1998 (7) TMI 4

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..... e of the licence and trade mark "Miller" by the Indian company was a capital receipt, and, therefore, not taxable in the assessee's hands ? The assessee is a foreign company which entered into agreement with Tube Investments Ltd., and later with T. I. Miller Ltd., Madras. These agreements were entered into in the year 1961. Under the agreement between the assessee and Tube Investments Limited, it was provided that the assessee would receive a sum of Rs. 50,000 from the company to be incorporated in the form of equity shares of that company as consideration for allowing that company an exclusive licence to use the trade mark "Miller" over its products. The agreement also provided that the new company was not to use any mark other than the .....

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..... t when received in the hands of the payee. Even assuming that the amount paid by T. I. Miller Limited, the newly established company, to the assessee was a payment of capital character so far as the payer was concerned, it could still be regarded as revenue receipt in the hands of the assessee. The Supreme Court in the case of Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1, held that it is not a universally true proposition that what may be a capital receipt in the hands of the payee must necessarily be capital expenditure in relation to the payer. While the payer in this case may have acquired an advantage of enduring benefit for the period covered by the agreement, so far as the assessee is concerned, it did not part with the trade mark b .....

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..... in advance by the user to the assessee. The fact that the payment so made is a lump sum by itself cannot be determined of the character of the receipt in the hands of the assessee. Had the assessee not licensed its mark but itself exploited the mark in the territories for which it had granted licence, the monies realised by it would certainly have been of revenue character. By agreeing to receive a lump sum for the exploitation of that mark in the limited areas over a specified period and receiving that amount in advance would not be sufficient to convert what is otherwise a revenue receipt into a capital receipt. The manner of exploitation of the mark owned by the assessee does not make any difference to the character of the amount realis .....

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