TMI Blog2011 (6) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... under the SEBI(Portfolio Managers) Regulations 1993 w.e.f. 16/9/05. 3. On perusal of depreciation chart filed as Annexure to Tax Audit Report in Form No.3CD, the AO noticed that the assessee had claimed depreciation on intangible assets @ 25%. It was further stated by way of note that, the intangible assets comprised of Pre-operative expenses of ₹ 77,58,599/- and SEBI Registration fee of ₹ 25,00,000/-. According to the Assessee, the expenditure incurred in securing registration from SEBI by paying registration fee of ₹ 25,00,000/- was an intangible asset on which the Assessee can claim depreciation u/s.32(1)(ii) of the Act. Further the expenditure incurred prior to obtaining registration to act as Mutual fund manager o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses 24,00,621 4. SEBI Registration Fees 25,00,000 Total Expenditure incurred before commencement of business. On April 2,2002 1,02,58,599 ========== Less: Depreciation claimed @ 25% for assessment year 2003-04 (relevant to previous year ended Marchg, 2003) (-)25,64,650 WDV as on April 1, 2003 76,93,949 Less: Depreciation claimed @ 25% for Assessment Year 2004-05 (relevant to previous yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the business of the assessee cannot be carried on. It was argued that the right obtained on registration with SEBI is similar to the right obtained by a member of a recognized stock exchange on obtaining membership of the Stock Exchange. The same principle can be applied to Registration required by the assessee company to carry on the business of an Asset Management Company. The assessee relied on the following decisions in which it was held that the membership of a recognized stock exchange is in nature of commercial right, and is an Intangible Asset on which depreciation u/s. 32 is allowable viz., a) Techno Shares and Stock Limited vs. ITO (101 TTJ 349)(bom); M/s. Kaynet Capital Ltd. vs. DCIT (ITA No.3870/M/05)(Mum) 4. The AO howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of which depreciation had already been allowed. This submission of the assessee was not considered by the CIT(A). The CIT(A) confirmed the order of the AO holding that there were no intangible assets on which depreciation can be allowed. 6. Aggrieved by the order of the CIT(A) the assessee has filed the present appeal before the Tribunal. 7. Though the Assessee has raised many grounds of appeal, it was submitted by the learned counsel for the Assessee that the Assessee would press for adjudication only the ground raised by the assessee before the Tribunal that depreciation should be allowed treating the SEBI Registration fee as intangible asset or in the alternative the same should be allowed as deduction under section 37(1) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing deductions shall be allowed-- (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed. (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: Provided that .. Explanation 2.--For the purposes of this sub-section written down value of the block of assets shall have the same meaning as in clause (c) of sub-section (6) of section 43; Explanation 3.--For the purposes of this sub-section, the expressions assets and block of assets shall mean-- (a) tangible assets, being buildings, machinery, plant or furniture ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings under the Act. We are therefore, of the view that it was not possible for the AO in the present assessment year to take a stand different from the one taken in the earlier assessment year. Having allowed the depreciation in the immediately preceding year it is not open to the AO to take different stand for the year under consideration. On this short ground, we direct that the depreciation claimed by the assessee should be allowed. In view of the above, we have not gone into the question whether the sums in question would be terms as intangible assets entitled to depreciation. For the reasons given above we allow the appeal of the assessee. 9. In the result, the appeal of the assessee is allowed. Order pronounced in the open cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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