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TMI Blog1946 (9) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... tial registration of its "old" trade marks, i.e., trade marks which had been continuously in use since before the 25th day of February, 1937, was rightly held to be expenditure attributable to revenue? (2) If it was revenue expenditure, whether it was incurred wholly and exclusively for the purposes of the assessee company's business? In this case we are glad to note that there is an agreed statement of facts from which it appears that:― "The assessee company carries on a business of manufacture and sale of textile goods which are branded or stamped with its distinctive trade marks. The company had registered these trade marks with the Millowners' Association, Bombay. They are its 'old' trade marks, in the sense that the company had been continuously using them since before the 25th February, 1937, which date is important having regard to one of the material sections of the Trade Marks Act, V of 1940." And then a little further on:― "In the account year 1942 which is material to the assessments in question, the company made one or more applications for the first registrations of their trade marks and incurred an expense of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sly in use since before the 25th of February, 1937, by such person or by a predecessor in title of his and unless an application for its registration, made within five years from the commencement of the Act, has been refused; and the Registrar shall, on application in the prescribed manner, grant a certificate that such application has been refused. Sub-section (2) saves rights with regard to passing off actions. Section 21 sets out the rights conferred by registration and it is in these terms:― "Subject to the provisions of Sections 22, 25 and 26, the registration of a person in the register as proprietor of a trade mark in respect of any goods shall, if valid, give to that person the exclusive right to the use of the trade mark in relation to those goods and, without prejudice to the generality of the foregoing provision, that right shall be deeded to be infringed by any person who, not being the proprietor of the trade mark or a registered user thereof using by way of the permitted use, uses a mark identical with it or so nearly resembling it as to be likely to deceive or cause confusion, in the course of trade, in relation to any goods in respect of which it is regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany had laid out to form the nucleus of a fund to provide the amount necessary in order that past years of service of their then existing staff should rank for certain pension benefits, the sum being arrived at by actuarial calculations and on the basis that the sum would ultimately be exhausted when the object for which it was provided had been attained. The passage from Viscount Cave's judgment which has since been much quoted is to be found at page 213:― "When an expenditure is made, not only once and for all, but with a view to bringing into existence as asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital." And Lord Atkinson at page 221 said:― "It is difficult to see on what principle the company are, for the purposes of the assessment of income-tax for the year in which the payment was made, entitled to deduct it from their profits and gains for that year, since it cannot, I think, be regarded as forming part of the cost by which thos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne between deductions that were permissible and those that were not had previously been uncertain and difficult to follow. As regards the large majority of deductions, there was and could be no conceivable doubt. They were clearly on one side of the line or the other. But as regards a comparatively small number, it was difficult to say on which side of the line they fell. This was particularly the case where, as in the present one, an expenditure is not a recurring one, but is made once and for all. It was pointed out by Lord Cave in Atherton's case [1926] A.C. 205 that an expenditure, though made once and for all, may nevertheless be treated as a revenue expenditure, and he then added this: (And the Lord Justice then quotes the passage I have read and continues). It should be remembered, in connection with this passage, that the expenditure is to be attributed to capital if it be made 'with a view' to bringing an asset or advantage into existence. It is not necessary that it should have that result. It is also to be observed that the asset or advantage is to be for the 'enduring' benefit of the trade. I agree with Rowlatt, J., that by 'enduring' is mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to register a trade mark, and when they register it that is equivalent to evidence of public use of it by them, and during five years the registration is prima facie evidence of their exclusive right to it, and after the five years it is conclusive evidence of such right." In the case before us it seems to me that the duration of the advantage gained by registration is uncertain, the fees only preserve it for specified periods, in the first instance seven years, and for subsequent periods of fifteen years. How can it be said, to use the words of Lord Cave, "to bring into existence an asset or an advantage for the enduring benefit of the trade?" Can it be said that periods of 7 and 15 years are sufficiently permanent to make it enduring? I think not. It could not, in may opinion, be disputed that if in order to protect these trade marks by registration, an annual fee had to be paid, that the payments so made would be revenue payments and deductible for tax purposes, and, in my opinion, the fact that the periodic payments are spaced by longer intervals cannot effect the principle, so long as the payments are recurrent and they are not made once and for all. But were t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed companies and the practice of operating through subsidiaries, in which the old rules had become artificial. The entire control of a business might be changed by a transfer of shares without any assignment of the trade mark, whilst, on the other hand, the transfer of a part of a business to a subsidiary company might involve no real change in control and yet require an assignment of the trade mark which could not be legally effected." In my opinion the registration fees paid were not paid for the purpose of acquiring a right of transmissibility, which did not previously exist, the enhanced status of a registered trade mark is only incidental to the registration of an existing asset. But even if it could be regarded as new right, it is not enduring since in order to keep it up, periodic payments are necessary. This case may fall near the dividing line, but in my judgment it falls on the revenue side of it, and accordingly in my opinion the first questions should be answered in the affirmative. As to question No. 2, there is no evidence that the trade marks are used in any way except for the purposes of the assessee company's business, and admittedly the expenditure was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mark is a capital asset. It is also not disputed that in this particular case the expenditure, namely, the payment of registration fees, does not bring into existence any new asset, but the question is whether there has been brought into existence an advantage for the enduring benefit of a trade; and Mr. Setalvad said that an enduring advantage has been brought into existence on two specific grounds. The first ground is that the registered holder of a trade mark gets a proprietary right in the trade mark which he did not enjoy before. Mr. Setalvad particularly emphasizes Section 21 of the Trade Marks Act (V of 1940) which confers upon the registered proprietor of a trade mark the exclusive right to the use of the trade mark. Now in England the law governing the question of trade marks was first placed on the Statute Book in 1875. Prior to that, an action also for deceit lay in the common law Courts ands in equity an action also lay for an infringement of a trade mark; and as pointed out in Kerly on Trade Marks, sixth edition, by 1838 the right of property in trade mark was established by a series of decisions of English Courts. And, as pointed out by the learned Chief Justice in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adical alteration in the law relating to registered trade marks. Now it is to be noted that what that case actually decided was that the decision of the House of Lords in the Yeast-Vite case [1934] 103 L.J. Ch. 106 was overruled by the Act of 1938. In the Yeast-Vite case the plaintiffs were the registered proprietors of the trade mark "YeastVite," and they claimed that the defendant's use of that word in the way described amounted to an infringement. The House of Lords rejected on the ground that the defendant's use of the mark was not for the purpose of indicating the origin of his goods and, therefore, did not infringe the right conferred upon the plaintiffs as registered proprietors of the trade mark under the statutes then in force. It should also be noted that Section 39 of the Act of 1905 conferred upon the proprietor of a registered trade mark the exclusive right to the use of such trade mark upon or in connection with the goods in respect of which it was registered; and Sir Wilfrid Greene came to the conclusion that looking to the language of Section 4 of the Act of 1938, a radical alteration had been brought about in the law relating to registered trade m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to which I have just referred, it must have a degree of permanence. What that degree should be is a matter which must depend upon the facts of each case. But a mere advantage without it being at the same time an enduring advantage would not be the advantage to which Viscount Cave refers as making the expenditure for bringing it into existence a capital expenditure. Now in this case all that the payment of the registration fee involves is that for a period of seven years the proprietor of the registered trade mark obtains in the first instance certain procedural rights to which I have referred and, secondly, his fixed asset in the trade mark becomes assignable. But these advantages only last for a period of seven years and at the end of that period both the advantages lapse unless he pays a fresh fee for a period of fifteen years. In my opinion this does not constitute the advantage received by the proprietor of a trade mark an enduring advantages. Mr. Setalvad has referred to a decision in Kneeshaw v. Abertolli. [1941] 9 I.T.R. Suppl. 121 The facts in that case were that the respondent was granted a licence by justices to sell intoxicating liquor and the monopoly value of the li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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