Trade mark licence consideration treated as revenue income where ownership remained with the licensor

A trade mark owner who merely grants a licence for use, without assigning the asset, receives consideration that is revenue in character. The assessee retained ownership and allowed an Indian company to use the mark as a registered user for a specified territory and period. The lump-sum form of payment, and any enduring benefit to the payer, did not change the character of the receipt in the owner's hands. The amount was therefore treated as consideration for exploitation of the trade mark rather than a capital receipt, and was taxable as revenue income.

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Issues: Whether the sum of Rs. 50,000 received for permitting use of the trade mark under the agreement was a capital receipt or a revenue receipt.

Analysis: The arrangement did not amount to an assignment of the trade mark. The assessee retained ownership and merely permitted the Indian company to use the mark as a registered user for a specified territory and period. The form of payment as a lump sum, and the fact that the payer may have obtained an enduring benefit, did not determine the character of the receipt in the assessee's hands. What was realised was consideration for exploitation of the trade mark while ownership remained with the assessee, and such consideration was revenue in character.

Conclusion: The receipt was a revenue receipt and not a capital receipt, and the issue is answered in favour of the Revenue.

Final Conclusion: The assessee's retention of trade mark ownership meant that the advance lump sum for permitted user was taxable as revenue income.

Ratio Decidendi: Where the owner of a trade mark merely grants a licence for its user without assigning the asset, consideration received for such user remains a revenue receipt even if paid as a lump sum in advance.

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