Case: Commissioner Of Income Tax, Bombay Vs. Finlay Mills Ltd

and altered asset by that process. So long as the machinery lasts, the improvement continues to the advantage of the owner of the machinery. The replacement of a dilapidated roof by a more substantial roof stands on the same footing. The result however of the Trade Marks Act is only two-fold. By registration, the owner is absolved from the obligation to prove his ownership of the trade mark. It is treated as prima facie proved on production of the registration certificate. It thus merely saves him the trouble of leading evidence, in the event of a suit, in a Court of law, to prove his title to the trade mark. It has been said that registration is in the nature of collateral security furnishing the trader with a cheaper and more direct remedy against infringers. Cancel the registration and he has still his right enforceable at Common Law to estrain the piracy of his trade mark. In our opinion, this is neither such an asset nor an adventage so as to make payment for its registration a capital expenditure. In this connection it may be useful to notice that expenditure incurred by a company in defending title to property is not considered expense of a capital nature. In Southern (H M Inspector of Taxes ) v. Borax Consolidated Ltd.,10 I. T R. Sup. 1,it is there stated that where a sum of money is laid out for the acquisition or the improvement of a fixed capital asset it is attributable to capital but of no alteration is made in the fixed capital asset by the payment, then it is properly attributable to revenue, being in substance a matter of maintenance, the maintenance of the capital structure or the capital asset of the company. In our opinion, the advantage derived by the owner of the trade mark by registration falls within this class of expenditure. The fact that a trade mark after registration could be separately assigned, and not as a part of the good will of the business only, does not also make the expenditure for registration a capital expenditure, That is only an additional and incidental facility given to the owner of the trade mark. It adds nothing to the trade mark itself.5. In the judgment of the High Court some emphasis is laid on the fact that by reason of registration the duration of the trade mark is only for seven years, and it does not thus possess that permanency which is ordinarily required of an expenditure to make it a capital expenditure and in order to prove the existence of a benefit of an enduring character. The learned Attorney-General contended that the view that the benefit of registration lasted for seven years, i.e., for a limited period, prevented the expenses of registration being treated as capital expenditure is unsound and for that contention he relied onHenriksen (Inspector of Taxes) v. Grafion Hotel Ltd.,1942-2 K. B 184. In that case, tenants of licensing premises by agreement with the landlord paid by installment the monopoly value fixed by the licensing justices when granting the licence under S.14, Licensing (Consolidation) Act. 1910. These were sought to be deducted as revenue expenditure but were disallowed by the Court Lord Greene M. R. first considered that the payment fell into the same class as the payment of a premium on the grant of a lease or the expenditure on improvements to the property which justices may require to be made as a condition of granting a licence. Having reached that conclusion he rejected the argument that the payment not being made in one lump sum but by instalments made a difference in the character of the payment. He observed as follows :"Whenever a licence is granted for a term, the payment is made as on a purchase of a monopoly for that term. When a licence is granted for a subsequent term, the monopoly value must be paid in respect of that term and so on. The payments are recurrent if the licence is renewed, they are not periodical so as to give them the quality of payments which ought to be debited to revenue account. The thing that is paid for is of a permanent quality although its permanence, being conditioned by the length of the term is short-lived. A payment of this character appears to me to fall into the same class as the payment of a premium on the grant at a lease, which is admittedly not deductible."The Attorney-General relied on those observations to point out that the permanence of the advantage was thus not dependant on the number of years for which it was to enure for the benefit of the proprietor of the trade mark. In our opinion these observations have to be read in the context in which they have been made. The learned Master of the Rolls was discussing only the question of payment being made by instalments as not making any difference in the nature of the expenditure. It was first held by him that the payment in question was of a capital nature and of the same character as premium paid on the grant of a lease and was, therefore, necessarily of a capital nature. Having come to that conclusion he only rejected the contention that because the premium was paid in more instalments than one it lost its character of a capital expenditure. In our opinion, this is an entirely different thing from stating that the fact of the advantage being for a limited time altered the character of the payment in any way. As observed by Viscount Cave, L. C. the question is always one of fact depending on the circumstances of each case individually.6. In our opinion, the decision of the High Court reported in Commissioner of Income-tax Bombay v. The Century Spinning and Weaving and Manufacturing Co. Ltd.,(1947) 15 I. T. R. 105 (Bom.) is correct and in the present case also the contention of the appellant must fail.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]4. In our opinion, the contention urged on behalf of the appellant must fail. It is not contended that by the Trade Marks Act a new asset has come into existence. It was contended that an advantage of an enduring nature had come intoour opinion, this analogy is fallacious. The machinery which acquires a greater productive capacity by reason of its improvement by the inclusion of some new invention naturally becomes a new and altered asset by that process. So long as the machinery lasts, the improvement continues to the advantage of the owner of the machinery. The replacement of a dilapidated roof by a more substantial roof stands on the same footing. The result however of the Trade Marks Act is only two-fold. By registration, the owner is absolved from the obligation to prove his ownership of the trade mark. It is treated as prima facie proved on production of the registration certificate. It thus merely saves him the trouble of leading evidence, in the event of a suit, in a Court of law, to prove his title to the trade mark. It has been said that registration is in the nature of collateral security furnishing the trader with a cheaper and more direct remedy against infringers. Cancel the registration and he has still his right enforceable at Common Law to estrain the piracy of his trade mark. In our opinion, this is neither such an asset nor an adventage so as to make payment for its registration a capital expenditure. In this connection it may be useful to notice that expenditure incurred by a company in defending title to property is not considered expense of a capital nature. In Southern (H M Inspector of Taxes ) v. Borax Consolidated Ltd.,10 I. T R. Sup. 1,it is there stated that where a sum of money is laid out for the acquisition or the improvement of a fixed capital asset it is attributable to capital but of no alteration is made in the fixed capital asset by the payment, then it is properly attributable to revenue, being in substance a matter of maintenance, the maintenance of the capital structure or the capital asset of the company. In our opinion, the advantage derived by the owner of the trade mark by registration falls within this class of expenditure. The fact that a trade mark after registration could be separately assigned, and not as a part of the good will of the business only, does not also make the expenditure for registration a capital expenditure, That is only an additional and incidental facility given to the owner of the trade mark. It adds nothing to the trade markAttorney-General relied on those observations to point out that the permanence of the advantage was thus not dependant on the number of years for which it was to enure for the benefit of the proprietor of the trade mark. In our opinion these observations have to be read in the context in which they have been made. The learned Master of the Rolls was discussing only the question of payment being made by instalments as not making any difference in the nature of the expenditure. It was first held by him that the payment in question was of a capital nature and of the same character as premium paid on the grant of a lease and was, therefore, necessarily of a capital nature. Having come to that conclusion he only rejected the contention that because the premium was paid in more instalments than one it lost its character of a capital expenditure. In our opinion, this is an entirely different thing from stating that the fact of the advantage being for a limited time altered the character of the payment in any way. As observed by Viscount Cave, L. C. the question is always one of fact depending on the circumstances of each case individually.In our opinion, the decision of the High Court reported in Commissioner of Income-tax Bombay v. The Century Spinning and Weaving and Manufacturing Co. Ltd.,(1947) 15 I. T. R. 105 (Bom.) is correct and in the present case also the contention of the appellant must fail.