Depreciation on trademark cannot be denied on the basis that the trademark has not been registered in the name of the assessee.

 

Case: Trio Elevators Company (India) Ltd. v. Assistant Commissioner of Income Tax

 

FACTS

In an agreement of slump sale, the assessee company purchased the business with all its assets and liabilities, benefits and obligations, employees and customers, as a going concern. The assets which were transferred included intangible assets like trademark. The assessee claimed depreciation on the asset so acquired.

 

The Assessing Officer held that since the assessee was not yet registered owner of the trademark its claim for depreciation could not be allowed. On appeal, the Commissioner (Appeals) confirmed the order of Assessing Officer. On higher appeal it was held that:

 

The authorities were of view that unless a trademark is a registered trademark, it cannot be considered to be an asset worth any value so as to entitle assessee to claim the depreciation in respect of the same.

 

It was also argued that unless a trademark is registered in the name of a person, he does not get exclusive rights to use the trademark in respect of the goods for which the trade mark is registered. However, this was really immaterial because the person in whose name the trademark was registered had already assigned the rights to the assessee.

 

The higher authority observed that valuation of the trademark as per the valuation report, is not even dispute. The assessee did, therefore, have the rights to use the trademark as these rights were assigned to the assessee by the person who had these legal rights. The registered owner of the trademark, while initiating the process for registration of trademark in the name of the assessee company, has given an affidavit as well.

 

The entire business was transferred to the assessee as a going concern and the assessee was, conducting the business under the same trademark. Therefore, the effective use of the trademark could not be disputed. This intangible asset was an integral part of the business carried on by the assessee. The fact that the trademark was not registered in the name of the assessee did not affect assessee’s valuable rights.

 

In view of the above, it is held that the assessee was indeed eligible for depreciation in respect of the intangible asset by way of trademark. The Assessing Officer is, therefore, directed to grant the depreciation on the trademark. Claim depreciation on trademark even if not registered in your name.

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