Transfer of intangible assets located in India

FOREIGN ENTERPRISE

In the above context, recent case of Foster's Australia Ltd (170 Taxman 341) may be referred to. The brief facts of the case are that an Australian company is engaged in brewing, processing and selling of beer products. It owns trademarks, logos, technology and know-how, etc. On Oct, 13, 1997, the company entered into a Brand License (BL) Agreement with Foster's India, an Indian company whereby Foster's India was granted an exclusive license to brew, package, label and sell Foster's beer and an exclusive right of use of the trademarks within the territory of India. The Australian company was paying income-tax on such consideration, treating the same as royalty income.

On August, 4, 2006, the Australian company entered into a sale and purchase (S&P) agreement with SAB Miller, UK in Australia for transfer of shares of Foster India and other intangible assets in the nature of intellectual property.

In the instant case, the prime issue for consideration was as to whether the capital assets transferred through the S&P Agreement are