TMI Blog2010 (10) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... come and other income. The assessee had claimed depreciation of ₹ 17,09,572/- on BSE Membership Card. Vide notice u/s 142(1) dated 28.8.2008, the assessee was asked explain why the claim of depreciation of stock exchange card amounting to ₹ 17,09,572/- should not be disallowed as it is not eligible for depreciation. The assessee vide letter dated 9.9.2008 submitted a revised computation of income in which the claim of depreciation on BSE Membership Card was withdrawn by it. It was also submitted that a revised return has also been filed on 29.3.2008 for withdrawing this claim. 4. Further the assessee was asked to explain as to why the depreciation already allowed to the assessee in earlier years in pursuance to appellate orders should not be added back as income u/s 28(iv) of the I.T. Act 1961 for the current year. This query was raised on account of assessee having received 10000 shares of BSE Ltd at a notional rate of ₹ 1 per share on demutualization of BSE Ltd during this year. The AO was of the view that the cost of acquisition of these shares as per section 55(2)(ab) of the I.T. Act 1961 is to be taken as the cost of acquisition of the original membership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed under the Act is an allowance, it is not receipt of income. It has never been the intention of the legislation to grant allowance for depreciation on one hand and to tax such allowance granted as a benefit chargeable u/s 28(iv) thereby nullifying or withdrawing the allowance u/s 32. Based on the above submissions, there is no question of taxing the depreciation granted on BSE card u/s 32 of the Act as an allowance benefit chargeable to tax u/s 28(iv). The Assessee also submitted without prejudice to the above submissions, the Tax Department has consistently disallowed our claim for depreciation u/s 32 up to assessment year 2005- 06.Therefore, consistent with its own stand it cannot tax such depreciation u/s 28(iv). 6. But the Assessing officer rejected the submissions of the assessee observing as under: The assessee has stopped claiming further depreciation on BSE Card from AY 2006-07. Now due to the provisions of sec 55(2)(ab) against the written down value as on the date of exchange of BSE card with shares of BSEL and BSEL trading rights the assessee gets entitled to claim the original cost of the acquisition of membership of BSE i.e. ₹ 2.8 crores as cost of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee as a benefit u/s 28(iv) during this year. As para 4.5 the AO has quoted the assessee s reply. At para 4.6 and 4.13 (incorrectly shown as para 4.7 after the para 4.11) the AO has given finding that the addition is being made as protective addition. The appellant submitted that protective addition s not correct and addition cannot be made on notional basis but the benefit u/s 28(v) is taxable in the year of transfer of BSEL shares. It was further submitted that no tax be levied on addition made on protective basis. I have gone through the order of the AO and the submission of the appellant. The action of the AO to make protective addition to protect the interest of revenue is correct as protective assessment to protect the interest of revenue is recognized in case of Lalji Haridas vs ITO 43 43 ITR 387(SC) but no demand on protective addition may be enforced. The AO is directed not to enforce demand pertaining to protective addition. 8. Aggrieved the assessee is on appeal before us. The facts of the case are that the assessee acquired a membership card in the Bombay Stock exchange for a cost of ₹ 2.88 crores. The Assessee had claimed depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to participate in the sale and purchase of shares through the platform offered by the Stock Exchange .As contended by the assessee, if the value of the shares issued in lieu of the Stock exchange card is considered to have higher value than the WDV of the Stock exchange card, the difference can be taxed only as short term capital gains u/s 50. This is not possible as u/s 47(xiiia) any transfer of a stock exchange card for shares issued by the Stock exchange in a scheme of corporatisation is not regarded as a transfer. Hence the difference cannot be taxed u/s 50. Further the benefit does not arise from the conduct of business by the assessee. It has arisen from the conversion or corporatisation of the Stock Exchange, without any change in the rights of the Assessee. Again the transaction is in the capital field being exchange of a depreciable asset with shares. It is not a benefit or perquisite assessable as business income and hence cannot be brought to tax under sec 28(iv). 11. In view of the above we delete the addition of Rs. ₹ 21961712/- , being depreciation granted in the earlier year. 12. In the result, the appeal filed by the assessee is allowed. ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading is sophisticated method of trading. This by itself will not be sufficient to holding technical services being rendered. The Assessing Officer has also held that services are not available to the public at large but only to registered members, again this by itself will not make the services in question as technical services. Another reason given by the Assessing Officer is that speed at which transactions were completed and the ease with which transactions are done in screen based trading. This again is not relevant criteria for holding that the services rendered were technical services. Fact that the data provided on screen will provide better data for carrying out transaction will not again be sufficient to hold that technical services are being rendered. All the above features present in screen based trading saves time. This is the result of improved technology. That does not mean that stock exchange is providing technical services. Members of the stock exchange and the public at large are beneficiaries of these technical improvements. Stock exchanges are not the owner of this technology to provide them for a fee to prospective use. They are themselves consumers of the tech ..... X X X X Extracts X X X X X X X X Extracts X X X X
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