D.K. MODI SECURITIES P. LTD, MUMBAI V. ITO 4(1)(1), MUMBAI

ITA 118/MUM/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0653 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 10-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Cost of acquisition
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D , MUMBAI BEFORE SHRI B.R. BASKARAN , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 118/M/2011 ASSESSMENT YEAR: 2007 - 08 M/S. D.K. MODI SECURITIES PVT. LTD., 515, ROTUNDA BUILDING, FOR T, MUMBAI 400 023 PAN: AAACD 5552 H VS. ITO 4(1)(1), AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SANJAY CHAUDHARY, A.R. REVENUE BY : SHRI LOVE KUM AR, D.R. DATE OF HEARING : 10.03. 201 5 DATE OF PRONOUNCEMENT : 27.05. 2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 29.10.2010 OF THE COMMISSIONER OF INCOME TAX (APPEAL S) [(HEREINAFTER REFERRED TO AS CIT(A)] RELEVANT TO ASSESSMENT YEAR 2007 - 08 . THE ASSESSEE HAS TAKEN THR EE EFFECTIVE GROUNDS OF APPEAL. 2. AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE HAS STATED AT BAR THAT HE DOES NOT PRESS GROUND NO.1. GROUND NO.1 IS AC CORDINGLY DISMISSED AS NOT PRESSED. GROUND NO.2 3. GROUND NO.2 RELATES TO THE ADDITION OF RS. 2,23,957/ - UNDER SECTION 36 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) NOTED THAT IN THE LIST OF OUTSTANDING SUNDRY DEBTS THERE WAS INCLUDED AN AMOUNT OF RS.1 , 08 , 43 , 143/ - AGAINST THE PERSONS NAMELY ITA NO.118/M/2011 M/S. D.K. MODI SECURITIES PVT. LTD. 2 AAYUSH SHAH, ANIKA AND YUGAM WHO WERE THE PERSONS DEFINED UNDER SECTION 40 A(2)(B) ON WHICH NO INTEREST WAS CHARGED. IT WAS ALSO NOTICED BY THE AO THAT THE ASSESSEE HAD PAID INTEREST OF RS.3,12,819/ - ON ACCOUNT OF OVERDRAFT FROM BANK. THE AO WORKED OUT THE PEAK DEBIT IN RESPECT OF ABOVE STATED THREE PERSONS AND BANK OVERDRAFT ON THE RELEVANT DEBT AND ARRIVED AT A CONCLUSION THAT THE ASSESSEE HAD PAID THE BO RROWED FUNDS FROM BANK AND HAD PAID THE AMOUNT ON BEHALF OF THE ABOVE STATED THREE PERSONS IN RESPECT OF SETTLEMENT OF PAYMENT ON PAY ON DEBTS OF THE STOCK EXCHANGE. THE AO WORKED OUT THE INTEREST EXPENDITURE ON THE AMOUNT PAID BY THE ASSESSEE ON ACCOUN T OF THE ABOVE STATED THREE PERSON AT RS.9,13,571/ - WHICH WAS MORE THAN THE INTEREST OF RS.3,12,819/ - PAID ON OVERDRAFT FROM BANK. THEREFORE, THE AO RESTRICTED THE DISALLOWANCE OF INTEREST AT RS.3,12,819/ - HOLDING I T TO BE UNREASONABLE AND EXCESSIVE A S PE R THE PROVISIONS OF SECTION 40A(2)(B) READ WITH SECTION 36 OF THE ACT. 4. IN APPEAL, THE LD. CIT(A) ALSO AGREED WITH THE FINDINGS OF THE AO THAT THE ASSESSEE HAD USED ITS FUNDS IN SETTLEMENT OF PAYMENT OF ABOVE STATED SPECIFIED PERSONS. HE, THEREFORE, HELD THAT THE INTEREST BEARING FUNDS WERE USED BY THE ASSESSEE FOR PAYMENT FOR SETTLEMENT OF THE ACCOUNT OF THE SPECIFIED PERSONS AND HENCE THE INTEREST BEARING FUNDS WERE DIVERTED AND USED FOR NON INTEREST BEARING PAYMENTS. HE, THEREFORE, CONFIRMED THE D ISALLOWANCE OF INTEREST BUT RESTRICTED THE SAME UP TO AN AMOUNT OF RS. 2,23,957/ - OBSERVING THAT THE PAYMENT OF INTEREST PAID ON OVERDRAFT FEES WAS OF RS.2,23,957/ - ONLY. 5. BEFORE US, THE LD. A.R. OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE COMPANY WAS HAVING ITS OWN FUNDS OF RS.2,63,15,762/ - AS ON 31.03.07. THE INTEREST WAS PAID ON OVERDRAFT ACCOUNT MAINTAINED WITH THE BANK WHICH WAS REQUIRED TO BE MANDATORILY MAINTAINED FOR THE PURPOSE OF SETTLEMENT OF TRANSACTIONS EXECUTED WITH STOCK EXCHANGE. A LL THE TRANSACTIONS RELATING TO PAYMENT TO AND FROM STOCK EXCHANGE HAVE BEEN SETTLED THROUGH THIS ACCOUNT ITA NO.118/M/2011 M/S. D.K. MODI SECURITIES PVT. LTD. 3 ONLY. EVEN THE OVERDRAFT FEES WAS OBTAINED AGAINST THE FDR UPON WHICH THE ASSESSEE HAS RECEIVED INTEREST OF RS.1,42,698/ - , HENCE THE NET INTEREST P AID BY THE ASSESSEE ON OVERDRAFT ACCOUNT WAS RS.81,259/ - ONLY. 6. WE HAVE CONSIDERED THE SUBMISSIONS. ADMITTEDLY, THE ASSESSEE, THOUGH, HAD SURPLUS FUNDS BUT FROM THE FACTS ON FILE IT IS CLEAR THAT THE ASSESSEE HAD USED THE OVERDRAFT FUNDS FOR SETTLEME NT OF ACCOUNTS OF THE PERSONS SPECIFIED UNDER SECTION 40 A (2)(B) OF THE ACT. HOWEVER, THE OTHER FACTS REMAIN THAT THE ASSESSEE HAD ALSO RECEIVED INTEREST FROM THE FDR PLEDGED WITH THE BANK IN RELATION TO THE OVERDRAFT FACILITY . UNDER THE CIRCUMSTANCES, TH E DISALLOWANCE, IF ANY, IN OUR VIEW, SHOULD BE RESTRICTED TO N ET INTEREST PAID ON THE OVERDRAFT AMOUNT IN RELATION TO PAYMENTS MADE BY THE ASSESSEE ON BEHALF OF THE SPECIFIED PERSONS UNDER SECTION 40A(2)(B). WE ACCORDINGLY RESTRICT THE DISALLOWANCE TO RS. 8 1 , 259 / - I.E. TO THE EXTENT OF NET INTEREST PAID BY THE ASSESSEE ON OVERDRAFT ACCOUNT . THIS ISSUE IS ACCORDINGLY PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. GROUND NO.3 7. GROUND NO.3 IS RELATING TO THE CLAIM OF DEPRECIATION ON STOCK EXCHANGE CARD. TH E AO NOTED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS.1 , 48 , 918/ - ON STOCK EXCHANGE CARD. HE HELD THAT THE ASSESSEE WAS NOT ENTITLED TO THE ABOVE STATED DEPRECIATION AND DISALLOWED THE SAME. 8. IN APPEAL, THE LD. CIT(A) OBSERVED THAT THERE WAS DEM UTUALIZATION AND CORPORATIZATION OF STOCK EXCHANGE DURING THE A.Y. 2006 - 07. AS A RESULT OF WHICH THE NEW TRADE RIGHTS WERE GIVEN IN PLACE OF OLD TRADE RIGHTS. THE COST OF NEW TRADE RIGHTS AND LICENSE WAS TO BE CONSIDERED AT NIL AS PER PROVISO TO SECTION 55(2)(AB) OF THE ACT. HE, THEREFORE, OBSERVED THAT SINCE THE VALUE OF STOCK MEMBERSHIP CARD WAS DEEMED TO BE NIL, HENCE THE WRITTEN DOWN VALUE (WDV) OF THAT CARD WOULD ALSO BE NIL AND THEREFORE THE ASSESSEE COULD NOT ITA NO.118/M/2011 M/S. D.K. MODI SECURITIES PVT. LTD. 4 CLAIM DEPRECIATION ON THE OLD CARD WHI CH HAD ALREADY BEEN CONVERTED INTO NEW TRADE RIGHTS , TH E VALUE ON WHICH WAS TO BE DETERMINED AT NIL. HE, THEREFORE, CONFIRMED THE FINDINGS OF THE AO. 9. BEFORE US, THE LD. D.R. HAS BROUGHT OUR ATTENTION TO THE DECISION OF THE CO - ORDINATE BENCH OF THE T RIBUNAL , IN THE CASE OF SINO SECURITIES (P.) LTD. V. INCOME - TAX OFFICER [2011] 16 TAXMANN.COM 354 (MUMBAI) , WHEREIN , WHILE ADJUDICATING THE IDENTICAL ISSUE OF DEPRECIATION ON STOCK EXCHANGE CARD AFTER DEMUTUALIZATION OF THE STOCK EXCHANGE, THE TRIBUNAL H AS OBSERVED THAT WHEN THE BSE UNDER SCHEME OF DEMUTUALIZATION AND CORPORATIZATION WAS SUCCEEDED BY A COMPANY UNDER THE NAME AND STYLE OF BSE LTD., THE ASSESSEE , WHO CONSEQUENT TO DEMUTUALIZATION , HAD ACQUIRED T W O SEPARATE RIGHTS IN NEW COMPANY I.E. (I) OWN ERSHIP RIGHTS OF SHARES IN LIEU OF THE BSE CARD AND (II) TRADING RIGHTS , WHICH WERE SUBJECT TO DEPOSIT OF CERTAIN AMOUNT BY THE ASSESSEE WITH THE BSE LTD. THE ASSESSEE COULD NOT BE ALLOWED DEPRECIATION IN RESPECT OF OWNERSHIP RIGHT WHICH WAS NOT A BUSINES S AND COMMERCIAL RIGHT OF SIMILAR NATURE AS PROVIDED UNDER SECTION 32(1)(II) OF THE ACT BEING INTANGIBLE ASSET . IT WAS FURTHER HELD THAT EVEN THOUGH THE TRADING RIGHT WAS A COMMERCIAL RIGHT BUT SINCE THE VALUE OF THE SAID RIGHT WAS EQUAL TO REFUNDABLE DEP OSIT TO BE MADE BY THE ASSESSEE WITH BSE LTD. , IT COULD NOT BE DEPRECIATED WHEN ITS VALUE IN REALITY DID NOT COME DOWN AND HENCE THE ASSESSEE WAS NOT ENTITLED TO DEPRECIATION ON BSE CARD. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL FOR THE SAKE OF CONVENIEN CE ARE REPRODUCED AS UNDER: 25 . FROM THE ABOVE, FOLLOWING CONCLUSIONS CAN BE DRAWN. ( I ) BSE WHICH WAS A VOLUNTARY, NOT FOR PROFIT CHARACTER OF ENTITY, GOT CONVERTED INTO A 'FOR PROFIT' AND CORPORATE ACTIVITY; ( II ) BSE MEMBERSHIP CARD IS CANCELLED AN D THE TWIN RIGHTS THAT A HOLDER OF BSE CARDHOLDER HAD GOT SEPARATED INTO THE FOLLOWING INDEPENDENT RIGHTS - (A) OWNERSHIP RIGHTS AND (B) TRADING RIGHTS. ITA NO.118/M/2011 M/S. D.K. MODI SECURITIES PVT. LTD. 5 ( III ) THE PREVIOUS RIGHTS OF A BSE MEMBERSHIP CARDHOLDER GETS EXTINGUISHED AND IN LIEU THEREOF THE B SE MEMBER ACQUIRES SHARES IN BSEL AND TRADING RIGHTS IN BSEL; ( IV ) UNDER SECTION 47(XIIIA), SUCH EXTINGUISHMENT OF RIGHTS AND ACQUISITION OF SHARES AND TRADING RIGHTS IN BSEL IS NOT REGARDED AS TRANSFER. ( V ) THAT COST OF ACQUISITION OF OWNERSHIP RIGH TS AND TRADING RIGHTS WOULD HAVE TO BE SPLIT AND VALUED ON TRANSMISSION. ( VI ) TRADING RIGHTS ARE BASED AS DEPOSIT SYSTEM AS OPPOSED TO CARD SYSTEM; ( VII ) THE TRADING CARD SYSTEM IS REPLACED BY THE DEPOSIT SYSTEM; ( VIII ) THE MONEY DEPOSIT BY THE ME MBER TO OBTAIN TRADING RIGHTS, IS BE CONSIDERED AS A DEPOSIT WITH STOCK EXCHANGE FOR TRADING PURPOSE; ( IX ) VALUE OF OWNERSHIP RIGHT SHALL BE THE SHARE IN THE NET ASSETS AND GOODWILL OF THE STOCK EXCHANGE; ( X ) THE VALUE OF DEPOSIT PLACED TO OBTAIN TRA DING RIGHTS WILL BE THE VALUE OF THE RIGHT TO TRADE; ( XI ) A TRADING MEMBER HAS TO RETAIN THE DEPOSIT AS LONG AS HE TRADES. IF A TRADING MEMBER WISHES TO TERMINATE HIS MEMBERSHIP, HE CAN DEMAND REFUND OF DEPOSIT. 26 . HENCE, IT IS CLEAR THAT THE ASSET OF THE ASSESSEE, AS IT EXISTED WHILE IT WAS A BSE MEMBERSHIP CARDHOLDER, IS DIFFERENT FROM THE ASSETS HELD BY THE ASSESSEE AFTER CORPORATIZATION AND DEMUTUALIZATION OF STOCK EXCHANGES, WHICH RESULTED IN THE ASSESSEE BECOMING A SHARE HOLDER IN BSEL. 27 . THE O WNERSHIP RIGHTS OF THE ASSESSEE GIVES IT A RIGHT TO PARTICIPATE IN THE OWNERSHIP OF THE ASSETS AND MANAGEMENT OF THE STOCK EXCHANGE. THE ASSESSEE HAS BEEN GRANTED CERTAIN SHARES IN BSEL AT PAR. THE ASSESSEE HAS DISCLOSED THEM AS INVESTMENT. RIGHTLY, THE AS SESSEE HAS NOT CLAIMED THAT THE SHARES ALLOTTED IN BSEL WAS A BUSINESS AND COMMERCIAL RIGHT OF SIMILAR NATURE UNDER SECTION 32(1)(II) OF THE ACT. 28 . COMING TO THE TRADING RIGHTS, THE REPORT OF THE GROUP ON CORPORATIZATION AND DEMUTUALIZATION OF STOCK EXCH ANGE FIXED THE VALUE AS EQUIVALENT TO THE DEPOSIT REQUIREMENT. THE TRADING RIGHT IS A BUSINESS AND COMMERCIAL RIGHTS OF SIMILAR NATURE UNDER SECTION 32(1)(II) OF THE ACT. 29. THE BUSINESS AND COMMERCIAL RIGHTS OF SIMILAR NATURE HELD BY THE ASSESSEE AS A HO LDER OF THE MEMBERSHIP CARD OF THE ERSTWHILE BSE NO LONGER EXISTS. THE SAME GOT EXTINGUISHED. HENCE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER WAS RIGHT IN HOLDING THAT NO DEPRECIATION CAN BE GRANTED ON THE WRITTEN DOWN VALUE OF THE BSE M EMBERSHIP CARD. AT BEST, THE CLAIM FOR DEPRECIATION CAN BE ON A TRADING RIGHT OF THE MEMBERS, WHICH IS NEWLY ACQUIRED, WHICH ASPECT WE WILL DISCUSS HEREAFTER. ITA NO.118/M/2011 M/S. D.K. MODI SECURITIES PVT. LTD. 6 30 . AS WE HAVE NOTICED, THE GROUP ON CORPORATISATION AND DEMUTUALIZATION OF STOCK EXCHANGES HAS S UGGESTED THE MANNER OF VALUATION OF OWNERSHIP RIGHTS AND TRADING RIGHTS. IT WAS RECOMMENDED THAT THE VALUE OF TRADING RIGHTS BE FIXED AT THE AMOUNT OF DEPOSIT THAT WAS REQUIRED FOR ACQUIRING TRADING RIGHTS. THE VALUE OF THE BSE CARD TO THE EXTENT ALLOCABLE OR ATTRIBUTABLE TO OWNERSHIP RIGHTS, CAN BE SAID TO HAVE BEEN TRANSMITTED BY WAY OF ALLOTMENT OF SHARES IN BSEL. THE VALUE IS TO BE DETERMINED BY THE UNDERLYING VALUE OF ASSETS OF BSEL OR THROUGH SOME OTHER APPROVED METHOD. 31 . COMING TO TRADING RIGHTS, W E FIND THAT THE VALUE THAT CAN BE ASSIGNED FROM OUT OF THE VALUE OF BSE CARD IS ONLY TO THE EXTENT OF DEPOSIT MADE. TRADING RIGHT IS NO DOUBT A BUSINESS IN COMMERCIAL RIGHTS BUT VALUE IS EQUIVALENT TO THE QUANTUM OF DEPOSIT. THE ASSESSEE IS ENTITLED TO REF UND OF THE DEPOSIT. WHEN THE VALUE IS EQUAL TO A REFUNDABLE DEPOSIT, HOW CAN SUCH VALUE OF REFUNDABLE DEPOSIT BE DEPRECIATED WHEN THE VALUE IN REALITY DOES NOT COME DOWN. IF THE REFUNDABLE DEPOSIT IS DEDUCTED FROM THE VALUE, THEN THE PRESENT VALUE OF TRADI NG RIGHT IS NIL. UNDER THESE CIRCUMSTANCES, THERE IS NO VALUE TO THE TRADING IN COMMERCIAL RIGHT ENTITLING THE ASSESSEE FOR DEDUCTION BY WAY OF DEPRECIATION. HENCE, NO DEPRECIATION CAN BE GRANTED ON THIS RIGHT. THUS, WE UPHOLD THE FINDING OF THE REVENUE AU THORITIES. WE NOW DISCUSS THE IMPACT OF THE FOLLOWING SECTIONS: - '55(2) FOR THE PURPOSES OF SECTIONS 48 AND 49, 'COST OF ACQUISITION', - (AB) IN RELATION TO A CAPITAL ASSET, BEING EQUITY SHARE OR SHARES ALLOTTED TO A SHAREHOLDER OF A RECOGNISED STOCK EXCHAN GE IN INDIA UNDER A SCHEME FOR DEMUTUALISATION OR CORPORATISATION APPROVED BY THE SECURITIES AND EXCHANGE BOARD OF INDIA ESTABLISHED UNDER SECTION 3 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992, (15 OF 1992) SHALL BE THE COST OF ACQUISITION OF H IS ORIGINAL MEMBERSHIP OF THE EXCHANGE. PROVIDED THAT THE COST OF A CAPITAL ASSET, BEING TRADING OR CLEARING RIGHTS OF THE RECOGNISED STOCK EXCHANGE ACQUIRED BY A SHAREHOLDER WHO HAS BEEN ALLOTTED EQUITY SHARE OR SHARES UNDER SUCH SCHEME OF DEMUTUALISATION OR CORPORATISATION, SHALL BE DEEMED TO BE NIL. 2(42)(H) IN THE CASE OF A CAPITAL ASSET, BEING TRADING OR CLEARING RIGHTS OF A RECOGNISED STOCK EXCHANGE IN INDIA ACQUIRED BY A PERSON PURSUANT TO DEMUTUALISATION OR CORPORATISATION OF THE RECOGNISED STOCK EX CHANGE IN INDIA AS REFERRED TO IN CLAUSE (XIII) OF SECTION 47, THERE SHALL BE INCLUDED THE PERIOD FOR WHICH THE PERSON WAS A MEMBER OF THE RECOGNISED STOCK EXCHANGE IN INDIA IMMEDIATELY PRIOR TO SUCH DEMUTUALISATION OR CORPORATISATION. (HA) IN THE CASE OF A CAPITAL ASSET, BEING EQUITY SHARE OR SHARES IN A COMPANY ALLOTTED PURSUANT TO DEMUTUALISATION OR CORPORATISATION OF A RECOGNISED STOCK EXCHANGE IN INDIA AS REFERRED TO IN CLAUSE (XIII) OF SECTION 47, THERE SHALL BE INCLUDED THE PERIOD FOR WHICH THE PERSO N WAS A MEMBER OF THE RECOGNISED STOCK EXCHANGE IN INDIA IMMEDIATELY PRIOR TO SUCH DEMUTUALISATION OR CORPORATISATION] 113C[(HB) IN THE CASE OF A CAPITAL ASSET, BEING ANY SPECIFIED SECURITY OR SWEAT EQUITY SHARES ALLOTTED OR TRANSFERRED, DIRECTLY OR INDIRE CTLY, BY THE EMPLOYER FREE OF COST OR AT CONCESSIONAL RATE TO HIS EMPLOYEES (INCLUDING ITA NO.118/M/2011 M/S. D.K. MODI SECURITIES PVT. LTD. 7 FORMER EMPLOYEE OR EMPLOYEES), THE PERIOD SHALL BE RECKONED FROM THE DATE OF ALLOTMENT OR TRANSFER OF SUCH SPECIFIED SECURITY OR SWEAT EQUITY SHARES. 47(XIII) ANY TRANSF ER OF A CAPITAL ASSET OR INTANGIBLE ASSET BY A FIRM TO A COMPANY AS A RESULT OF SUCCESSION OF THE FIRM BY A COMPANY IN THE BUSINESS CARRIED ON BY THE FIRM, OR ANY TRANSFER OF A CAPITAL ASSET TO A COMPANY IN THE COURSE OF DEMUTUALISATION OR CORPORATISATION OF A RECOGNISED STOCK EXCHANGE IN INDIA AS A RESULT OF WHICH AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS IS SUCCEEDED BY SUCH COMPANY :] PROVIDED THAT - ( A ) ALL THE ASSETS AND LIABILITIES OF THE FIRM [OR OF THE ASSOCIATION OF PERSONS OR BODY OF INDIV IDUALS] RELATING TO THE BUSINESS IMMEDIATELY BEFORE THE SUCCESSION BECOME THE ASSETS AND LIABILITIES OF THE COMPANY; ( B ) ALL THE PARTNERS OF THE FIRM IMMEDIATELY BEFORE THE SUCCESSION BECOME THE SHAREHOLDERS OF THE COMPANY IN THE SAME PROPORTION IN WHIC H THEIR CAPITAL ACCOUNTS STOOD IN THE BOOKS OF THE FIRM ON THE DATE OF THE SUCCESSION; ( C ) THE PARTNERS OF THE FIRM DO NOT RECEIVE ANY CONSIDERATION OR BENEFIT, DIRECTLY OR INDIRECTLY, IN ANY FORM OR MANNER, OTHER THAN BY WAY OF ALLOTMENT OF SHARES IN T HE COMPANY; AND ( D ) THE AGGREGATE OF THE SHAREHOLDING IN THE COMPANY OF THE PARTNERS OF THE FIRM IS NOT LESS THAN FIFTY PER CENT OF THE TOTAL VOTING POWER IN THE COMPANY AND THEIR SHAREHOLDING CONTINUES TO BE AS SUCH FOR A PERIOD OF FIVE YEARS FROM THE DATE OF THE SUCCESSION; ( E ) THE DEMUTUALISATION OR CORPORATISATION OF A RECOGNISED STOCK EXCHANGE IN INDIA IS CARRIED OUT IN ACCORDANCE WITH A SCHEME FOR DEMUTUALISATION OR CORPORATISATION WHICH IS APPROVED BY THE SECURITIES AND EXCHANGE BOARD OF INDIA ESTABLISHED UNDER SECTION 3 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992);] 47(XIIIA) ANY TRANSFER OF A CAPITAL ASSET BEING A MEMBERSHIP RIGHT HELD BY A MEMBER OF A RECOGNISED STOCK EXCHANGE IN INDIA FOR ACQUISITION OF SHARES AND TR ADING OR CLEARING RIGHTS ACQUIRED BY SUCH MEMBER IN THAT RECOGNISED STOCK EXCHANGE IN ACCORDANCE WITH A SCHEME FOR DEMUTUALISATION OR CORPORATISATION WHICH IS APPROVED BY THE SECURITIES AND EXCHANGE BOARD OF INDIA ESTABLISHED UNDER SECTION 3 OF THE SECURIT IES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992);] 32 . ALL THESE SECTIONS DEAL WITH COMPUTATION OF CAPITAL GAINS UNDER CHAPTER - IV(E) I.E., SECTIONS 45 TO 55A OF THE ACT. IN OUR CONSIDERED OPINION, THESE SECTIONS WHICH ARE FOR THE COMPUTATION OF CAPIT AL GAINS, HAVE NO RELEVANCE ON THE ALLOWABILITY OF DEPRECIATION. THE ARGUMENT OF THE ASSESSEE THAT IT HAD TAKEN THE ORIGINAL COST OF THE SHARE @ RS. 1, WHILE COMPUTING CAPITAL GAIN IN A LATTER YEAR, DOES NOT EFFECT OUR DECISION. THUS, WE UPHOLD THE ORDER O F THE ASSESSING OFFICER AS CONFIRMED BY THE ITA NO.118/M/2011 M/S. D.K. MODI SECURITIES PVT. LTD. 8 COMMISSIONER (APPEALS) WHEREIN DEPRECIATION ON MEMBERSHIP CARD HAS BEEN DENIED. 10. EVEN SIMILAR VIEW HAS BEEN TAKEN BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF PAVAK SECURITIES ( P ) LTD. VS. ITO [2 013] 38 TAXMANN.COM 387, WHEREIN THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS OBSERVED THAT WHEN THE MEMBERSHIP CEASED TO EXIST AND IN LIEU OF THE CARD, NEW ASSET CAME INTO EXISTENCE I.E. 1000 SHARES AS WELL AS RIGHTS TO TRADE AND CLEARING IN THE STOCK EXCHAN GE AND THE ACQUISITION OF THE COST OF TRADE AND CLEARING HAS BEEN PROVIDED TO BE NIL AS PER PROVISO TO SECTION 55(2)(AB) OF THE ACT, THEN T HE ENTIRE COST OF MEMBERSHIP AS STANDS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WOULD BE TREATED AS COST OF ACQUISITI ON OF 1000 SHARES WHICH IS NOT A DEPRECIABLE ASSET AND HENCE THE CLAIM OF THE ASSESSEE TO CLAIM DEPRECIATION ON DEMUTUALIZATION OR CORPORATIZATION OF THE STOCK EXCHANGE CARD W OULD NOT BE JUSTIFIABLE. 11. IN VIEW OF THE ABOVE STATED DECISIONS AND RESPECT FULLY FOLLOWING THE SAME, IT IS HELD THAT THE ASSESSEE IS NOT ENTITLED TO DEPRECIATION ON THE BSE CARD. THIS ISSUE IS ACCORDINGLY DECIDED AGAINST THE ASSESSEE. 12. GROUND NO.4 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 13. IN VIE W OF OUR FINDINGS GIVEN ABOVE, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.05. 201 5 . SD/ - SD/ - ( B.R. BASKARAN ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 27.05.2015 . * KISHORE , SR. P.S. ITA NO.118/M/2011 M/S. D.K. MODI SECURITIES PVT. LTD. 9 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.