Trade mark registration fees held revenue expenditure where they only protected an existing business asset

Expenditure on the initial registration of an existing trade mark was treated as revenue expenditure because registration under the Trade Marks Act, 1940 only conferred procedural and evidentiary advantages, such as prima facie validity and exclusive use, without creating a new capital asset or enduring capital advantage. The registration fees merely facilitated protection and proof of title to an existing business asset. The court also held that the payment was incurred wholly and exclusively for the assessee's business, as it was made solely to register marks used in the textile business and formed part of the ordinary process of protecting trading assets. The fees were therefore allowable as business expenditure.

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Issues: (i) Whether the expenditure incurred for the initial registration of the assessee's trade marks was capital expenditure or revenue expenditure; (ii) whether, if the expenditure was revenue in character, it was incurred wholly and exclusively for the purposes of the assessee's business.

Issue (i): Whether the expenditure incurred for the initial registration of the assessee's trade marks was capital expenditure or revenue expenditure.

Analysis: The Trade Marks Act, 1940 conferred procedural and evidentiary advantages on registration, including prima facie validity, exclusive right of use, and assignability, but the trade mark itself remained an existing business asset. The registration fee did not bring into existence a new asset or an advantage of enduring nature in the sense of fixed capital. The rights secured by registration were time-limited and had to be maintained by further periodic payments. Registration was therefore treated as facilitating proof and enhancing the mode of protection of an existing asset rather than creating a new capital asset.

Conclusion: The expenditure was revenue expenditure and not capital expenditure.

Issue (ii): Whether, if the expenditure was revenue in character, it was incurred wholly and exclusively for the purposes of the assessee's business.

Analysis: The expenditure was incurred solely to register trade marks used in the assessee's textile business. There was no material showing any purpose unrelated to business operations, and the payment was part of the ordinary process of protecting the marks used in earning profits.

Conclusion: The expenditure was incurred wholly and exclusively for the purposes of the assessee's business.

Final Conclusion: The reference was answered in favour of the assessee on both questions, and the registration fees were held allowable as revenue expenditure laid out for business purposes.

Ratio Decidendi: Expenditure on registration of an existing trade mark is revenue expenditure where it merely secures or facilitates the protection and proof of title to an existing business asset and does not create an enduring capital advantage.

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