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The capital or revenue nature of any payment is to be judged from the business viewpoint of the payer and not on the basis of the treatment given in the books of the recipient. The same rule will hold good in judging the nature of any receipt, as every payment would be a receipt for someone. The Supreme Court in the case of Empire Jute Co. Ltd. (1980) 124ITR1 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.

The Madras High Court in the case of CIT v. H Miller’s Co. Ltd. (2001) 118TAX193 in the case of a payment made for use of trade mark held that the character of the payment made by the payer need not be identical with the character of that payment when received in the hands of the payee. In this case it was found that while the payer might have acquired an advantage of enduring benefit for use of trademark for 25 years for a lump sum price, so far as the assessee was concerned, it did not part with the trademark but merely permitted its exclusive user thus retaining all its rights of ownership over the trade mark. The High Court further held that in such a case it cannot be said that the assessee had transferred any part of its asset under the agreement. Also since the assessee has retained the ownership rights with it the receipt could not be described as capital in nature.

The view of the Tribunal regarding the capital nature of such receipt on the basis that the assessee has been completely deprived of the asset, as it could not use the trade mark in the area for which the license has been granted is termed as incorrect by the High Court.

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