TMI Blog2013 (9) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was justified to allocate the WDV of the Bombay Stock Exchange card to the cost of acquisition during the course of assessment proceedings and was to be allowed or not Held that:- The ld. CIT(A), was not justified in not considering the revised Long Term Capital Gains on sale of shares - The said revised computation of Long Term Capital Gains filed by the assessee had to be considered to adjudicate the issue as per law - Hence, we set aside the orders of authorities below and restore this issue to the file of AO with a direction to compute Long Term Capital Gain by considering the cost of shares taking into account the WDV of the Stock Exchange card - Long Term Capital Gain in respect of the shares hae to be considered after assigning the WDV of the Bombay Stock Exchange Card to the cost of 10000 shares allocated to the assessee - It was observed that the assessee in the assessment year under consideration has sold 4562 shares, therefore, proportionate cost of said Bombay Stock Exchange card has to be assigned to the said shares while computing the Long Term Capital Gains. From section 55(2)(ab) of the Act, it was evident that on demutualization or corporatization of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change doing brokerage activities and also trading in shares. 5. In the assessment year under consideration, the assessee has earned dividend income amounting to ₹ 46,5,118/- which is claimed as exempt. AO has stated that assessee has not made any disallowance u/s 14A of Income Tax Act, 1961 (the Act), in respect of expenditure incurred in relation to income which does not form part of the total income under the Act. However, the assessee vide letter dated 7.12.2010 stated that investment was made by the assessee in new shares by paying the application money which remains outstanding pending allotment or refund. That the said application money cannot be considered as investment for the purpose of inclusion in the list of investment under rule 8D. However, the AO did not accept the contention of assessee and stated that as per balance sheet, total investment are at ₹ 6,53,56,661/-. AO has stated that certain percentage of the expenses claimed by the assessee- company would definitely be attributable to tax free income earned by assessee as it is the common pool of human and financial resources which are being utilized to earn income in various form. AO after consideri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Sub-Section (2) of Section 14 of the Act, that AO is not satisfied in respect of correctness of claim of assessee of the expenditure in relation to exempt income. He submitted that disallowance made by authorities below by applying Rule 8D should be deleted. 9. On the other hand, ld. DR supports the orders of authorities below and submitted that Rule 8D is applicable to the assessment year under consideration in view of decision of the Hon'ble Bombay High Court in the case of Godrej Boyce Mfg Co Ltd (supra). 10. We have carefully considered the orders of authorities below and the submissions of ld. Representatives of the parties. We observe that the assessee received dividend income in the assessment year under consideration of ₹ 4,65,118/-, which is exempt from tax. Admittedly, assessee has not made any disallowance on account of the expenditure relating to exempt income. On behalf of assessee, it was contended that said dividend income has been received in respect of shares, purchased by assessee during its share-broking transactions. The question is not as to whether the shares purchased were during the shares-broking transactions or for the purpose of invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, AO stated that Bombay Stock Exchange card ceased to exists on demutualization and as per Section 55(2)(ab) of the Act, the cost of shares allotted to the card holders of the Stock Exchange under the Scheme of demutualization shall be cost of acquisition of the original membership of the Exchange. In view of above, AO disallowed the claim of depreciation of the assessee on Bombay Stock Card. Further, the assessee in the assessment year under consideration sold 4562 shares and determined the capital gain in the return of income as under : i) Proportionate cost of 4562 shares of BSE Ltd, in the hands of assessee Rs.4,562/- ii) Year of purchase in 2006-07 and it's Index is 519 iii) Year of sale is 2007-08 and it's index is 551 iv) Indexed cost of 4562 shares of BSE Ltd is Rs.4,843/- v) Sale proceed of 4562 shares of BSE Ltd is Rs.2,37,22,400/- vi) Taxable long term capital gain on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares and computed the Long Term Capital Gain in respect of shares sold by considering the cost of acquisition of shares i.e. ₹ 1 per share. He submitted that the claim of depreciation has been withdrawn, and therefore, the claim by increasing cost of shares was made and the revised statement of Long Term Capital Gain was filed. Ld. AR referred the decision of ITAT, Mumbai in the case of Sino Securities (P.) Ltd. V/s ITO (2011) 134 ITD 321 (Mum), wherein it was held that the depreciation is not available on the erstwhile Bombay Stock Exchange Card after demutualization of the Stock Exchange and the said decision was followed by ITAT, Mumbai in the case of Sunidhi Consultancy Services Ltd V/s DCIT (2012) 50 SOT 223 (Mum). Ld. AR submitted that the matter may be restored to the AO to consider the Long Term Capital Gains as there was no malafide intention in claiming depreciation on membership card after demutualization of the Stock Exchange and it is the evident that the assessee had not allocated to the cost the WDV of the membership card. 14. On the other hand, ld. DR submitted that assessee made wrong Long Term Capital Gain in the computation filed with the return of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stock Exchange, in the case before us, the cost of acquisition of ownership right and trading rights have been split. The trading rights are based on deposit system and in the case of existing member its cost deemed to be nil. The entire value of Bombay Stock Exchange card, as stands in the books of account of the assessee on the date of demutualization of Bombay Stock Exchange would be assigned to the shares allocated to said members. Therefore, when the membership ceased to exists and in lieu of the card new asset came into existence i.e. 10000 shares as well as rights to trade and clearing in the stock exchange and the acquisition of cost of trade and clearing has been provided to be nil as per proviso to section 55(2)(ab) of the Act, the entire cost of membership as stands in the books of account of the assessee would be treated as cost of acquisition of 10000 shares, which is not a depreciable asset. Hence, the claim of assessee to claim depreciation on demutualization or corporatization of the stock exchange of the Bombay Stock Exchange Card was not justified and legal. Therefore, the same was rightly denied by AO in the assessment year under consideration. Now the question ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
