2014 (5) TMI 1125 - AT - Income Tax

Depreciation on membership rights of Multi Commodity Exchange - Held that - In the present case assessee has paid non-refundable admission fees for acquiring trading rights in Multi Commodity Exchange Ltd. The said capital expenditure was eligible for depreciation u/s 32 of the Act. See case of Techno Shares and Stocks Ltd. 2010 (9) TMI 6 - SUPREME COURT OF INDIA - Decided in favour of assessee

Summary

Issues:
1. Maintainability of the Department's appeal due to tax effect below the monetary limit fixed by CBDT.
2. Disallowance of depreciation on membership rights of Multi Commodity Exchange Ltd. by the Assessing Officer (A.O.) and confirmed by the ld. CIT(A).

Issue 1: Maintainability of Department's Appeal
The Tribunal considered the monetary limit fixed by the CBDT for filing appeals before the Tribunal. The tax effect involved in the appeal of the Revenue was less than the prescribed limit. Citing judicial pronouncements and CBDT Instruction No. 3 of 2011, the Tribunal held that the Department's appeal was not maintainable due to the tax effect being below the specified threshold.

Issue 2: Disallowance of Depreciation on Membership Rights
The primary issue in the appeal of the assessee was the disallowance of depreciation on membership rights of Multi Commodity Exchange Ltd. The A.O. disallowed the claim for depreciation, stating that the membership right was not an asset subject to wear and tear. The ld. CIT(A) upheld this disallowance, referring to a Bombay High Court decision regarding BSE cards. The assessee contended that the Supreme Court had overruled the High Court's decision, allowing depreciation on stock exchange membership cards as intangible assets.

The Tribunal noted that the cases cited by the Revenue were distinguishable as they involved different facts related to shares issued by the Bombay Stock Exchange. The Tribunal referred to a previous decision where payment to MCX was treated as capital expenditure eligible for depreciation. Relying on the Supreme Court's decision and previous Tribunal rulings, the Tribunal directed the A.O. to delete the disallowance of depreciation on the membership right of Multi Commodity Exchange.

In conclusion, the Tribunal allowed the appeal of the assessee while dismissing the appeal of the Revenue. The decision highlighted the importance of relevant judicial pronouncements and legal interpretations in determining the allowability of depreciation on intangible assets such as membership rights in commodity exchanges.