Appeal details
Counselvise Citation
[2017] 130 COUNSELVISE.COM (IT) 8070 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-01-2017
Appeal Filed By
Department
Bench Allotted
B
Assessment Year
2006-2007
Appeal Filed On
19-09-2016
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI , ! ' ! # . $% & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.2700/MDS./2016 / ASSESSMENT YEAR : 2006-07 ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1(2), CHENNAI 600 034. VS. M/S.CHOLAMANDALAM SECURITIES LTD., DARE HOUSE, NO.2, NSC BOSE ROAD, CHENNAI 600 001. [PAN AABCC 5958 R ] ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : SHRI SHRI SUPRIYO PAL, JCIT DR, /RESPONDENT BY : SHRI SAROJ KUMAR PARIDA, ADVOCAE / DATE OF HEARING : 15 - 12 - 2016 / DATE OF PRONOUNCEMENT : 25 - 01 - 2017 - / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1, CHENNAI DATED 27.06.2016 PERTAINING TO ASSESSMENT YEAR 2006-07. ITA NO.2700/16 :- 2 -: 2. THE FIRST ISSUE RAISED BY THE REVENUE IN ITS AP PEAL IS WITH REGARD TO DELETION OF DISALLOWANCE OF DEPRECIATION ON STOCK EXCHANGE MEMBERSHIP CARD. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE IS A MEMBER OF BOMBAY STOCK EXCHANGE AND THE MEMBERSHIP WAS ACQUIR ED DURING THE FINANCIAL YEAR 2000-01 AT A COST OF ` 2,37,50,000/-. THE AO OBSERVED THAT THE MEMBERSHIP CARD HAS BEEN ISSUED TO THE ASS ESSEE AND THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE VALUE OF M EMBERSHIP CARD. ACCORDING TO AO, THE STOCK EXCHANGE MEMBERSHIP CARD IS ONLY A LICENSE GIVEN BY THE STOCK EXCHANGE TO TRADE IN SHARES, AND THE VALUE OF SUCH LICENSE DOES NOT GET DIMINISHED FROM YEAR TO YEAR A ND THEREFORE CANNOT PARTAKE THE CHARACTER OF AN INTANGIBLE ASSET AND ACCORDINGLY, NOT ELIGIBLE FOR ANY DEPRECIATION. HENCE, THE AO DISALL OWED THE AMOUNT OF ` 14,08,997/- CLAIMED BY THE ASSESSEE AS DEPRECIATION ON STOCK EXCHANGE MEMBERSHIP CARD. AGGRIEVED, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, LD.CIT(A) A LLOWED THE APPEAL OF ASSESSEE BY PLACING RELIANCE ON THE ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE IN ITA NOS.1993, 1994/2006, 225 4/2005 FOR ASSESSMENT YEARS 2001-02, 2002-03, 2003-04 AND 2005 -06 AND 2444/2007 AND ALSO ORDER OF TRIBUNAL FOR ASSESSMEN T YEARS 2001-02 & 2003-04 IN ITA NOS.1993 & 1994/MDS./2006 WHEREIN HE LD AS FOLLOWS:- ITA NO.2700/16 :- 3 -: 5. COMING TO THE MERITS, THE COMMON ISSUE RAIS ED IN THE APPEALS FOR BOTH THE ASSESSMENT YEARS 2001-02 AND 2 003-04 IS WHETHER DEPRECIATION CAN BE ALLOWED ON THE CAPITALI ZED STOCK EXCHANGE MEMBERSHIP CARD--- 6. AFTER HEARING THE RIVAL SUBMISSIONS, WE FIND THAT IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2002-03, TH IS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY CHENNAI BE NCH OF THE TRIBUNAL IN ITA NO.2254/MDS./05 VIDE ITS ORDER DATE D 9 TH FEBRUARY, 2007 BYFOLLOWIGN THE DECISION OF ITAT MUM BAI BENCH IN THE CASE OF TECHNO SHARES & STOCKS LTD. V. ITO ( 2006) 101 TTJ 349 WHEREIN AN IDENTICAL ISSUE WAS CONSIDERED A ND IT WAS HELD THAT THE STOCK EXCHANGE MEMBERSHIP CARD IS A C APITAL ASSET AND SINCE IT IS AN INTANGIBLE ASSET WITHIN TH E DEFINITION OF SEC.32, THE ASSESSEE IS ENTITLED TO DEPRECIATION TH EREON. THE FACTS ARE BEING IDENTICAL AND TO BE CONSISTENT WITH THE DECISIONS OF THE ITAT CHENNAI IN ASSESSEE'S OWN CASE AS WELL AS ITAT MUMBAI BENCH, WE HAVE NO HESITATION TO ALLOW THE CL AIM OF DEPRECIATION ALLOWANCE ON THE STOCK EXCHANGE MEMBER SHIP CARD. FURTHER, IT IS TO BE NOTED THAT THE ABOVE VIEW OF T HE TRIBUNAL IS SUPPORTED BY THE JUDGEMENT OF SUPREME COURT IN THE CASE OF TECHNO SHARES AND STOCKS LTD., IN [2010] 327 ITR 323 (SC) WHEREIN HELD THAT MEMBERSHIP CARD OF STOCK EXCHANGE IS A BUSINESS OR COMMERCIAL RIGHT AS IT GIVES A RIGHT TO ACCESS THE EXCHANGE A ND TO PARTICIPATE THEREIN TO A NON-DEFAULTING CONTINUING MEMBER AND I N THAT SENSE IT IS A LICENCE OR AKIN TO LICENCE IN TERMS OF SEC.32(1)(II ) OF THE ACT AND THEREFORE, DEPRECIATION IS ALLOWABLE ON THE COST OF STOCK EXCHANGE MEMBERSHIP CARD. IN OUR OPINION, THE ABOVE VIEW OF THE LD.CIT(A) IS ITA NO.2700/16 :- 4 -: IN ACCORDANCE WITH THE JUDGEMENT OF SUPREME COURT C ITED SUPRA, AS SUCH WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF L D.CIT(A) AND THE SAME VIEW IS CONFIRMED. HENCE, THIS GROUND OF REVEN UE IS DIMISSSED. 4. THE SECOND ISSUE RAISED BY THE REVENUE IN ITS A PPEAL IS WITH REGARD TO ALLOWING THE SHORT TERM CAPITAL GAINS NOT AS BUSINESS INCOME BY THE LD.CIT(A). 5. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE O PINION THAT THIS ISSUE CAME FOR CONSIDERATION BEFORE THIS TRIBUNAL I N ASSESSEE'S OWN CASE IN ITA NO.1181/MDS./2014 FOR ASSESSMENT YEAR 2 006-07 VIDE ORDER DATED 28.04.2016 WHEREIN THE TRIBUNAL HELD TH AT: WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS CITED. THE ONLY DISPU TED ISSUE IN RESPECT OF TAXABILITY OF INCOME TO BE TREATED AS SH ORT TERM CAPITAL GAIN OR BUSINESS INCOME. THE LD. AUTHORISED REPRESENTATIVE EMPHASIZED THAT ASSESSEE INVESTED EX CESS TEMPORARY SURPLUS INTO MUTUAL FUNDS AND LIQUIDS FUN DS AND THIS BEING A FINANCE COMPANY THE MONEY CANNOT BE KEPT ID LE AS INTEREST HAS TO PAID ON BORROWINGS AND SUCH ACTIVIT IES CANNOT BE TERMED AS BUSINESS INCOME. THE LD. AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO THE PROFIT OF TREASURY DEPLOYMENT WERE PURCHASE AND SALE OF MUTUAL FUNDS U NITS AND LIQUID FUND WERE TRANSACTED AND HOLDING PERIOD IS L ESS THAN FOUR DAYS. FURTHER WE FOUND THAT THE ASSESSEE IS PA RKING THE FUNDS ONLY FOR THE CAPITAL APPRECIATION AND LIQUIDA TE AS PER THE REQUIREMENT WITHIN DAY OR TWO WITHOUT DISTURBING TH E BASIC BUSINESS OPERATIONS AND SUCH INVESTMENTS ARE DISCLO SED IN THE BALANCE SHEET. CONSIDERING THE NATURE OF INVESTMENT STRATEGY ITA NO.2700/16 :- 5 -: AND UTILIZATION OF THE FUNDS, WE ARE OF THE OPINION THAT THE STRATEGY OF SYSTEMATIC INVESTMENT IS ONLY FOR THE T EMPORARY ACCOMMODATING OF INVESTMENT IN LIQUID FUNDS AND INC OME FROM TREASURY OPERATION ARE TO BE TREATED AS SHORT TERM CAPITAL GAINS CONSIDERING THE APPARENT FACTS, WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND DIRECT THE ASSESSING OFFICER TO TREAT THE INCOME AS SHORT TERM CAPITAL GAINS AND ALLOW THE GROUND OF THE ASSESSEE. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL CITED SU PRA, WE ARE INCLINED TO DECIDE THE ISSUE IN FAVOUR OF ASSESSEE. ACCORIDN GLY, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED ON 25 TH JANUARY, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) & / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 25 TH JANUARY, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF
