TMI Blog2015 (10) TMI 2121X X X X Extracts X X X X X X X X Extracts X X X X ..... - Held that:- Tribunal in the case of "Pavak Securities (P) Ltd. vs. ITO" [2013 (9) TMI 608 - ITAT MUMBAI] wherein held when the membership ceased to exist and in lieu of the card, new asset came into existence i.e. 1000 shares as well as rights to trade and clearing in the stock exchange and the acquisition of the cost of trade and clearing has been provided to be nil as per proviso to section 55(2)(ab) of the Act, then the entire cost of membership as stands in the books of accounts of the assessee would be treated as cost of acquisition of 1000 shares which is not a depreciable asset and hence the claim of the assessee to claim depreciation on demutualization or corporatization of the stock exchange card would not be justifiable. Thus it is held that the assessee is not entitled to depreciation on the BSE card. - Decided against assessee. - ITA No. 118/M/2011 - - - Dated:- 27-5-2015 - B R Baskaran, AM And Sanjay Garg, JM For the Appellant : Shri Sanjay Chaudhary, AR For the Respondent : Shri Love Kumar, DR ORDER Per Sanjay Garg, Judicial Member The present appeal has been preferred by the assessee against the order dated 29.10.2010 of the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 2,63,15,762/- as on 31.03.07. The interest was paid on overdraft account maintained with the bank which was required to be mandatorily maintained for the purpose of settlement of transactions executed with stock exchange. All the transactions relating to payment 'to and from stock exchange have been settled through this account only. Even the overdraft fees was obtained against the FDR upon which the assessee has received interest of ₹ 1,42,698/-, hence the net interest paid by the assessee on overdraft account was ₹ 81,259/- only. 6. We have considered the submissions. Admittedly, the assessee, though, had surplus funds but from the facts on file it is clear that the assessee had used the overdraft funds for settlement of accounts of the persons specified under section 40A(2)(b) of the Act. However, the other facts remain that the assessee had also received interest from the FDR pledged with the bank in relation to the overdraft facility. Under the circumstances, the disallowance, if any, in our view, should be restricted to net interest paid on the overdraft amount in relation to payments made by the assessee on behalf of the specified persons under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BSE Ltd., it could not be depreciated when its value in reality did not come down and hence the assessee was not entitled to depreciation on BSE Card. The relevant observations of the Tribunal for the sake of convenience are reproduced as under: 25. From the above, following conclusions can be drawn. (i) BSE which was a voluntary, not for profit character of entity, got converted into a for profit and corporate activity; (ii) BSE membership card is cancelled and the twin rights that a holder of BSE cardholder had got separated into the following independent rights - (a) ownership rights and (b) trading rights. (iii) The previous rights of a BSE membership cardholder gets extinguished and in lieu thereof the BSE member acquires shares in BSEL and trading rights in BSEL; (iv) Under section 47(xiiia), such extinguishment of rights and acquisition of shares and trading rights in BSEL is not regarded as transfer. (v) That cost of acquisition of ownership rights and trading rights would have to be split and valued on transmission. (vi) Trading rights are based as deposit system as opposed to card system; (vii) The trading card system is replaced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attributable to ownership rights, can be said to have been transmitted by way of allotment of shares in BSEL. The value is to be determined by the underlying value of assets of BSEL or through some other approved method. 31. Coming to trading rights, we find that the value that can be assigned from out of the value of BSE card is only to the extent of deposit made. Trading right is no doubt a business in commercial rights but value is equivalent to the quantum of deposit. The assessee is entitled to refund of the deposit. When the value is equal to a refundable deposit, how can such value of refundable deposit be depreciated when the value in reality does not come down. If the refundable deposit is deducted from the value, then the present value of trading right is nil. Under these circumstances, there is no value to the trading in commercial right entitling the assessee for deduction by way of depreciation. Hence, no depreciation can be granted on this right. Thus, we uphold the finding of the Revenue authorities. We now discuss the impact of the following sections:- 55(2) For the purposes of sections 48 and 49, cost of acquisition ,- (ab) In relation to a capital ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns or body of individuals] relating to the business immediately before the succession become the assets and liabilities of the company; (b) all the partners of the firm immediately before the succession become the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the succession; (c) the partners of the firm do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company; and (d) the aggregate of the shareholding in the company of the partners of the firm is not less than fifty per cent of the total voting power in the company and their shareholding continues to be as such for a period of five years from the date of the succession; (e) the demutualisation or corporatisation of a recognised stock exchange in India is carried out in accordance with a scheme for demutualisation or corporatisation which is approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);] 47(xiiia) any transfer of a capital asset bei ..... 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