DCIT 4(1), MUMBAI V. D J SHAH SECURITIES P. LTD, MUMBAI

ITA 2314/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71744 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 31-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 09-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PRAKASH MUNI
• Keywords: Depreciation; Cost of acquisition

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND SANJAY ARORA (AM) . . , , ./I.T.A. NO.2314/MUM/2012 ( / ASSESSMENT YEAR : 2008-09) DY . COMMISSIONER OF INCOME TAX -4(1), ROOM NO.640, 6 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S D.J.SHAH SECURITIES P.LTD., 9, KHATAU BUILDING, 1 ST FLOOR, 8/10, AD MODY MARG,FORT, MUMBAI-400001. ( ( / APPELLANT) .. ( ) ( / RESPONDENT) ./ ./PAN/GIR NO. : AABCD2593B ( /: REVENUE BY SHRI ASHIM KUMAR MODI ) ( , / ASSESSEE BY SHRI PRAKASH MUNI , / / DATE OF HEARING : 18.11.2013 , / /DATE OF PRONOUNCEMENT : 22.11.2013 / O R D E R PER B.R.MITTAL, JM: THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSME NT YEAR 2008-09 AGAINST THE ORDER OF LD. CIT(A) DATED 23.1.2012. 2. ONLY ISSUE INVOLVED IN THIS APPEAL IS AS TO WHET HER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORIGINAL COST OF AC QUISITION OF BOMBAY STOCK EXCHANGE (BSE) CARD OR WRITTEN DOWN VALUE( WDV) OF BSE CA RD SHOULD BE CONSIDERED FOR WORKING OUT CAPITAL GAIN ON SALE OF SHARES OF BS E WHICH WERE ACQUIRED BY ASSESSEE UNDER SCHEME OF DEMUTUALIZATION ON CORPORATIZATIO N OF BOMBAY STOCK EXCHANGE. 3. RELEVANT FACTS ARE THAT ASSESSEE IS A MEMBER OF BSE. THE ASSESSEE-COMPANY CLAIMED DEPRECIATION ON STOCK EXCHANGE CARD, BEFORE THE MEMBERSHIP RIGHTS OF BOMBAY STOCK EXCHANGE (BSE) GOT DEMUTUALIZED IN THE ASSES SMENT YEAR 2006-07 AFTER CORPORATIZATION OF THE BOMBAY STOCK EXCHANGE. UNDER THE SCHEME OF DEMUTUALIZATION ON CORPORATIZATION OF THE BOMBAY STOCK EXCHANGE, THE ASSESSEE GOT 10000 SHARES OF BOMBAY STOCK EXCHANGE LTD. (BSEL) OF FACE VALUE OF RS.1 EACH. IN THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE SOLD 9123 SH ARES OF BSE LTD ON WHICH IT HAS I.T.A. NO.2314/MUM/2012 2 EARNED LONG TERM CAPITAL GAIN (LTCG). THE ASSES SEE CLAIMED ORIGINAL COST OF BSE CARD WHILE CALCULATING CAPITAL GAIN. IT IS RELEVA NT TO STATE THAT ASSESSEE ALREADY CLAIMED DEPRECIATION ON THE SAID BSE CARD IN THE EARLIER YEARS. AO STATED THAT TAKING THE ORIGINAL COST OF THE BSE CARD AS COST OF ACQUISI TION OF SHARES AMOUNT TO CLAIMING DOUBLE DEDUCTION ON THE SAME ASSET. THEREFORE, AO CONSIDERED THE WDV OF THE BSE CARD AS THE COST AND ALLOWED INDEXATION FROM THE AS SESSMENT YEAR 2005-06 IN COMPUTING THE LTCG ON 9123 SHARES SOLD BY ASSESSEE OF BSE LTD IN THE ASSESSMENT YEAR UNDER CONSIDERATION. AO CALCULATED THE LTCG AT RS.3,37, 18,432/-, THE DETAILS OF WHICH ARE GIVEN AT PAGE 5 OF THE ASSESSMENT ORDER AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE T HE FIRST APPELLATE AUTHORITY. 4. LD. CIT(A) ACCEPTED THE CONTENTIONS OF ASSESS EE TO TAKE ORIGINAL COST OF ACQUISITION OF BSE CARD AS COST OF ACQUISITION OF BSE EQUITY SHARES AND REFERRED THE PROVISIONS OF SECTION 55(2)(AB) OF THE INCOME TAX ACT, 1961 (THE ACT). HENCE, DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. 5. DURING THE COURSE OF HEARING, LD. DR RELIED ON THE ORDER OF AO AND SUBMITTED THAT ABOVE ISSUE IS COVERED IN FAVOUR OF DEPARTMENT BY THE ORDER OF THE MUMBAI BENCH OF TRIBUNAL DATED 27.7.2012 IN THE CASE OF ACIT V/ S M/S. SATCO SECURITIES & FINANCIAL SERVICES LTD. IN ITA NOS.6032/MUM/2011 AND 6044/MU M/2011(A.Y. 2008-09) AND FILED A COPY OF THE SAME TO SUBSTANTIATE HIS SUBMISSIONS. 6. ON THE OTHER HAND, LD. AR RELIED ON THE ORDER O F LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEPRECIATION ON THE BSE CARD. HE FURTHER SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 55(2)(A) OF THE ACT, THE SHARES ALLOTTED UNDER SCHEME OF DEMUTUALIZATION ON CORPORATIZATION OF THE BSE AS APPROVED BY SEBI SHALL BE THE COST OF THE ACQUISITION OF THE ORIGINAL COST OF MEMBERSHIP CARD OF EXCHANGE. HE SUBMITTED THAT THE ORDER OF LD. CIT(A) IS JUSTIFIED . 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIO NS OF LD. REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF AUTHORITIES BELOW. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON THE BSE CARD TILL BSE WAS DEMUTUALISED AS PER THE SCHEME OF CORPORATIZATION AND DEMUTUALIZATION AS APP ROVED BY SEBI. PURSUANT THERETO RIGHTS OF THE EXISTING BSE MEMBER AS CARD HOLDERS GOT EXT INGUISHED AND IN LIEU THEREOF BSE MEMBERS HAVE GOT 10000 SHARES OF NEWLY INCORPORA TED COMPANY VIZ BOMBAY STOCK EXCHANGE LIMITED (HEREINAFTER REFERRED TO AS BSEL) AT THE RATE OF RS.1/- PER SHARE. THEREFORE, WHEN THE MEMBERSHIP OF THE ERSTWHILE B SE WAS EXTINGUISHED, THE ASSESSEE HAS GOT IN LIEU OF THE SAID MEMBERSHIP CARD 10000 SHARES AS WELL AS RIGHTS TO TRADE AND I.T.A. NO.2314/MUM/2012 3 CLEARING IN THE STOCK EXCHANGE. THAT THE ACQUISITI ON OF COST OF TRADING OR CLEARING RIGHTS OF THE EXCHANGES HAS BEEN CONSIDERED TO BE NIL AS PER PROVISO TO SECTION 55(2)(AB) OF THE ACT. THE ENTIRE COST OF MEMBERSHIP CARD AS S TANDS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE BECOMES COST OF ACQUISITION OF 10000 SHA RES. NOW, THE QUESTION ARISES AS TO WHETHER WDV OF BSE CARD IN THE BOOKS OF ACCOUNTS O F ASSESSEE OR ORIGINAL COST OF ACQUISITION OF BSE CARD IS TO BE CONSIDERED TOWARD S COST OF SHARES ALLOTTED TO THE MEMBERS. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE AVAILED DEPRECIATION ON THE BSE CARD TILL BSE WAS CORPORATIZED AND ACCORDINGLY WDV OF THE BSE CARD IS THE COST OF MEMBERSHIP IN THE BOOKS OF ACCOUNTS OF THE ASSESS EE HAS TO BE TREATED AS COST OF ACQUISITION TOWARDS 10000 SHARES; WERE ALLOTTED T O ASSESSEE AT THE RATE OF RS.1 PER SHARE. HENCE, WE ARE OF THE CONSIDERED VIEW THAT LTCG IN RESPECT OF SHARES HAS TO BE CONSIDERED AFTER ASSIGNING THE WDV OF BSE CARD TO THE COST OF 10000 SHARES ALLOTTED TO THE ASSESSEE. IT IS ASCERTAINED THAT THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION HAS SOLD 9123 SHARES. THEREFORE, PROP ORTIONATE COST OF WDV OF BSE CARD HAS TO BE ASSIGNED TO THE SAID SHARES WHILE COMPUTI NG THE LTCG. WE ARE OF THE CONSIDERED VIEW THAT THE AO HAS RIGHTLY COMPUTED L TCG BY CONSIDERING THE COST OF SHARES TAKING INTO ACCOUNT THE WDV OF THE STOCK EXCHANGE CARD. SIMILAR ISSUE HAS BEEN CONSIDERED BY ITAT, MUMBAI BENCH IN THE CASE OF M /S PAVAK SECURITIES PVT. LTD. V/S ITO IN I.T.A. NO.1803/MUM/2012(AY:2008-09) ORDER DATED 13.9.2013, TO WHICH ONE OF US IS A PARTY (JM) AND HAS HELD THAT WDV OF THE STOCK EXCHA NGE CARD HAS TO BE TAKEN INTO CONSIDERATION WHILE CONSIDERING COST OF SHARES ALLO TTED TO THE ERSTWHILE MEMBERS ON CORPORATIZATION OF BSE . THE ABOVE ISSUE HAS ALSO BEEN DECIDED BY ITAT IN FAVOUR OF THE DEPARTMENT BY THE ORDER DATED 27.7.2012 (SUPRA). 8. RESPECTFULLY FOLLOWING THE EARLIER ORDERS OF TH E TRIBUNAL, WE CONFIRM THE ACTION OF AO BY REVERSING THE ORDER OF LD. CIT(A). THEREFORE , GROUNDS OF APPEAL TAKEN BY DEPARTMENT IS ALLOWED BY CONFIRMING THE ACTION OF AO. 9. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 22 ND NOVEMBER, 2013 , 2 3 22 ND NOVEMBER, 2013 , SD SD ( / SANJAY ARORA) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI: ON THIS 22 ND NOVEMBER, 2013 I.T.A. NO.2314/MUM/2012 4 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. ( / THE APPELLANT 2. ) ( / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- CONCERNED 4. 7 / CIT CONCERNED 5. 8 ): , / : , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) / : , /ITAT, MUMBAI