2010 (9) TMI 6 - SC - Income Tax

Depreciation - BSE Membership card - intangible asset - section 32(1)(ii) - Held that: - On the analysis of the Rules of BSE, it is clear that the right of membership (including right of nomination) gets vested in the Exchange on the demise/ default committed by the member; that, on such forfeiture and vesting in the Exchange the same gets disposed of by inviting offers and the consideration received thereof is used to liquidate the dues owed by the former/ defaulting member to the Exchange, Clearing House, etc. - the right of membership (including the right of nomination) vests in the Exchange only when a member commits default. Otherwise, he continues to participate in the trading session on the floor of the Exchange; that he continues to deal with other members of the Exchange and even has the right to nominate subject to compliance of the Rules. Moreover, by virtue of Explanation 3 to Section 32(1)(ii) the commercial or business right which is similar to a "licence" or "franchise" is declared to be an intangible asset. - Therefore, the right of membership, which includes right of nomination, is a "licence" or "akin to a licence" which is one of the items which falls in Section 32(1)(ii) of the 1961 Act. The right to participate in the market has an economic and money value. It is an expense incurred by the assessee which satisfies the test of being a "licence" or "any other business or commercial right of similar nature" in terms of Section 32(1)(ii). - the Tribunal was right in holding that depreciation was allowable on the cost of the membership card under Section 32(1)(ii) of the 1961 Act.