The 'Crocin' Verdict: Bombay High Court Clarifies Taxability of Intangible Asset Exports

In a significant judgment delivered on November 21, 2025, the High Court of Judicature at Bombay has provided much-needed clarity on the intersection of intellectual property law and state taxation. The Bench comprising Justices M.S. Sonak and Advait M. Sethna ruled that the assignment of a trademark to a non-resident foreign entity constitutes an "export" under the Central Sales Tax (CST) Act, 1956, thereby exempting the transaction from local sales tax levied by the State of Maharashtra.

The Crocin Controversy: Taxing Intangibles

The dispute originated from a 1996 Brand Acquisition Agreement, wherein the Indian company M/s. Duphar Interfran Ltd. sold its famous trademark, ‘Crocin’, to the UK-based SKB Play PLC. While the sale was executed in London, the Commissioner of Sales Tax, Mumbai, subsequently determined that because the trademark was registered in India, the assignment constituted a local sale of "goods" under the Bombay Sales Tax Act, 1959, inviting a 4% tax liability on the transaction value.

The Applicant challenged this, arguing that the transaction fell under the ambit of "export" because the situs of the intangible asset followed the owner—a foreign company based in the UK.

Mobilia Sequuntur Personam: Does the Asset Follow the Owner?

The core of the legal battle rested on the concept of situs for intangible assets. The state argued that the registration of the trademark in India firmly anchored the asset within the state's jurisdiction.

However, the Court leaned heavily on the internationally recognized legal principle of mobilia sequuntur personam (“movables follow the owner”). By citing precedents such as * Mahyco Monsanto v. Union of India * and the Delhi High Court’s ruling in CUB Pty Ltd. v. Union of India , the Court observed that in the absence of explicit legislative deeming fictions for the situs of intellectual property, the location of the owner provides the closest legal approximation of the asset’s location.

The Court’s Verdict: Redefining Taxable 'Goods'

The Bench emphatically rejected the argument that physical registration in India tied the trademark to the state for tax purposes post-assignment. The Court noted that an assignee acquires title through the deed of assignment, not through the subsequent administrative act of recording that change with a registrar.

"If such contention [of the State] is to be accepted, the expression ‘sale in the course of export’, which ought to be premised based on situs and none other, would render the said provision redundant and otiose," the Court observed in its reasoned order.

Key Observations

• On the nature of Intangibles: "In this legislative vacuum, the internationally accepted principle of mobilia sequuntur personam would apply, i.e., the situs of the owner of an intangible asset would be the closest approximation of the situs of his intangible asset."
• On the Movement of Situs: "A bare perusal of the above would lead to an inevitable inference that the trademark – ‘Crocin’, in the given facts pursuant to its assignments has moved its situs to UK."
• On the Final Ruling: "We hold that the Brand Acquisition Agreement dated 18 January 1996 in respect of trademark- ‘Crocin’ entered into between the parties is an Agreement to Sale and such sale is not a sale within the State of Maharashtra, but shall be deemed to have taken place in the course of export."

Future Implications

This ruling provides a definitive shield for corporations engaging in cross-border intellectual property transfers. By confirming that the sale of intangibles to foreign entities qualifies as an export, the Bombay High Court has aligned Indian tax jurisprudence with global commercial realities. This decision not only puts to rest a multi-million rupee tax dispute but also underscores that intellectual property, while intangible, must be afforded the same protections and characterizations as physical goods when crossing national borders.