Shri Sunil Mantri, Kolkata V. ITO,Ward-56(4), Kolkata, Kolkata

ITA 1005/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78328 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 27-06-2012
• Court: TRIBUNAL
• Department Lawyers: A S MONDAL
• Keywords: Depreciation; Business expenditure; Revenue expenditure
• Section: 143(3)

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & / I.T.A NOS.1005 & 1006/KOL/2012 '( )*/ ASSESSMENT YEARS: 2006-07 & 2007-08 SHRI SUNIL MANTRI VS. INCOME-TAX OFFICER, WD-5 6(4), KOLKATA. (PAN: ADVPM7766P) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 26.05.2014 DATE OF PRONOUNCEMENT: 26.05.2014 FOR THE APPELLANT: SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT: SHRI A. S. MONDAL, ADDL.CIT, SR. DR $0 / ORDER PER SHRI MAHAVIR SINGH, JM : BOTH THESE APPEALS BY ASSESSEE ARE ARISING OUT OF S EPARATE ORDERS OF CIT(A)-XXXVI, KOLKATA IN APPEAL NOS. 543 & 999/CIT(A)-XXXVI/KOL/W D.-56(4)/09-10 BOTH DATED 01.06.2012. ASSESSMENTS WERE FRAMED BY ITO, WARD-5 6(4), KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) FOR ASSESSMENT YEARS 2006-07 AND 2007-08 VIDE HIS SEPARATE ORDERS DATED 26.12.2008 A ND 24.12.2009 RESPECTIVELY. 2. THE FIRST COMMON ISSUE IN THESE TWO APPEALS OF A SSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO IN DISALLOWING C LAIM OF THE ASSESSEE TOWARDS WRITING OFF OF DEVELOPMENT FEE TO THE EXTENT OF 1/10 TH OF EACH OF THE TOTAL FEE PAID TO STOCK EXCHANGE IN BOTH THE YEARS I.E. AY 2006-07 AND 2007-08. 3 . BRIEFLY STATED FACTS ARE THAT THE ASSESSEE APPLIED FOR MEMBERSHIP CARD OF CALCUTTA STOCK EXCHANGE ASSOCIATION LTD., 9, LYONS RANGE, KOLKATA- 700 001. CALCUTTA STOCK EXCHNAGE ISSUED LETTER TO ASSESSEE DATED 04.04.1992 TO PAY A SUM OF RS.25.09 LACS FOR MEMBERSHIP CARD. THE ASSESSEE PAID THE SUM OF RS.25.09 LACS BY CHEQU E DATED 18.04.1992 AND STOCK EXCHNAGE ISSUED MONEY RECEIPT NO. S804. BY PAYING THIS AMOU NT, ASSESSEE ACQUIRED RIGHT TO TRADE IN THE STOCK EXCHANGE. STOCK EXCHANGE CHARGED THIS RS.25 LACS UNDER THE HEAD DEVELOPMENT FEE 2 ITA NOS. 1005 & 1006/K/2012 SUNIL MANTRI AY 2006-07 & 2007-08 AND ISSUED MEMBERSHIP CARD. THE ASSESSEE HAS NOT C LAIMED ANY EXPENSES ON THIS ACCOUNT BECAUSE THIS WAS TREATED AS FIXED ASSET IN HIS BALA NCE SHEET BY THE ASSESSEE. THE ASSESSEE HAS ALSO NOT CLAIMED DEPRECIATION ON THE SAME. THE AS SESSEE IN THIS VERY YEAR I.E. AY 2006-07 FIRST TIME CLAIMED 10% OF DEVELOPMENT FEE AS ALLOWABLE AN D CLAIMED TOWARDS WRITING OFF OF DEVELOPMENT FEE. THE AO DURING THE COURSE OF ASSES SMENT PROCEEDINGS DISALLOWED THE CLAIM OF ASSESSEE FOR THE REASON THAT THIS CANNOT BE WRIT TEN OFF BECAUSE ASSESSEE HAS PAID THIS AMOUNT ON 18.04.1992 AND MORE THAN 10 YEARS HAVE ELAPSED. THE AO ALSO RECORDED THAT ASSESSEES CASE IS NOT COVERED BY THE DECISION OF JURISDICTIONAL IT AT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER: (A) APPELLANT APPLIED AND GOT THE MEMBERSHIP OF TH E [CSEA LTD.] CALCUTTA STOCK EXCHANGE ASSOCIATION LTD. IN THE YEAR 1992. THOUH T HE FIRST YEAR FOR CLAIM OF CSEA DEPOSIT WRITTEN OFF (I.E. 10% OF TOTAL DEPOSIT OF R S.25.00.000) WAS A.Y. 1993-94, THE APPELLANT MADE ITS FIRST CLAIM IN THE A.Y. 2005-06. THE YEAR UNDER CONSIDERATION S SECOND YEAR OF CSEA DEPOSIT WRITTEN OFF. (B) FOR JUSTIFICATION OF HIS CLAIM, APPELLANT RELIE D ON VARIOUS JUDGEMENT INCLUDING TECHNOSHARES AND STOCKS LTD -VS- ITO (2006) 101 TTJ (MUM) 349 BY TREATING MEMBERSHIP CARD AS INTANGIBLE ASSET AND REQUESTED F OR ALLOWABILITY OF DEPRECIATION THEREOF. PPELLANT INSTEAD OF CLAIM OF DEPRECIATION , PUT FORWARD HIS CLAIM OF 10% OF DEVELOPMENT FEES PAID FOR GETTING THE CARD AS REVEN UE EXPENDITURE IN EACH YEAR. (C) IT IS TRUE, STOCK EXCHANGE CARD IS INTANGIHLE O N WHICH DEPRECIATION IS ALLOWABLE ON FACE VALUE BUT FROM WHEN - THE YEAR IN WHICH SUCH M EMBERSHIP CARD IS ACQUIRED. HERE, THE FRST YEAR CLAIM OF DEPRECIATION OR DEPOSIT WRI TTEN OFF IS A.Y. 1993-94 NOT A.Y. 2005- 06. N A.Y. 2005-06, APPELLANT CLAIM OF DEPRECIATES OR DEPOSIT WRITTEN OFF IS ALREADY EXHAUSTED. (D) IT IS NOT CLEAR UNDER WHICH SECTION OF INCOME T AX ACT HE IS CLAIMING 10% OF CSEA DEPOSIT WRITTEN OFF PER ANNUM. SUO-MOTTO CLAIM OF 1 0% OF CSEA DEPOSIT WRITTEN OFF STARTING FROM A.Y. 2005-06 IS NOT ALLOWABLE REVENUE EXPENDITURE. (E) KEEPING IN VIEW OF THE ABOVE, APPELLANT IS NOT ALLOWED THE CLAIM OF DEPOSIT WRITTEN OFF @ 10% PER ANNUM OF RS.2,50,000-. IN A.Y. 2006-07. WE ALSO FIND THAT THE CIT(A) HAS NOT ALLOWED THE CL AIM OF DEPRECIATION. WE FURTHER FIND THAT THE ASSESSEE MADE A CLAIM OF DEPRECIATION BEFORE CI T(A) IN TERMS OF SECTION 32(1)(II) OF THE ACT. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. ADMITTEDLY, THE ASSESSEE HAS TREATED THIS MEMBERSHI P ACQUIRED AND AMOUNT PAID AS INTANGIBLE ASSET AS IS EVIDENT FROM THE TREATMENT GIVEN BY ASS ESSEE IN HIS BALANCE SHEET. WE FIND THAT THE DEVELOPMENT FEE IS NOTHING BUT THE COST OF ACQUIRIN G MEMBERSHIP RIGHT IN THIS STOCK EXCHANGE 3 ITA NOS. 1005 & 1006/K/2012 SUNIL MANTRI AY 2006-07 & 2007-08 TO EXECUTE TRADE ON THE FLOOR OF THE STOCK EXCHANGE . HENCE, ACCORDING TO US, THIS IS AN INTANGIBLE ASSET SUBJECT TO DEPRECIATION U/S. 32(1) (II) OF THE ACT. THIS VIEW OF OURS IS SUPPORTED BY THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF TECHNO SHARES AND STOCKS LTD. VS. CIT (2010) 327 ITR 323 (SC), WHEREIN HONBLE COURT HAS HELD AS UNDER (HEAD NOTES): HELD, REVERSING THE DECISION OF THE HIGH COURT, ON A CONSIDERATION OF THE BSE RULES, THAT THE RIGHT OF MEMBERSHIP WAS A BUSINESS OR COMMERCI AL RIGHT AND COULD BE SAID TO BE OWNED BY THE ASSESSEE AND USED FOR BUSINESS PURPOSE S IN TERMS OF SECTION 32(1)(II). THE RIGHT OF MEMBERSHIP, WHICH INCLUDED THE RIGHT OF NO MINATION, WAS A LICENCE OR AKIN TO A LICENCE WHICH WAS ONE OF THE ITEMS WHICH FELL IN SECTION 32(1)(II). THE RIGHT TO PARTICIPATE IN THE MARKET HAD AN ECONOMIC AND MONEY VALUE. IT WAS AN EXPENSE INCURRED BY THE ASSESSEE WHICH SATISFIED THE TEST OF BEING A LICENCE OR ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE IN TERMS OF SEC TION 32(1)(II). AS THE ISSUE IS EVIDENTLY CLEAR, ASSESSEE IS NOT LI ABLE TO CLAIM ANY DEDUCTION ON ACCOUNT OF DEVELOPMENT FEE @ 1/10 TH BUT DEFINITELY THE ASSESSEE IS ELIGIBLE FOR CLAIM ING DEPRECIATION U/S. 32(1)(II) OF THE ACT. BUT SINCE THIS CLAIM WAS NOT MADE BEFORE THE AO AND AO HAS NOT ADJUDICATED THE ISSUE WHETHER AT ANY POINT OF TIME ASSESSEE HAS CLAIMED DEPRECIATION ON THE SAME OR NOT AND MOREOVER, THE AO HAS ALLOWED THE SA ME OR NOT. THIS NEEDS EXAMINATION FACTUALLY. IN CASE THE ASSESSEE HAS MADE CLAIM OF DEPRECIATION AND AO HAS ALLOWED THE SAME OR THE ASSESSEE HAS NOT MADE ANY CLAIM BUT THE AO HAS ALLOWED THE SAME, THEN THE ASSESSEE IS ACCORDINGLY ELIGIBLE FOR CLAIMING DEPRECIATION ON W DV OF THE ASSETS. BUT IF THE ASSESSEE HAS MADE NO CLAIM AND AO HAS ALSO NOT ALLOWED THE SAME, THE ASSESSEE IS ELIGIBLE FOR LAST VALUE IN THE BALANCE SHEET AS ON 31.03.2004 OR 01.04.2004. IN SUCH CIRCUMSTANCES, THE AO WILL RECOMPUTE THE CLAIM OF DEPRECIATION AND ALLOW ACCOR DINGLY. THIS GROUND OF APPEALS OF ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 5. THE NEXT COMMON ISSUE IN THESE TWO APPEALS OF A SSESSEE IS AS REGARDS TO THE CLAIM OF INTEREST PAID IN BOTH THE ASSESSMENT YEARS AT RS.48 ,750/- IN EACH YEAR CONFIRMED BY CIT(A). 6. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE CLAIM ED THAT HE HAS TAKEN LOAN OF RS.5,60,373/- AND ON WHICH PAID A SUM OF RS.48,750/- AS INTEREST AND ASSESSEE CLAIMED THE SAME AS BUSINESS EXPENDITURE. THE AO DISALLOWED FOR THE SIMPLE REAS ON THAT THE BORROWED AMOUNTS WERE USED FOR PROPRIETARY FIRM AND NOT FOR THE PURPOSE OF BUS INESS. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO SIMPLY FOR THE REASON THAT THE ASSESSEE HAS FAILED TO EXPLAIN THAT THIS MONEY HAS DIRECT NEXUS WITH THE INVESTMENT IN THE PROPRIETARY CONCERN. AGGRIEVED, NOW ASSESSEE IS IN APPEALS BEF ORE US. 4 ITA NOS. 1005 & 1006/K/2012 SUNIL MANTRI AY 2006-07 & 2007-08 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT NONE OF THE AUTHORITIES BELOW HAS NOT APPRECIATED THE FACT THAT THE ASSESSEE CLAIMED FROM THE VERY BEGINNING THAT HE HAD MADE THIS INVES TMENT IN PROPRIETARY CONCERN M/S. S. MANTRI & CO. AFTER BORROWING THE SAME. THIS AMOUNT WAS BO RROWED 10 YEARS AGO FROM ONE SMT. SUMITRA DEVI MUNDHRA AND LOAN HAS BEEN ACCEPTED BY THE SUCCESSIVE AO AND INTEREST WAS ALLOWED AS EXPENDITURE SINCE THEN. WE FIND NO REAS ON TO DEVIATE IN THESE TWO YEARS AND THAT ALSO IN THE ABSENCE OF ANY REASONS. IN SUCH CIRCUM STANCES, WE ALLOW THIS ISSUE IN FAVOUR OF THE ASSESSEE. THIS ISSUE OF ASSESSEES APPEALS IS ALLOW ED. 8. IN THE RESULT, APPEALS OF ASSESSEE ARE PARTLY AL LOWED FOR STATISTICAL PURPOSES. 9. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26TH MAY, 2014 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT SHRI SUNIL MANTRI, 6, WATERLOO STREET, KOLKATA- 700069. 2 ./,- / RESPONDENT ITO, WARD-56(4), KOLKATA. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .