2012 (2) TMI 718 - AT - Income Tax

Summary

Issues involved: The judgment involves two main issues: (1) confirmation of disallowance of depreciation on BSE Membership card and (2) disallowance of claim of expenses u/s.14A.

Issue No.1 - Disallowance of Depreciation on BSE Membership Card:
The assessee claimed depreciation on membership rights which was disallowed by the AO due to demutualisation of BSE and the cessation of the asset in the form of BSE card. The Ld. CIT(A) confirmed the AO's decision. The Tribunal referred to a previous case and explained that after demutualisation, the rights of members were segregated into ownership of assets and trading rights. It was clarified that depreciation was not allowable on the trading rights as their value was equivalent to a refundable deposit, making the present value nil. The Tribunal upheld the Revenue's decision based on relevant sections dealing with capital gains computation, stating that the original cost of the share did not impact the decision. Consequently, the issue was decided against the assessee.

Issue No.2 - Disallowance u/s.14A:
The judgment referred to a decision by the Hon'ble Bombay High Court stating that Rule 8D is not applicable retrospectively, allowing only a reasonable disallowance in the absence of Rule 8D. Following this decision, the order of the ld. CIT(A) was set aside, and the matter was remitted back to the AO to determine a reasonable disallowance in line with the High Court's ruling. The appeal was partly allowed for statistical purposes.

Separate Judgement:
No separate judgment was delivered by the judges in this case.