MOTILAL OSWAL COMMODITIES BROKER P. LTD, MUMBAI V. DCIT CC 22, MUMBAI

ITA 7375/MUM/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6568 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 28-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Tax effect; Revenue expenditure; Capital expenditure
• Section: 32

Judgement Text

B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI .. , , BEFORE SHRI P.M. JAGTAP, AM AND SHRI SANJAY GARG, J M ./ I.T.A. NO.7375 /MUM/2010 ( / ASSESSMENT YEAR : 2007-2008 M/S MOTILAL OSWAL COMMODITIES BROKER PVT. LTD., 81/82, BAJAJ BHAVAN, 226 NARIMAN POINT, MUMBAI 400 021. / VS. DY. COMMISSIONER OF INCOME TAX CC -22, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 20. ./ PAN :AAACP3147N ( / APPELLANT ) .. ( !' / RESPONDENT ) ./ I.T.A. NO.8217 /MUM/2010 ( / ASSESSMENT YEAR : 2007-2008 DY. COMMISSIONER OF INCOME TAX CC -22, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 20. / VS. M/S MOTILAL OSWAL COMMODITIES BROKER PVT. LTD., 81/82, BAJAJ BHAVAN, 226 NARIMAN POINT, MUMBAI 400 021. ./ PAN :AAACP3147N ( / APPELLANT ) .. ( !' / RESPONDENT ) A SSESSEE BY SHRI ANUJ KISNADWALA DEPARTMENT BY : SHRI RAVI PRAKASH ' ( / DATE OF HEARING : 13-03-2014 ' ( / DATE OF PRONOUNCEMENT : 07-05-2014 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THESE TWO APPEALS, ONE FILED BY THE ASSESSEE BEING ITA NO. 7375/MUM/2010 AND THE OTHER FILED BY THE REVENUE BE ING ITA NO. ITA 7375/M/10 & 8217/M/10 2 8217/MUM/2010 ARE CROSS APPEALS WHICH ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) -39, MUMBAI DATED 17-8-2010. 2. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET, ALTHOUGH THERE ARE AS MANY AS FOUR GROUNDS RAISED IN THE APP EAL OF THE REVENUE, THE RELIEF ALLOWED BY THE LD. CIT(A) WHICH IS DISPUTED THEREIN IS ONLY TO THE EXTENT OF RS. 7,85,679/- AND THE TAX EFFECT INVOLVED IN TH E APPEAL OF THE REVENUE IS LESS THAN THE MONETARY LIMIT OF RS. 3 LACS FIXED BY THE CBDT VIDE INSTRUCTION NO. 3 OF 2011 DATED 9-2-2011 REPORTED IN (2011) 332 ITR 1 (STATUTES) FOR FILING THE APPEALS BEFORE THE TRIBUNAL. THE LD. D.R. HAS N OT DISPUTED THIS POSITION CLEARLY EVIDENT FROM THE ORDERS OF THE AUTHORITIES BELOW. IN CIT VS. MADHUKAR K. INAMDAR (HUF) (2009) 318 ITR 148 (BOM), IT WAS H ELD BY THE HONBLE BOMBAY HIGH COURT THAT THE REVISED MONETARY LIMIT F IXED BY THE CBDT IN THE CIRCULAR WOULD BE APPLICABLE TO ALL THE PENDING APP EALS. A SIMILAR VIEW HAS BEEN REITERATED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SMT. VARSHA DILIP KOLHE IN TAX APPEAL NO. 7 OF 2010 DTD. 5-3-2012 AFTER CONSIDERING THE INSTRUCTION NO. 3/2011 DATED 9-2-20 11 AND THE DECISION OF THE HONBLE SUPREME COURT IN CIT - CENTRAL III VS . SURYA HERBAL LTD. DECIDED ON 29-8-2011. 3. KEEPING IN VIEW THE JUDICIAL PRONOUNCEMENTS DISC USSED ABOVE AND CBDT INSTRUCTION NO. 3 OF 2011 DATED 9-2-2011, WE H OLD THAT THE PRESENT APPEAL FILED BY THE DEPARTMENT INVOLVING TAX EFFECT OF LESS THAN RS. 3 LACS IS NOT MAINTAINABLE AND THE SAME IS LIABLE TO BE DISMI SSED AT THE THRESHOLD. 4. IN SO FAR AS THE APPEAL OF THE ASSESSEE IS CONCE RNED, THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE DISALLOWANCE OF RS. 1,42,500/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF ASSESSEES CLAIM FOR DEPRECIATION ON MEMBERSHIP RIGHTS OF MULTI COMMODIT Y EXCHANGE LTD. (MCX). ITA 7375/M/10 & 8217/M/10 3 5. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF COMMODITIES BROKING IN RESPECT OF COMMO DITIES EXCHANGE AND DEALING IN SHARES AND SECURITIES AND COMMODITIES. T HE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 28- 10-2007 DECLARING TOTAL INCOME AT NIL. IN THE SAID RETURN, DEPRECIATION O F RS. 1,42,500/- WAS CLAIMED BY THE ASSESSEE @ 25% ON THE AMOUNT OF RS. 7,60,000 /- PAID FOR ACQUIRING RIGHTS OF MULTI COMMODITIES EXCHANGE CLAIMING THAT IT WAS INTANGIBLE ASSET IN THE FORM OF COMMERCIAL RIGHT AS PER PROVISIONS OF S ECTION 32(1)(II) OF THE INCOME TAX ACT, 1961 AS AMENDED W.E.F. 1-4-1998. T HIS CLAIM OF THE ASSESSEE, HOWEVER, WAS NOT FOUND ACCEPTABLE BY THE A.O. FOR THE FOLLOWING REASONS:- 1) THE MCX MEMBERSHIP RIGHT IS NOT AN ASSET BUT A DEPO SIT OR A PERSONAL PRIVILEGE GRANTED TO A MEMBER FOR TRADING RIGHTS ON THE MCX PLATFORM. 2) DEPRECIATION IS ALLOWABLE ON AN ASSET ON ACCOUNT OF WEAR AND TEAR AND OBSOLESCENCE. THE MCX CARD IS NOT SUBJECT TO SUCH WEAR AND TEAR ON ACCOUNT OF USE. 6. FOR THE REASONS GIVEN ABOVE AND RELYING ON THE D ECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TECHNO SHA RES AND STOCK LTD., 323 ITR 69 WHEREIN DEPRECIATION ON BSE CARDS WAS HELD T O BE NOT ALLOWABLE, THE A.O. DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEPRE CIATION ON THE MEMBERSHIP RIGHT OF MULTI COMMODITIES EXCHANGE. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE MADE BY THE A.O. HOLDING THAT THE ISSUE WAS ALREADY SETTLED AGAINST THE ASSESSEE BY THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF CIT VS. TECHNO SHARES & STOCKS LTD. (SUPRA). AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE T RIBUNAL. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF TECHNO SHARES AND STOCKS LTD. (SUPRA) RELIED UPON BY THE A UTHORITIES BELOW HAS ITA 7375/M/10 & 8217/M/10 4 ALREADY BEEN OVERRULED BY THE HONBLE SUPREME COURT VIDE ITS JUDGMENT IN [2010] 327 ITR 323 (SC) HOLDING THAT THE STOCK EXCH ANGE MEMBERSHIP CARDS ARE ELIGIBLE FOR DEPRECIATION U/S 32 OF THE ACT BEI NG IN THE NATURE OF INTANGIBLE ASSET. ALTHOUGH THE LD. D.R. HAS RELIED IN SUPPORT OF THE REVENUES CASE ON THIS ISSUE ON THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SINO SECURITIES (P.) LTD. VS. ITO [2012] 134 ITD 3 21 (MUM) AND IN THE CASE OF SUNIDHI CONSULTANCY SERVICES VS. DCIT REPORTED IN [ 2012] 50 SOT 223 (MUM), IT IS OBSERVED THAT THE CLAIM OF DEPRECIATION MADE BY THE ASSESSEE IN THESE CASES WAS IN RESPECT OF SHARES ISSUED BY THE BOMBAY STOCK EXCHANGE IN LIEU OF MEMBERSHIP CARDS UNDER THE SCHEME OF CORPORATISA TION AND DEMUTUALISATION AND KEEPING IN VIEW THE SAID SCHEM E, IT WAS HELD BY THE TRIBUNAL THAT DEPRECIATION CLAIMED BY THE ASSESSEE ON THE SHARES OF BOMBAY STOCK EXCHANGE COULD NOT BE ALLOWED. THE FACTS INV OLVED IN THE CASES OF SINO SECURITIES (P.) LTD. (SUPRA) AND SUNIDHI CONSULTAN CY SERVICES (SUPRA) DECIDED BY THE TRIBUNAL THUS ARE MATERIALLY DIFFERENT FROM THE FACTS OF THE PRESENT CASE INASMUCH AS THE ASSESSEE IN THE PRESENT CASE HAS PA ID NON-REFUNDABLE ADMISSION FEES FOR ACQUIRING TRADING RIGHTS IN MULT I COMMODITY EXCHANGE LTD. THE LD. COUNSEL FOR THE ASSESSEE IN THIS REGARD HAS RELIED ON THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF P YRAMID COMMODITIES VS. ITO RENDERED VIDE ITS ORDER DATED 28-8-2013 PASSED IN ITA NO. 558/MUM/2011 FOR A.Y. 2007-08. IN THE SAID CASE, T HE ASSESSEE HAD PAID A SUM OF RS. 6,99,000/- TO MCX AND THE AMOUNT SO PAID WAS CLAIMED TO BE A REVENUE EXPENDITURE BY THE ASSESSEE. THE LD. CIT(A ), HOWEVER, TREATED THE SAME AS CAPITAL EXPENDITURE AND DIRECTED THE A.O. T O ALLOW DEPRECIATION THEREON. ON FURTHER APPEAL, THE TRIBUNAL UPHELD TH E ORDER OF THE LD. CIT(A) TREATING THE PAYMENT OF MEMBERSHIP FEES TO MCX AS C APITAL EXPENDITURE RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TECHNO SHARES AND STOCKS LTD. (SUPRA) AND ALSO HELD THAT T HE SAID CAPITAL EXPENDITURE WAS ELIGIBLE FOR DEPRECIATION U/S 32 OF THE ACT. T HE ISSUE INVOLVED IN THE PRESENT CASE THUS IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ITA 7375/M/10 & 8217/M/10 5 DECISION OF THE TRIBUNAL IN THE CASE OF PYRAMID COM MODITIES (SUPRA) AS WELL AS THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F TECHNO SHARES AND STOCKS LTD. (SUPRA) AND RESPECTFULLY FOLLOWING THES E JUDICIAL PRONOUNCEMENTS, WE DIRECT THE A.O. TO DELETE THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF ASSESSEES CLAIM FO R DEPRECIATION ON MEMBERSHIP RIGHT OF MULTI COMMODITY EXCHANGE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 07-05-2014 . ' . / 07-05-2014 ' SD/- SD/- (SANJAY GARG) (P.M. JAGTAP ) JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; / DATED 07-05-2014 [ .../ RK , SR. PS ' #%& '& / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. 2 () / THE CIT(A)39 MUMBAI. 4. 2 / CIT CENTRAL -II MUMBAI 5. 5 !7 , ( 7 , / DR, ITAT, MUMBAI B BENCH 6. / GUARD FILE. / BY ORDER, '5 ! //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI