TMI Blog2018 (2) TMI 1294X X X X Extracts X X X X X X X X Extracts X X X X ..... sh any special circumstances for an opposite conclusion in the present matter. Further, the expenditure made was for acquiring and bringing into existence an asset or advantage of enduring benefit and not for running business to produce more profits. The question raised, it was observed, should be answered by adopting common sense and not legalistic and theoretical approach. In the context of the present case, “enduring benefit” test and “once and for all” payment test would be the most appropriate and proper tests to apply, though we would accept that there are exceptions to the said principles and these tests might break down in a given case. The expenditure incurred was for acquisition of property and rights of a permanent character. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant had also paid amounts towards interest free security deposit, annual subscription for the first year and as margin deposit. 5. The substantial question of law which arises for consideration, is whether the said payment of ₹ 5,00,000/- was capital or revenue expenditure in the hands of the appellant-assessee. 6. The appellant-assessee had treated the payment of ₹ 5,00,000/- as revenue expenditure. However, this was not accepted by the Assessing Officer, who held that the payment was non-recurring in nature and had given rise to an enduring benefit, as it was the initial payment for membership of National Stock Exchange, without which the applicant could not be given membership. Payment was to enable the appellant to acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquiring membership of the National Stock Exchange, the assessee could not have acted as a broker. 9. Counsel for the appellant had drawn our attention to different instructions/circulars issued by the Board on the question of deductibility of security deposits with the postal department under OYT schemes or other schemes to state that the said deposits have been treated as revenue expenditure under Section 37 of the Act. We do not perceive and believe that the said circulars postulate and hold that all cases where security or other deposit is made, they have to be treated as revenue expenditure and not capital in nature. Similarly, the circular to treat the membership subscription paid to the Indian Institute of Packaging as revenue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icence under Section 32(1)(ii) of the Act. It was a right or a licence owned by the assessee and was used by him as an asset, i.e., the capital asset. 11. It is an accepted and admitted position that ₹ 5,00,000/- was paid by the appellant-assessee to acquire membership of the National Stock Exchange. This was a fixed amount, which was paid at one time and is not an annual subscription fee. Without payment of the said amount, the appellant-assessee could not have acquired membership of the National Stock Exchange. On acquisition of membership, the appellant acquired right to trade in shares and act as a broker. Deposit of this amount was sine-qua-non for issue of and entitlement to the broker s card. With the said card and having ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lations on when transfer of capital asset can be made. There cannot be any doubt that one-time and lump-sum payment made to acquire membership right by a company or person engaged in business of trading in stocks, brings into existence an asset or an advantage of enduring nature. Membership card is not an addition to the stock-in-trade or consumable stock. This expenditure enabled the assessee to acquire an asset to earn income in that year and in future. It was a payment by the appellant assessee to acquire a source which enabled the appellant-assessee to do business. Membership brought into existence an advantage for all times. In the context in question, ₹ 5,00,000/- represents money paid to procure a permanent right in the form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as capital expenditure. This expense, it was observed, was for bringing business into existence and then for running and sustaining it, for there was no existing business. Further, the Technical Collaboration Agreement was not only for transfer of technical information but for complete assistance, actual, factual and on the spot, for establishment of plant and machinery and continuous assistance at every stage. It was, therefore, expenditure to bring business into existence. It was observed that the aim and object of the expenditure determines character of the expenditure. 17. Alembic Chemical Works Co. Ltd. Vs. Commissioner of Income Tax, Gujarat (1989) 3 SCC 329, elucidates and affirms that a once and for all payment , when it brings ..... X X X X Extracts X X X X X X X X Extracts X X X X
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