Trade mark registration costs are revenue expenditure when they only provide evidentiary advantage, not a capital asset.

Expenditure on first-time trade mark registration was treated as revenue expenditure because it did not create a new capital asset or alter the capital structure of the business. Registration merely reduced the burden of proving title in litigation, gave a prima facie evidentiary advantage, and provided an incidental business , while the underlying common law right against infringement remained intact. The separately assignable and time-limited nature of the registered right did not change the character of the outlay. Applying the capital-revenue distinction, the payment was held to be incurred for the conduct of business and allowable as a deduction.

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Issues: Whether the expenditure incurred for first-time registration of trade marks was revenue expenditure and an allowable deduction under Section 10(2)(xv) of the Indian Income-tax Act.

Analysis: The expenditure did not bring into existence any new asset or alter the capital structure of the business. Registration under the Trade Marks Act merely relieved the owner of the burden of proving title in litigation, gave prima facie evidentiary advantage, and conferred an incidental facility, while the common law right to restrain infringement remained intact. The fact that the registered right could be separately assigned and that registration operated for a limited period did not convert the payment into capital expenditure. Applying the accepted test distinguishing capital from revenue outlay, the payment was directed to the conduct of the business and not to the acquisition or improvement of a fixed capital asset.

Conclusion: The expenditure on registration was revenue expenditure and was allowable as a deduction; the answer was in favour of the assessee.

Final Conclusion: The appeal failed because the registration fee for trade marks was treated as an admissible business deduction and not as capital outlay.

Ratio Decidendi: Expenditure that merely facilitates the carrying on of business by securing an evidentiary or procedural advantage, without creating or improving a capital asset, is revenue expenditure.

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