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2018 (4) TMI 1485 - HC - Income TaxDeduction of expenditure u/s 37(1) - revenue expenditure or capital expenditure - Instead of a royalty payable periodically, a onetime royalty of ₹ 1 Crore was payable towards the Trade Mark license - Right to use the Mark “HILTON” - Held that:- The fundamental test to determine as to whether a particular mark has been licensed or assigned is to see if the licensor/assignor has retained any rights in the mark. If rights are retained with the owner, usually it is a license and if no rights are retained by the owner, then it would usually be an assignment. A license is, therefore, nothing but a permissive use of the mark, which permission, is revocable. A 'right to use' is usually a license and not an assignment, except in certain circumstances. A license agreement usually has some or all of the above stipulations. Thus, the nature of the agreement can be easily deduced from the existence of all or any of the above conditions/characteristics. In some circumstances however, an exclusive licence which excludes the owner from using the mark and vests perpetual rights without any termination clause, could constitute an assignment. However, the present case is not one such case. The payment of ₹ 1 crore ought to be treated as revenue expenditure. There is no doubt in the proposition relied upon by the revenue, as held in Honda Siel (2017 (6) TMI 524 - SUPREME COURT OF INDIA), the Court has to look at the real nature of the agreement. On an analysis of the agreement on record, there is no doubt that it was merely a trademark license agreement, which conferred no enduring benefit or long term benefit to the appellant. Even the corporate name license agreement was terminable and did not create ownership rights in the appellant for the word “HILTON”. The Court takes notice of the fact that the corporate name has in any event been changed by the appellant. Held as Revenue expenditure - Decided in favor of assessee.
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