TMI Blog2019 (8) TMI 1770X X X X Extracts X X X X X X X X Extracts X X X X ..... and, as such, the same is not a good precedent. As regards the reliance placed by the learned DR on the decision of M/s Pavak Securities Pvt. Ltd. vs. ITO [ 2013 (9) TMI 608 - ITAT MUMBAI ] the same is distinguishable on facts as in that case, assessee had not argued and claimed that it was eligible to claim entire cost of acquisition of membership card while computing Long Term Capital Gains - assessee itself chose to claim only the WDV as the cost of acquisition of membership card. Such an action on the part of the assessee in that case cannot be said to be a valid binding precedent and thus, the same cannot help the cause of Revenue in the present case. As hold that the cost of acquisition of shares of BSE Ltd. shall be the original cost of acquisition of membership card in terms of Section 55(2)(ab) of the Act even though assessee has claimed depreciation on the cost of membership card in the earlier years. As regards the period of holding of shares of BSE Ltd., we find that as per clause (ha) inserted in Explanation 1 to Section 2(42A) of the Act by the Finance Act, 2003, period for which the person was a member of the recognised stock exchange in India immediately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the membership card acquired by the assessee was an intangible asset as per Section 32(1)(ii) of the Act. Accordingly, the assessee was claiming depreciation on such assets and the Written Down Value ( WDV ) of the membership card as on 31st March 2005 was ₹ 12,61,422/-. 3. In the meantime, it was proposed by the Government to demutualize and corporatize the stock exchange. The sequence of event was as under:- a. On 20th May 2005, the BSE (Corporatization and Demutualization) Scheme, 2005 was announced by the Security Exchange Board of India ( SEBI ). b. On 8th August 2005, Bombay Stock Exchange Limited ( BSE Ltd. ) was incorporated as a Company. c. On 12th August 2005, Certificate of Commencement of business was provided to the BSE Ltd. 4. Pursuant to the Scheme of Corporatization and Demutualization, the assessee as well as all other members were allotted two different rights, i.e. (a) 10,000 shares of the incorporated entity, i.e. BSE Ltd.; and, (b) right to carry on trading in the stock exchange. 5. The following amendments were made in the Act to provide for treatment of cost of shares and period of holding of shares allotted to the members of BSE pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of acquisition of the membership right, i.e. 1998 and determined the total cost at ₹ 67,67,552/- and offered Long Term Capital Gain of ₹ 1,69,54,848/-. 8. The Assessing Officer, vide order dated 08.12.2010, accepted the asset being long term capital asset and the gains being chargeable to tax as Long Term Capital Gains; however, held that cost of the asset, i.e. the shares, is to be determined as per the WDV of the membership right as the assessee had claimed depreciation on such membership right. The Assessing Officer also held that although Section 55(2)(ab) of the Act provides that cost of the membership card shall be the cost of shares; however, no provision can allow double deduction and, hence, the WDV of the membership card is taken to be the cost of the shares. The Assessing Officer, accordingly, computed the Long Term Capital Gains on the basis of such WDV. 9. The CIT(A), vide order dated 13th January 2012, confirmed the assessment order in so far as the issue of computation of Long Term Capital Gains is concerned. 10. When the matter was heard originally by the Division Bench of the Tribunal, there was a difference of opinion between the learned Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the period of holding of shares of BSE Ltd.; will it be computed from date of acquisition of membership card or from date of allotment of shares in BSE Ltd. 13. At the outset, I make it clear that so far as the relevant factual matrix is concerned, which has been discussed in the above paras, there is no dispute and, therefore, I refrain from adverting to the same in detail again. 14. Before me, the learned Representative for the assessee has argued to support the order proposed by the learned Judicial Member. At the outset, it was argued that the consequence of demutualization and corporatization of the stock exchange is that the earlier existing membership right has been transferred by way of extinguishment of the membership right/ by way of an exchange in consideration for the receipt of two independent assets, i.e. (a) shares of BSE Ltd.; and, (b) trading right in BSE Ltd. The new asset is completely different and independent of the old asset which, but for provision of Section 47(xiia) of the Act, would have been chargeable to tax under Section 45 of the Act. The cost of the new asset acquired by the assessee is to be determined as per Section 55(2)(ab) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. DCIT, 314 ITR 314 (SC) at Para 12 which provides that bottles , which did not form part of block of assets, was not chargeable to tax under Section 50 of the Act. 17. Therefore, it was submitted that the finding of the learned Accountant Member that Section 50 of the Act was applicable as the assessee had been allowed deprecation on the membership card is not sustainable in law. The applicability of Section 50 of the Act is to be seen qua the assets which have been transferred for which the Capital Gain has to be computed. There can be no dispute that the share of BSE Ltd. is an asset which is completely different from the membership card held by the assessee prior to demutualization and corporatization of the stock exchange. Admittedly, the membership card was transferred by the assessee on account of corporatization of the stock exchange and in consideration, other asset was received by the assessee, i.e. the shares and the trading rights. 18. The fact that there was a transfer on corporatization of the stock exchange is clear from the provision of Section 47(xiiia) of the Act, which accepts that there is a transfer on account of corporatization. However, the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of transfer of membership card and the cost of acquisition of shares to be the original cost and not the WDV of the membership rights. 21. In view of the aforesaid, it has been vehemently canvassed that even on an application of the dictum of the decision of Escorts Ltd. (supra), it is clear that cost of acquisition of instant shares would be the original cost and not the WDV. The learned Representative relied on the decision of the Hon'ble Supreme Court in the case of CIT vs. Rajasthan and Gujarati Charitable Foundation, 402 ITR 441 (SC) wherein the Supreme Court has held that it is permissible for an assessee, being a charitable institute, to claim application of income for acquisition of assets as well as the depreciation of the said assets in subsequent years. Further, reliance was placed on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Ala Chemicals Pvt. Ltd., 203 ITR 891 (Bom.) wherein the Hon'ble High Court has explained the decision in the case of Escorts Ltd. (supra) and allowed the depreciation to the assessee as well as claim of deduction under Section 80J of the Act on the basis of the original cost of the asset. In view of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has chosen to disagree with the decision of the co-ordinate Bench. It has been asserted that the learned Judicial Member has also not cited any decision in favour of assessee which was delivered by any Tribunal or High Court after the date on which the order in the case of Twin Earth Securities (P) Ltd. (supra) has been passed. The learned DR further pointed out that the instant assessee had waged a long battle on the issue of whether the BSE membership was entitled to depreciation or not, and, which has been finally settled by the Hon'ble Supreme Court, which held that the said asset was indeed entitled for depreciation. Thus, the assessee has been allowed depreciation on the BSE Membership card by the Assessing Officer. Now, all of a sudden, when the event of corporatisation of BSE took place and the assessee was allotted shares in lieu of the said card, whose cost had already been amortised to a large extent by the assessee through the allowance of depreciation, the assessee company wants to claim the original cost again for computing Capital Gains on sale of shares. According to the learned DR, this tantamounts to militating against the decision of the Hon'ble Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, it is amply clear that in terms of Section 55(2)(ab) of the Act, the cost of shares allotted to the assessee pursuant to the demutualisation and corporatisation has to be as per the original cost of acquisition of his original membership card of BSE. The section does not prescribe for any pre-condition to claim the cost of acquisition as the cost of shares allotted to the assessee. Thus, I find that language of Section 55(2)(ab) of the Act is unambiguous and clear. 25. Now, the grievance of the Assessing Officer is that since the assessee has claimed depreciation on the cost of membership card, the computation of Capital Gains on sale of shares of BSE Ltd. will be governed by Section 50 of the Act, which provides for calculation of Capital Gains on assets forming part of the block of assets and on which depreciation has been allowed under this Act. The relevant extract of Section 50 of the Act reads as under: *Special provision for computation of capital gains in case of depreciable assets. 50. Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming part of a block of assets in respect of which depreciation has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d dispense with the necessity of any further elaboration of the subject notwithstanding the numerous precedents available inasmuch as the evolution of all such principles are within the four corners of the following opinion of Rowlatt, J. ..in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. (underlined for emphasis by me) The above analysis clearly reveals that while interpreting the taxing statute, nothing is to be assumed, nothing is to be implied. One has to only look at the language used in the statute. The interpretation which prevailed with the learned Accountant Member will require assumption to the fact that the legislature never intended the double deduction. However, on a plain reading of the section, there is no ambiguity, a facet, which even the learned Accountant Member agrees to. The interpretation accepted by the learned Accountant Member will require one to go beyond the language employed in the section, even when there is no ambiguity in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned DR that first the assessee claimed the depreciation on the cost of membership card after long drawn litigation till Hon'ble Supreme Court and thereafter, claiming cost of the same at the time of sale of shares, has no substance. Thus, it will be wrong to say that the legislature must not have envisaged the present situation while amending Section 55 of the Act. 28. If for a moment, the argument of the learned DR is accepted that provisions of Section 50 of the Act and not Section 55(2)(ab) of the Act are applicable, then the moot question which arises is as to what was the purpose of insertion of Section 55(2)(ab) of the Act. It is a well settled principle of interpretation that all the sections dealing with the same subject should be given effect to in such a way that none of the sections are rendered infructuous. If I interpret the provisions of Section 50 and Section 55(2)(ab) of the Act the way the learned DR has canvassed, it will surely make the provisions of Section 55(2)(ab) of the Act redundant and infructuous, an approach which ought to be avoided, especially when the language of Section 55(2)(ab) of the Act is unambiguous and clear. 29. At this stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns include, inter alia, deduction of depreciation under section 32 and deduction regarding expenditure on scientific research in the manner set out in section 34. Therefore, the deductions which the Supreme Court was concerned with, were the deductions which were within the scheme of Chapter IV, to be taken into account while computing the income under section 28 of the Act. Section 80J. on the other hand, forms part of Chapter VIA which provides for certain additional deductions which are to be made from the gross total income of the assessee as computed under Chapter IV. Thus, for example, section 80A provides : In computing total income of an assessee, there shall be allowed from his gross total income, the deductions specified in sections 80C to 80U. These are additional deductions. They are quite different in kind from deductions which fall under Chapter IV. Under section 80J what is provided is an additional deduction which is calculated as a percentage of the capital employed by the assessee in certain undertakings as set out in section 80J. Section 80J(1A)(II) prescribes the manner of ascertaining the value of such capital assets. The assets which are to be taken in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 80J for the purpose of determining the quantum of deduction under section 80J. (underlined for emphasis by me) The above analysis of the Hon'ble High Court clearly answers the question that even if for the time being it is assumed that there is a double deduction, the nature of deduction claimed, i.e. as cost of shares under the head Capital Gains and nature of deduction claimed earlier, i.e. depreciation on cost of membership card under the head Income from Business and Profession is quite different and cannot be said to be of the same nature and thus, the ratio of the Hon ble Supreme Court in the case of Escorts Ltd. (supra) cannot be said to be militating against the position canvassed by the assessee. 30. I may also refer to the reasoning taken by the Hon ble Madras High Court in the case of Kali Aerated Water Works vs. CIT, 242 ITR 79 (Mad), in the context of Section 50 of the Act, which was to the effect that Section 50 will apply only to cases where the depreciation had been obtained by the assessee . The assessee before the Hon'ble Madras High Court was the new partnership firm formed after dissolution of the old firm. The case of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not prescribe any reservation or exception for cases wherein assessee has already claimed depreciation on the cost of membership card. This implies that the legislature in its wisdom has considered the scenario of double deduction while bringing in such amendment. In such cases, it cannot be inferred that the benefit granted to the assessee was unintentional and shall not be allowed to the assessee. When the language of the section is so clear and no conditions are attached with the allowance available to the assessee, while interpreting the section this bench cannot suo-moto put certain conditions to take away the benefit granted by the statute even when the same may lead to double deduction. Such an act on our part will be without jurisdiction, and without authority of law. 32. As regards the reference made by the learned Accountant Member and learned DR on the decision of our co-ordinate in case of Twin Earth Securities (P.) Ltd. vs. ACIT 66 taxmann.com 258, I find that in that case none appeared on behalf of the assessee therein and as such, arguments of the losing party were not articulated before the bench. In this regard, it is pertinent to refer to the reliance placed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost of acquisition of shares of BSE Ltd. shall be the original cost of acquisition of membership card in terms of Section 55(2)(ab) of the Act even though assessee has claimed depreciation on the cost of membership card in the earlier years. 35. As regards the period of holding of shares of BSE Ltd., I find that as per clause (ha) inserted in Explanation 1 to Section 2(42A) of the Act by the Finance Act, 2003, period for which the person was a member of the recognised stock exchange in India immediately prior to such demutualisation or corporatisation shall also be included in period of holding of shares. In terms of the clear and unambiguous language of the section, I hold that the period of holding of shares of BSE Ltd. shall be reckoned from the date of original membership of BSE and not from date of allotment of shares in BSE Ltd. 36. I thus agree with the view taken by the learned Judicial Member that the cost of shares will be original cost of the membership card in terms of Section 55(2)(ab) of the Act. 37. In view of the foregoing discussion, the questions put forth before me are answered in the positive and in favour of the assessee. The decision arrived at b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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