By Jagdish D. Shah, Jagdish T. Punjabi, Chartered Accountants
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10 K. Damani Securities Pvt. Ltd.
v. ITO
ITAT ‘C’ Bench, Mumbai
Before G. E. Veerabhadrappa (VP) and
G. C. Gupta (JM)
ITA No. 2568/M/04
A.Y. : 2001-02. Decided on : 22-10-2007
Counsel for assessee/revenue : Hiro Rai/
B. K. Singh
Whether stock exchange membership card acquired after
1-4-1998 represents a commercial right/intangible asset and therefore
qualifies for depreciation u/s.32 of the Income-tax Act, 1961 — Held, Yes.
The assessee claimed depreciation on membership card of
Bombay Stock Exchange, acquired after 1-4-1998. The Assessing Officer did not
allow the claim of the assessee. The CIT(A) upheld the action of the Assessing
Officer. The assessee preferred an appeal to the Tribunal. In the appeal to
the Tribunal the contention of the assessee was that membership card of Bombay
Stock Exchange represents a commercial right/intangible asset and therefore
qualifies for depreciation u/s.32 of the Act. Reliance in this connection was
placed on the decision of the Division Bench in the case of Techno Shares &
Stocks Ltd. (ITA Nos. 778, 779 and 1951/Mum./2004 decided on 4-1-2006). On the
other hand the Departmental Representative pointed out that subsequent to the
decision in the case of Techno Shares & Stocks Ltd., the Tribunal, in another
case, has set aside the issue to the file of the Assessing Officer with a
direction to allow depreciation only after he finds that there is a diminution
in the value of the asset as a result of use.
Held :
The principle that the acquisition of Bombay Stock Exchange
Card after 1-4-1998 results in acquisition of a commercial asset in the form
of an intangible asset and therefore is entitled for depreciation in the light
of the amended provisions has been accepted by both the decisions. The
Tribunal in the light of the contention of the AR that S. 32 which grants
depreciation on various conditions itself does not spell out such diminution
to be the condition for allowance of depreciation and also having regard to
the ratio of Techno Shares & Stocks Ltd. decided the issue in favour of the
assessee. The Tribunal also stated that the decision rendered in the other
case where the matter has been restored to the Assessing Officer must be taken
to have been decided on the facts that existed in that case.
- The flat in question was exclusively used for the purpose of the business of
the assessee. It was used for accommodating the business executives of various
suppliers, who visited the assessee’s shop for business purpose. Apart from
that, some senior staff of the assess was also residing in the flat;
- No rent was paid by the assessee for the use of the flat;
- The assessee had substantial amount of interest-free funds during both the
years under appeal;
- The AO was unable to pinpoint as to which part of the interest-bearing funds
had been diverted.
In view of the above, the Tribunal upheld the order of the
CIT(A).
(iii) In the case of SCM Creation, which was the intervener
in the case of Rogini Garments before the Special Bench of Chennai Tribunal,
the Madras High Court relying on its own decision in the case of V.
Chinnapandi, had allowed the appeal filed by the assessee;
(iv) The Bombay High Court in the case of Nima Specific
Family Trust, which decision was again based on the decision of the M. P. High
Court in the case of J. P. Tobacco Products Pvt. Ltd., had held that both the
Sections were independent and hence, deduction could be claimed on the gross
total income, subject to ceiling of 100%.
