Global beer brand Foster's Australia Ltd has moved the Supreme Court challenging the Authority for Advance Ruling's judgement that held it was liable to pay tax on income from transfer of its brand and trademarks in India to UK-based SABMiller.

A bench headed by Justice S H Kapadia asked the company to challenge the ruling before an appropriate high court. The apex court also stayed both the AAR order and the assessment till the company moves a high court.

On May 9, the AAR said that income of Foster's Australia Ltd from the transfer of its right, title and interest in trademarks and Foster's brand intellectual property is taxable in India.

UK-based SABMiller had acquired Foster's India, a subsidiary of Foster's Australia Ltd, for 120 million dollars in 2006. The tangible and intangible assets (brand and trademarks) of Foster's India were taken over by the UK company.

Saying that the ruling involves a substantial question of law, Foster's counsel Amar Dave said that intellectual property rights are a comprehensive bundle of rights.

In this case, only a license was extended for usage in India and the same was later terminated before sale to another foreign entity.

The position of IPRs originated and owned outside India cannot be held in India merely on the basis of permitted use under a license, he said.

According to the Australian company, the AAR erred in holding that situs of trademarks and Foster's brand intellectual property were situated in India even after observing that IPRs originated in Australia, were merely licensed in India and later the licensed agreement itself was terminated.

"The authority erred in giving contrary conclusion in respect of identical facts in so far as brand intellectual property was held to be having no situs in India and hence not taxable.

But on the same set of facts, Foster's trademarks and brands were held to have situs in India and hence taxable under Section 9(1) of the Act," said the petition filed through Seth Dua Associates.

There has been an ongoing debate between the company and the tax authorities on whether tax could be claimed in India on a transaction that had taken place outside the country.

The Income Tax department argued that 'the rights in and over the trademarks existed in India only' and hence their transfer is taxable.

However, before Foster's argued that the trademark was an asset independent of registration, which merely grants some protection to the brand, and so it should not be taxed.

The I-T department had earlier sent notices to Foster's India and asked for details of the deal struck two years ago.

SABMiller India, which has brands such as Royal Challenge, Haywards 5000, Castle and the recently-launched Haywards Black, is the second largest player in the domestic beer segment.

The company had few months ago announced the business revamp plan, according to which it hived off Asia business as a separate business division last year to tap the future growth potential of the region.