Taxation of Trademark Transactions

Abstract

In a global scenario like today, businesses want to have a lasting and long-term impact in the competitive market and for this, the trademark or brandmark plays a very significant role to help the consumer to identify the products. All the commercial brands use a mark which distinguishes their product from those of others. The provisions regarding trade marks are given under the Trade marks Act, 1999. A brand’s goodwill is also associated with this brandmark or trademark. In this paper, the author deals with a set of circumstances where there is a transfer of this trademark and tax is imposed under the Income Tax Act upon this trade. The research is divided into three parts. The first part deals with the meaning and definition of ‘trademark’ and explains the methods which are used for the valuation of intangible assets such as trade mark. The methods dealt with here align themselves with different factors which play an important role in assessing the value of any non-physical/ intangible asset. It mainly harmonises the various factors affecting the worth of the asset with the market forces. The second part describes how the provisions under the Income Tax Act will be applicable to the trade of trade mark and the discussion ranges from income tax provisions related to long-term capital assets to short-term capital assets and the formulas applicable therein while calculating tax applicable to assets under these categories. The last part deals with the modes of transfer of the trademark and computation of tax payable under different modes integrating the types of assets with the modes of transfer.