BOMBAY HIGH COURT

                                        Commissioner of Income Tax

                                                         Vs

                                          Century Spinning Weaving

                                                   (Stone, C.J.)

                                                   02.09.1946

                                                 JUDGEMENT

Stone, C.J.

( 1. ) THIS is a reference under Section 66 (1) of the Income-tax Act, and the problem which we
have to consider arises for the assessment year 1943-44 in respect of the account year of the
assessee company, which is the calendar year 1942. The questions referred to us concern an
expenditure of Rs. 16,707 in fees consequential upon the assessee company, who carry on the
business of textile mills, making an application for registration of their trade marks which had
been continuously in use since before the 25th of February, 1937. The questions submitted to us
by the Tribunal are these : (1) Whether in the circumstances of the case the expense of Rs.
16,707 incurred by the assessee company in the material year of account in respect of application
fees for the initial 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 companys business

( 2. ) 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 Rs. 16,707 on account of the
prescribed application fees. It debited the amount to its revenue account and, in its assessment for
1943-44, claimed allowance in respect of it in the computation of it business profits, under
Section 10 (2) (xii) of the Indian Income-tax Act. The first question, we have to consider,
depends primarily on an appreciation of the nature and effect of the Trade Marks Act, 1940. As
its preamble shows, it was enacted because it was expedient to provide for the registration and
more effective protection of trade marks. The definition section is Section 2 and by sub-clause (i)
registered (with its grammatical variation) means registered under this Act; (j) registered trade
mark means a trade mark which is actually on the register and (l) trade mark means a mark used
or proposed to be used in relation to goods for the purpose of indicating or so as to indicate a
connection in the course of trade between the goods and some person having the right, either as
proprietor or as registered user, to use the mark whether with or without any indication of the
identity of that person. The procedure which has to be adopted in order to effectuate registration
is contained in Chapter III and in section 18 provision is made for the duration and renewal of
registration. By sub-section (1) of that section, registration of a trade mark shall be for a period of
seven years, and it may be renewed from time to time in accordance with the provisions of the
section. Then sub-section (2) provides for the renewal of registration after the initial seven years
for periods of fifteen years, and sub-section (3) provides that at the prescribed time before the
expiration of the last registration of the trade mark the Registrar shall send notice in the
prescribed manner to the registered proprietor of the date of expiration and the conditions as to
payment of fees and otherwise. Under a schedule which is referential to prescribed rules made
under the Act the quantum of fees which have to be paid is provided for. Chapter IV is headed,
Effect of Registration, and commences with Section 20. Sub-section (1) of that section provides
that no person shall be entitled to institute any proceeding to prevent, or to recover damages for,
the infringement of an unregistered trade mark unless such trade mark has been continuously 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
registered....

( 3. ) MR. Setalvad on behalf of the Commissioner submits with reference to these two sections
that they show that a trade mark is a capital asset, and that this expenditure for registration is to
preserve that capital asset and to make it more effective, whilst Section 21 gives to the registered
proprietor a proprietary right to the trade mark, which he had not got before. Section 23 makes
registration prima facie evidence of validity, and by Section 24 registration after seven years is to
be conclusive as to validity. Section 28 which stands at the head of Chapter V, which chapter is
entitled Assignment and Transmission, provides that the person for the time being entered in the
register as the proprietor of a trade mark shall, subject to the provisions of the Act and to any
rights appearing from the register to be vested in any other person, have power to assign the trade
mark, and to give effectual receipts for any consideration for such assignment. Section 29
provides :- Notwithstanding anything in any other law to the contrary, a registered trade mark
shall, subject to the provisions of this Chapter, be assignable and transmissible whether in
connection with the goodwill of a business or not, and in respect either of all the goods in respect
of which it is registered or of some only of those goods. ;