registered in India? Would the temporary transfer of a patent registered in a country outside India also be covered under this entry? Since there is no condition regarding the law under which an intellectual right should be registered, temporary transfer of a patent registered outside India would also be covered in this entry. However, it will become taxable only if the place of provision of service of temporary transfer of intellectual property right is in taxable territory.