M/S. PYRAMID COMMODITIES, NAVI MUMBAI V. ITO 4(2)(1), MUMBAI

ITA 558/MUM/2011

• Counselvise Citation: 55819914 RSA 2011
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 20-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRA BHAT JHA
• Assessee Lawyers: KIRIT SHETH
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure
• Section: 32

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH. . . , , BEFORE S/SH. B.R.MITTAL, JUDICIAL MEMBER & RAJ ENDRA, ACCOUNTANT MEMBER ./ ITA NO. 558/MUM/2011, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2007-08 M/S PYRAMID COMMODITIES, H-101, VYAPAR BHAVAN, APMC MARKET-II, PHASE-II, SECTOR-19, VASHI NAVI MUMBAI - 400705 VS. ITO 4(2)(1) 6 TH FLOOR, AAYKAR BHAVAN, M.K.ROAD, MUMBAI-400020 PAN: AAIFP7039E ( #$ / APPELLANT ) ( %&#$ / RESPONDENT ) #$ #$ #$ #$ ' ' ' ' / APPELLANT BY : SHRI KIRIT SHETH %&#$ ( ' / RESPONDENT BY : SHRI PRABHAT JHA ! ! ! ! ( (( ( )* )* )* )* / DATE OF HEARING : 21-08-2013 +,' ( )* / DATE OF PRONOUNCEMENT : 28-08-2013 ! ! ! ! , 1961 ( (( ( 254(1) )-) )-) )-) )-) . . . . ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. FOLLOWING THE GROUNDS OF APPEAL HAS BEEN FILED BY T HE ASSESSEE AGAINST THE ORDER DATED 02.12.2010 OF CIT(A)-11, MUMBAI: 1. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISA LLOWANCE BY THE A.O. OF RS. 6,99,000 PAID TO MCX AN D RS. 5,00,000 PAID TO NCDEX ON THE GROUND THAT BOTH THE PAYMENTS ARE OF THE NATURE OF CAPITAL EXPENDITU RE. YOUR APPELLANT RESPECTFULLY SUBMITS THAT BOTH THE P AYMENTS ARE OF THE NATURE OF REVENUE EXPENDITURE AN D SHOULD THEREFORE BE ALLOWED IN FULL. 2. YOUR APPELLANT PRAYS FOR A LEAVE TO ALLOW IT TO ADD TO OR ALTER THE ABOVE GROUND. ASSESSEE-FIRM IS A COMMODITY BROKER AND HAD RECEIVE D INCOME FROM BROKERAGE, COMMISSION AND INTEREST DURING THE YEAR UNDER CONISDERATION.IT HAD FILED RETURN OF INCOME ON 29.10.2007 DECLARING TOTAL INCOME OF RS.7.19 LAKHS.ASSESSMENT WAS FINALI SED BY THE ASSESSING OFFICER (AO) ON 22.12. 2009 DETERMINING THE INCOME OF THE ASSESSEE AT RS.1 9,18,780/-. 2. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT IT HAD PAID RS. 6,99,000/- TO MCX AND RS. 5,00,000/- TO NCDEX AS ADMISSION FEES FOR TAKING ME MBERSHIP OF THE ABOVE EXCHANGES.HE HELD THAT THE MEMBERSHIP OF MCX AND NCDEX WAS THE PERMIS SION TO CARRY OUT THE TRANSACTION THROUGH THESE EXCHANGES, THAT PURPOSE OF THE SAID PAYMENT W AS TO MAKE ONE-TIME PAYMENT OF ADMISSION FEE,THAT BECAUSE OF THE PAYMENTS-IN-QUESTION ASSESS EE HAD NOT TO PAY THE ADMISSION FEE IN SUBSEQUENT YEARS FOR CARRYING OUT BUSINESS THROUGH THESE EXCHANGES, FEES WERE GIVING ENDURING BENEFIT TO THE ASSESSEE,THAT THE ADMISSION FEE MADE FOR DOING THE BUSINESS FOR A LONG TIME PERIOD COULD NOT BE REGARDED A REVENUE EXPENDITURE. ACCORD INGLY, HE DISALLOWED THE ADMISSION FEES PAID BY THE ASSESSEE TO MCX AND NCDEX AS REVENUE EXPENDI TURE AND CAPITALISED THE SAME. 2 ITA NO. 558/MUM/2011(AY 2007-08) M/S PYRAMID COMMODI TIES 2.1. ASSESEE PREFERRED AN APPEAL BEFORE THE FIRST APPELL ATE AUTHORITY(FAA).AFTER CONSIDERING THE ORDER OF THE AO AND THE SUBMISSION OF THE ASSESSEE HE HELD THAT EXPENDITURE INCURRED BY THE ASSESSEE FOR OBTAINING THE MEMBERSHIP OF MCX AND NC DEX TO CARRY OUT THE TRANSACTION THROUGH THESE EXCHANGES COULD NOT BE ALLOWED AS A REVENUE E XPENDITURE,THAT MEMBERSHIP IN THESE EXCHANGES WAS AN EXCLUSIVE RIGHT OF THE MEMBERS,THA T IT WAS OF ENDURING BENEFIT TO THE ASSESSEE,THAT IT WAS A CAPITAL ASSET.HE DIRECTED TH E AO TO ALLOW THE DEPRECIATION IN ACCORDANCE WITH THE LAW ON THE SAID CAPITAL ASSET. 2.2. BEFORE US,AUTHORISED REPRESENTATIVE(AR)SUBMITTED TH AT EXPENDITURE INCURRED BY THE ASSESSEE WAS REVENUE IN NATURE,THAT SAME SHOULD HAVE BEEN HE LD CAPITAL EXPENDITURE.DEPARTMENTAL REPRESE NTATIVE(DR)RELIED UPON THE ORDER OF THE AO AND THE FAA. 2.3 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD.WE FIND THAT THE ASSESSEE HAD MADE PAYMENTS TOWARDS MEMBERSHIP FEES OF TWO EXCHANGES.FEES PAID BY IT WAS ONE TIME PAYMENT AND AS A RESULT ASSESSEE WAS ALLOWED T O CARRY OUT BUSINESS ON BOTH THE EXCHANGES. SUCH A RIGHT HAS TO CONSIDERED A CAPITAL ASSET.IN T HE CASES OF TECHNO SHARES AND STOCKS LTD.(327 ITR323)AND SMIFS SECURITIES LTD.(348 ITR302) HONBL E APEX COURT HAS HELD THAT STOCK EXCHANGE MEMBERSHIP CARDS WERE ASSETS ELIGIBLE FOR DEPRECIAT ION UNDER SECTION 32 OF THE ACT.IN OUR OPINION MEMBERSHIP FEES PAID BY THE ASSESSEE UNDER THE HEAD EXCHANGES CARDS FEES IS SQUARELY COVERED BY THE ABOVE JUDGMENTS.FAA HAS ALREADY DIRECTED THE AO TO ALLOWS DEPRECIATION. THEREFORE, WE ARE OF THE OPINION HIS ORDER DOES NOT SUFFER FROM ANY I NFIRMITY AND DOES NOT NEED ANY INTERFERENCE FROM OUR SIDE.UPHOLDING HIS ORDER,WE DECIDE THE EFF ECTIVE GROUND OF APPEAL AGAINST THE ASSESSEE. AS A RESULT,APPEAL FIL ED BY THE ASSESSEE STANDS DISMISSED. 0 )1 !0) 2 3 ( - !4 ( ) 56 . ORDER PRONOUNCED IN T HE OPEN COURT ON 28 TH AUGUST,2013 . . ( +,' 7 8! 28 -) , 2013 , ( - 9 SD/- SD/- ( . : : : : . . B.R.MITTAL ) ( / RAJENDRA ) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 8! /DATE: 28 TH AUGUST,2013 SK . . . . ( (( ( %); %); %); %); <;') <;') <;') <;') / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT (A) / = > , 4. THE CONCERNED CIT / = > 5. DR C BENCH, ITAT, MUMBAI / ;?- %)! , . . . 6. GUARD FILE/ - @ &;) &;) &;) &;) %) %)%) %) //TRUE COPY// .! / BY ORDER, A / 5 DY./ASST. REGISTRAR , /ITAT, MUMBAI