TMI Blog2007 (7) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal : "On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not allowing a sum of Rs. 56,00,000 paid as entrance fees and admission fees to the Stock Exchange, Mumbai, as revenue expenses." 3. The short question in this appeal is whether expenditure of Rs. 56 lakhs incurred by the assessee towards acquisition of membership of Bombay Stock Exchange by way of entrance fee and admission fee is capital expenditure or revenue expenditure. The Assessing Officer and the CIT(A) have held that the impugned expenditure is capital expenditure. 4. In support of appeal, the ld. counsel for the assessee has reiterated the submissions which were earlier made before the CIT(A). According to him, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Tribunal in R.M. Valliappan v. Asstt. CIT [2006] 103 ITD 63 (Chennai) and submitted that the membership rights obtained from a Stock Exchange were in the nature of capital asset and, therefore, the order passed by the learned CIT(A) treating the membership card as capital asset should be upheld. 6. We have heard the parties. It is by virtue of the membership card issued by the Bombay Stock Exchange that the assessee is authorized to carry on his business. It is by virtue of holding the membership card that the assessee could exercise the rights and privileges attached thereto. The membership card is transferable on fulfilment of the conditions stipulated under the rules of the Stock Exchange. All these facts have been examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 32(1)( ii ) which allow depreciation on intangible assets acquired on or after 1-4-1998." 8. In support of appeal, the ld. Departmental Representative submitted that the assessee was not entitled to depreciation, as he has not satisfied the requisite conditions of section 32. According to him, the membership cards were neither depreciable nor were they owned by the assessee and hence the assessee was not entitled to depreciation under section 32. 9. Per contra , the ld. Authorized Representative for the assessee supported the order of the learned CIT(A) and submitted that the order passed by the CIT(A) was in conformity with the decision of this Tribunal in Techno Shares Stocks Ltd. v. ITO [2006] 101 TTJ (Mum.) 349 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for the reason that nothing would be available in respect of which the assessee would need compensation by way of allowance under section 32 of the Income-tax Act. Like every other animate and inanimate object, business premises, machinery, plant, furniture and other specified assets employed by the assessee in the course of his business, profession etc., have a limited effective life. The vigor, strength, capability, etc. of every such asset gradually exhaust by the factors of use and time. They undoubtedly aid the assessee to earn the "income" from such business or profession, which is subjected to the levy of tax. Section 32 incorporates a provision for proper recompense of such diminution in the vigor, strength, capability, etc., i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retirement of capital asset and, therefore, responsible for depreciation are : ( i ) ordinary wear and tear, ( ii ) unusual damage, ( iii ) inadequacy, and ( iv ) obsolescence. The factors listed above include not only those relating to physical deterioration but also those referring to the suitability of the asset as an economically productive unit after a period of time. In depreciation accounting, the cost of the asset is spread over the years of its usefulness in a systematic and sensible manner and in so doing all the aforesaid agents or causes of depreciation are taken into account before the true profits are ascertained ( vide Accountancy by William Pickles, third edition, page 168, Accountant's Hand Book by Dickson, fourth e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this view of the matter, the order of the CIT(A) in this behalf is vacated. 13. We are conscious of the decision taken by a co-ordinate Bench of this Tribunal in Techno Shares Stocks Ltd.'s case ( supra ) in which it has been held that BSE card is an "intangible asset" within the meaning of section 32(1)( ii ) and hence eligible for depreciation under section 32 of the Income-tax Act. The aforesaid decision was rendered in the context of the provisions of section 32(1)( ii ). Clause ( ii ) in sub-section (1) of section 32 was inserted by the Finance Act, 1998 with effect from 1-4-1999. The present case relates to assessment year 1994-95 when the aforesaid provisions namely section 32(1)( ii ) did not exist. Therefore, the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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