{"id":10848,"date":"2022-03-29T05:44:53","date_gmt":"2022-03-29T05:44:53","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=10848"},"modified":"2022-03-29T05:44:56","modified_gmt":"2022-03-29T05:44:56","slug":"a-complete-analysis-of-trademark-valuation-and-taxation","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/a-complete-analysis-of-trademark-valuation-and-taxation\/","title":{"rendered":"A Complete Analysis of Trademark Valuation and Taxation"},"content":{"rendered":"\n<p class=\"has-drop-cap\">A\nTrademark is a unique mark or logo linked with products or services of a\ncompany, business, or individual. Trademark means a mark or brand including\nsymbol, shape, colour, packaging of products, etc. Basically, Trademark helps\nto graphically represent and differentiate the products or services of one\nindividual from another. It\u2019s a set of rights that gives exclusive use to the\nowner and creates goodwill for the products or services with which it is associated.\nIn this blog, we will discuss Trademark Valuation and Taxation.<\/p>\n\n\n\n<p>Trademark is the face of the business and it has a high economic value. Being so powerful, Trademarks carry great commercial importance and financial value in any business establishment. Like any other IP, a <a class=\"text-primary\" href=\"https:\/\/swaritadvisors.com\/trademark-registration\"><strong>registered Trademark<\/strong><\/a> owner has the option of transferring the Trademark rights to a 3<sup>rd<\/sup> party, just like transferring a tangible party in someone else&#8217;s name. Therefore, a Trademark that is a solid intangible asset for a business venture can be sold, franchised, pledged, or assigned to someone else. Now let&#8217;s discuss Trademark Valuation and Taxation.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a54fe6721d25\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a54fe6721d25\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/a-complete-analysis-of-trademark-valuation-and-taxation\/#What_is_Trademark_Valuation_and_Taxation\" title=\"What is\nTrademark Valuation and Taxation?\">What is\nTrademark Valuation and Taxation?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/a-complete-analysis-of-trademark-valuation-and-taxation\/#Different_Methods_of_Trademark_Valuation_%E2%80%93_Trademark_Valuation_and_Taxation\" title=\"Different\nMethods of Trademark Valuation &#8211; Trademark Valuation and Taxation\">Different\nMethods of Trademark Valuation &#8211; Trademark Valuation and Taxation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/a-complete-analysis-of-trademark-valuation-and-taxation\/#Trademark_Taxation_Aspects_in_India_%E2%80%93_Trademark_Valuation_and_Taxation\" title=\"Trademark\nTaxation Aspects in India &#8211; Trademark Valuation and Taxation\">Trademark\nTaxation Aspects in India &#8211; Trademark Valuation and Taxation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/a-complete-analysis-of-trademark-valuation-and-taxation\/#Location_of_an_Intangible_Asset_%E2%80%93_Trademark_Valuation_and_Taxation\" title=\"Location of an\nIntangible Asset &#8211; Trademark Valuation and Taxation.\">Location of an\nIntangible Asset &#8211; Trademark Valuation and Taxation.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/a-complete-analysis-of-trademark-valuation-and-taxation\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Trademark_Valuation_and_Taxation\"><\/span>What is\nTrademark Valuation and Taxation?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li><strong><em>Trademark Valuation<\/em><\/strong>:\nWhen it comes to purchasing or selling an asset, the first course of action to\nbe taken is to determine the value of the respective property. The Trademark\nValuation is mainly of pivotal importance, as intangible assets are often\npriced sky-high than tangible assets. The valuation is usually arriving at a\nprice at which the seller aims to sell &amp; the buyer is ready to buy or\npurchase.<\/li><\/ul>\n\n\n\n<p>As\nfar as the valuation of the Trademark is concerned, the process is more complex\nthan it seems to be. Sellers often discover themselves in a fix for two\nreasons:<\/p>\n\n\n\n<ol><li>To ascertain the correct\nTrademark value at hand;<\/li><li>To determine their prospective\nbuyers who will be keen to buy it at the ascertained price.<\/li><\/ol>\n\n\n\n<p>Hence,\narriving at the correct Trademark Valuation is of great significance to any\nbusiness establishment and it is carried out for completing 3 main purposes:<\/p>\n\n\n\n<ul><li>For the purpose of the\ntransaction, where problems pertaining to taxation are excluded;<\/li><li>Purposes concerning taxation;<\/li><li>Purposes concerning financial\naccounting.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Different_Methods_of_Trademark_Valuation_%E2%80%93_Trademark_Valuation_and_Taxation\"><\/span>Different\nMethods of Trademark Valuation &#8211; Trademark Valuation and Taxation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>While\nthere are different methods to arrive at the Trademark value, the following are\nthe different approaches:<\/p>\n\n\n\n<ul><li><strong><em>Market-Approach Method<\/em><\/strong>: Trademarks in the market that are identical to the one that has to be assessed are examined &amp; compared to arrive at the value. Here the market data concerning selling, buying, franchising, etc., are studied to arrive at a solution. For example, if a Trademark from an identical brand in the business is sole for Rs. 1 lakh, that value is taken as the benchmark value for arriving at the valuation of the Trademark at hand.<\/li><li><strong><em>Relief from Royalty Approach<\/em><\/strong>: The valuation of Trademark has arrived at one of the bases of the presumed royalty savings towards the respective Trademark. Details regarding the royalties accrued by the Trademark or identical Trademarks &amp; all supplementary earnings brought forth by the Trademark can be used to evaluate the value of the Trademark.<\/li><li><strong><em>Cost Approach Method<\/em><\/strong>: This approach involves listing the cost incurred at the time of creating &amp; designing the Trademark. The cost also comprises the expenses accrued in marketing &amp; advertising the brand. This is one of the most standard methods of arriving at the economic value of the Trademark. The major drawback with this approach method is that it fails to bring in the value associated with the goodwill the Trademark carries. Yet, this method can be engaged in valuing Trademarks that are relatively new in the market.<\/li><li><strong><em>Future Income Approach<\/em><\/strong>: This is one of the most preferred\u00a0 &amp; viable methods for arriving at the financial value of a Trademark. Here an in-depth examination is carried out to get the figure of the upcoming income that the Trademark would fetch over the years to come based on its existing value. Say the Trademark earns a turnover of Rs. 2 crores\/year, then the value for the years to come is estimated using this existing value, and the same is discounted to the current date to fix the Trademark Valuation.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Trademark_Taxation_Aspects_in_India_%E2%80%93_Trademark_Valuation_and_Taxation\"><\/span>Trademark\nTaxation Aspects in India &#8211; Trademark Valuation and Taxation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\ntax treatment on intangible assets that comprise Trademarks in India is given\nand discussed below:<\/p>\n\n\n\n<ul><li><strong><em>Business Income\/Capital Gains<\/em><\/strong>: In the case of <strong><em>M\/S Mediworld Publications Pvt. Ltd. vs Income Tax Commissioner, 2011<\/em><\/strong>, the High Court of Delhi held that the profit or income generated from the transfer of an intangible asset, i.e., Trademark &amp; Copyright, is in the capital gains&#8217; nature and not business income thus taxable. The court clarified that a capital asset under <strong><em>Section 2(14) of the IT Act, 1961<\/em><\/strong><sup><a href=\"https:\/\/www.incometaxindia.gov.in\/pages\/acts\/income-tax-act.aspx\" class=\"text-primary\"><strong>[1]<\/strong><\/a><\/sup>, can be implied to be inclusive of IP.<\/li><\/ul>\n\n\n\n<p>According\nto <strong><em>Section\n2(11) of the IT Act<\/em><\/strong>, Intellectual Property (IP) would be considered as\nan intangible asset that serves as a means for earning profit. It further held\nthat the sale of an intangible asset serves as a means for earning profit. It\nfurther held that the sale of an intangible asset like a Trademark would be\ncovered by the proviso mentioned under <strong><em>Section 28(VA) of the IT Act.<\/em><\/strong><\/p>\n\n\n\n<ul><li><strong><em>Cross-Border Use of IPR<\/em><\/strong>:\nOne of the biggest issues regarding the Trademark Taxation arises from the\ncross-border use of IPR. It involves <strong><em>MNCs or Multi-National Companies licensing<\/em><\/strong>\ntheir subsidiaries located in different countries. These subsidiaries may\nsub-license the Intellectual Property Right to 3<sup>rd<\/sup> parties\nfunctioning locally. The companies owning the Intellectual Property Right may\nbe established in a low tax country. They may charge royalties against the\nsubsidiaries located in a high tax nation to avoid large tax cuts.<\/li><\/ul>\n\n\n\n<p>In\nthe instance of <strong><em>Commissioner of Income Tax vs Maruti Suzuki India Ltd., <\/em><\/strong>the\nDelhi High Court passed a judgement on the transfer pricing aspect in the case\nwhere the promotional efforts of an associated entity significantly increase\nthe Trademark value that is legally owned by another entity. In this instance,\nthe question is whether the income generated by the Trademark was to be\nattributed to the Trademark owner or the affiliated entity registered in India.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Location_of_an_Intangible_Asset_%E2%80%93_Trademark_Valuation_and_Taxation\"><\/span>Location of an\nIntangible Asset &#8211; Trademark Valuation and Taxation.<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\nidentification of the location of a property is needed for taxation purposes.\nHowever, the identification process of the location of intangible property is\ncomplicated. In concurrence with international\nprinciples, the Delhi High Court held that the location of the respective\nproperty owner would be considered the location of an intangible asset,\nregardless of it being registered in India.<\/p>\n\n\n\n<p>The\ncourt reached this conclusion via a strict interpretation of <strong><em>Section\n9 of the IT Act<\/em><\/strong>. The court held that the non-inclusion of Intellectual\nProperty Right under the provisions of Section 9 clearly denote the intent of\nlegislature not to tax IPR owners situated outside India even when they earned\nprofits in India through their respective Intellectual Property Rights.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p> The importance of Trademark Valuation and Taxation is on the rise. The differences that exist in different jurisdictions make it more complex for entities having engagements or transactions worldwide to reach a middle ground for ensuring their compliance with tax regulations. Such differences may also lead to double taxation  <\/p><p class=\"text-left\"><b>Read our Article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/how-can-you-check-if-a-logo-is-trademarked-in-india\/\">How Can You Check if a Logo is Trademarked in India<\/a><\/mark><\/p>\n\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A Trademark is a unique mark or logo linked with products or services of a company, business, or individual. Trademark means a mark or brand including symbol, shape, colour, packaging of products, etc. Basically, Trademark helps to graphically represent and differentiate the products or services of one individual from another. It\u2019s a set of rights [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":10849,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[72],"tags":[1007],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/10848"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=10848"}],"version-history":[{"count":19,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/10848\/revisions"}],"predecessor-version":[{"id":10872,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/10848\/revisions\/10872"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/10849"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=10848"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=10848"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=10848"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}