ACIT - 4(3), MUMBAI v. M/s. JOINDRE CAPITAL LTD., MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J BEFORE SHRI N.V. VASUDEVAN (JM) & PRAMOD KUMAR (AM) I.T.A.NO. 4796/MUM/2008 (ASSESSMENT YEAR : 2004-05 ) ACIT 4(3) 6 TH FLOOR ROOM NO. 649 AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS. M/S. JOINDRE CAPITAL LIMITED 32 RAJA BAHADUR MANSION GROUND FLOOR AMBALA DOSHI MARG FORT MUMBAI-400 023. APPELLANT RESPONDENT PAN/GIR NO. : AAACJ1480E ASSESSEE BY : NONE DEPARTMENT BY : SHRI L.K. AGRAWAL ORDER PER N.V. VASUDEVAN JM :- THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 16.5.2008 OF LEARNED CIT(A)-XV MUMBAI RELATING TO A.Y. 2004-05. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE ASSESSEE WOULD BE ENTITLED TO CLAIM DEP RECIATION OF MEMBERSHIP OF BOMBAY STOCK EXCHANGE CARD. LEARNED C IT(A) RELYING ON THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF TE CHNO SHARES & STOCK LTD. VS. ITO 101 TTJ 349 ALLOWED THE CLAIM OF THE ASSESSEE. 3. AT THE TIME OF THE HEARING IT WAS BROUGHT TO OU R NOTICE THAT HON'BLE BOMBAY HIGH COURT IN THE CASE OF ITA NO. 97 1 OF 2006 & ITA NO. 218 OF 2007 IN THE CASE OF M/S. TECHNO SHARES & STO CKS LIMITED. HON'BLE BOMBAY HIGH COURT BY ITS JUDGMENT DATED 11. 9.2009 HAS HELD THAT DEPRECIATION UNDER SECTION 32 OF THE ACT CAN NOT BE ALLOWED ON STOCK EXCHANGE MEMBERSHIP CARD ACQUIRED BY AN ASSES SEE ON OR AFTER 1.4.1998. S. 32 (1) (II) AS AMENDED W.E.F. 1.4.1998 ALLOWS DEPRECIATIO N ON M/S. JOINDRE CAPITAL LIMITED 2 INTANGIBLE ASSETS BEING INTER ALIA KNOW-HOW PA TENTS COPYRIGHTS TRADE MARKS LICENSES FRANCHISES OR ANY OTHER BUSINESS O R COMMERCIAL RIGHTS OF SIMILAR NATURE ACQUIRED ON OR AFTER 1-4-1998 OWNED BY AN ASSESSEE AND USED FOR THE PURPOSE OF BUSINESS. THE QUESTION WHET HER BSE MEMBERSHIP RIGHTS WILL FALL WITHIN THE EXPRESSION LICENSES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE WAS CONSIDERED BY THE HONBLE BOMBAY HIGH COURT AND IT WAS HELD: (1) THOUGH THE TERM LICENCES IS A VERY WIDE TERM AND INCLUDES PERMISSION TO CARRY ON ANY TRADE BUSINESS PROFESS ION ETC IT IS USED IN S. 32(1)(II) IN A RESTRICTED SENSE . S. 32 RESTRICTS DEPRECIATION TO A CLASS OF TANGIBLE & INTANGIBLE AS SETS SPECIFICALLY ENUMERATED THEREIN. ALL INTANGIBLE ASSETS ENUMERATE D IN S. 32(1)(II) (EXCEPT THE TERM LICENCES) BELONG TO THE CLASS OF INTELLECTUAL PROPERTIES. AS THE EXPRESSION LICENCES IN S. 32(1 )(II) IS PRECEDED BY THE EXPRESSIONS KNOW-HOW PATENTS COPYRIGHTS TRAD E MARKS AND SUCCEEDED BY THE EXPRESSION FRANCHISES WHICH ARE ALL RELATABLE TO INTELLECTUAL PROPERTY RIGHTS THE TERM LICENCES IN S. 32(1)(II) IS APPLYING THE PRINCIPLE OF NOSCITUR A SOCIIS INTEND ED TO BE USED RESTRICTIVELY AND AS APPLYING ONLY TO LICENCES RELATING TO ACQUISITION / USER OF INTELLECTUAL PROPERTY RIGHTS ; (2) A BSE CARD IS ALSO NOT A BUSINESS OR COMMERCIA L RIGHT BECAUSE WHAT S. 32(1)(II) CONTEMPLATES IS BUSINESS OR COMMERCIAL RIGHTS RELATING TO INTELLECTUAL PROPERTIES AND NOT ALL CATEGORIES OF BUSINESS OR COMMERCIAL RIGHTS. SINCE A BSE CARD IS NOT A BUSINESS OR COMMERCIAL RIGHT RELATING TO INTELLECTU AL PROPERTY RIGHTS DEPRECIATION CANNOT BE ALLOWED ON IT; (3) THE FACT THAT A BSE CARD IS A CAPITAL ASSET AND LIABLE FOR CAPITAL GAINS TAX IS IRRELEVANT BECAUSE S. 32 DOES NOT ALLO W DEPRECIATION ON ALL CAPITAL ASSETS BUT ONLY ON CAPITAL ASSETS WH ICH FALL IN THE ENUMERATED CATEGORIES. 4. IN VIEW OF THE ABOVE DECISION OF THE HON'BLE BOM BAY HIGH COURT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEPRECATION O N BSE CARD. WE M/S. JOINDRE CAPITAL LIMITED 3 THEREFORE REVERSE THE ORDER OF LEARNED CIT(A) AND R ESTORE THE ORDER OF THE ASSESSING OFFICER. 5. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED. ORDER HAS BEEN PRONOUNCED ON 21 ST DAY OF MAY 2010. SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 21 ST MAY 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT CONCERNED. 5. THE DR CONCERNED MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI PS