Ita/202/2005 Peerless Securities Ltd v. Commissioner Of Income Tax, Kolkata-1

O-92 IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE ITA/202/2005PEERLESS SECURITIES LTD.VS.COMMISSIONER OF INCOME TAX, KOLKATA-1 BEFORE :THE HON’BLE JUSTICE T.S. SIVAGNANAMAnd THE HON’BLE JUSTICE HIRANMAY BHATTACHARYYADate : 5[th] January, 2023 Appearance :Mr. Gopal Lal Sharma, Adv.…for the appellant.Ms. Smita Das De, Adv.…for the respondent The Court : This appeal by the assessee filed under Section 260A of theIncome Tax, 1961 (the Act, for brevity) is directed against the order datedFebruary 8, 2005 passed by the Income Tax Appellate Tribunal, ‘C’ Bench,Kolkata (Tribunal) in ITA No. 251/Kol./2000 for the assessment year 1996-97. The reframed substantial questions of law as suggested by theappellant/assessee are as follows : i)Whether the directions of the Tribunal to the Assessing Officer to de novoconsider allowance of depreciation on purchase of stock exchangemembership card in the sum of Rs. 70,00,000/- being the development feepaid for admission to the Calcutta Stock Exchange under section 32 of theIncome Tax Act, 1961 as amended and applicable to the appellant for theAssessment year 1996-97 is perverse ? ii)Whether on the facts and circumstances of the case, the Tribunal erred innot allowing depreciation on the Calcutta Stock Exchange membershipcard which is `a tool to trade’ in the business of share trading and brokingbusiness, hence akin to `a plant’ and eligible for depreciation as Plantunder section 32(1)(i) of the Act and further in violation of the principleslaid down by the Apex Court in case of Elecon Engineering Co. Ltd. (1987)166 ITR 66 (SC) ? We have heard Mr. Gopal Lal Sharma, learned counsel appearing for theappellant/assessee and Ms. Smita Das De, learned standing counsel for therespondent/revenue. The short issue which falls for consideration is whether the amount ofexpenditure incurred by the assessee to purchase stock exchange membershipcard is to be considered as a `tool to trade’ in the business of share trading andbroking business and hence akin to `a plant’ and eligible for depreciation asPlant under section 32(1)(i) of the Act. The Assessing Officer while completingthe assessment had held the expenditure to be of revenue expenditure.Subsequently, the Special Bench of the Tribunal in its order had held thatexpenditure incurred towards the development fee paid to the Stock Exchange iscapital in nature. When the assessee challenged the order of assessment byfiling an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], analternate plea was raised by the assessee contending that without prejudice tothe rights to claim the same as revenue expenditure, alternately it wassubmitted that in case the expenditure is considered as capital by consideringthat the assessee acquired a permanent right by considering the stock exchangemembership card as a capital asset, it should be as “a plant” within the meaningof section 43(3) of the Act. The CIT(A) rejected such contention by order dated 23[rd] November, 1999. This order was impugned before the Tribunal and by theimpugned order the learned Tribunal accepted the stand taken by the assesseeand held that the said alternate ground was agitated by the assessee andconsidered by the Special Bench of the Tribunal and payment of Rs.70 lacs onaccount of development fee paid by the assessee has been held to be capital innature and therefore the claim for depreciation has to be considered inaccordance with the provisions of the Act. For such reason the issue wasrestored to the file of the Assessing Officer to verify the claim in the light of theSpecial Bench decision of the Tribunal considering the same as capitalexpenditure, which otherwise was disallowed by the authorities below claimed asrevenue expenditure by the assessee in the first place. Thus, the matter stoodremanded to the Assessing Officer for de novo consideration in accordance withthe provisions of the Act. Learned counsel appearing for the appellant placed reliance on thedecision of the High Court of Bombay in the case of Commissioner of Income-taxvs. Kotak Securities Ltd., (2012) 20 taxmann.com 846 (Bombay)and held thatthe facts were identical for the said case and that also related to the rightaccrued by virtue of a membership card issued by the Bombay Stock Exchangepurchased by the assessee therein during the year 1995-96, which is also thecase of the assessee in this appeal. Therefore, it is submitted that prayer fordepreciation needs to be allowed. Reliance was also placed on the decision ofthis Court in the case of Commissioner of Income-tax vs. Integrated Coal MiningLtd., (2022) 142 taxmann.com 44 (Calcutta). Ms. Smita Das De, learned standing counsel appearing for therespondent/revenue placed reliance on the decision of the Supreme Court in thecase of The Stock Exchange, Ahmedabad vs. Assistant Commissioner of Income tax, Ahmedabad, (2001) 248 ITR 209 (SC) and also the decision of the HighCourt of Bombay in the case of Commissioner of Income tax - 4, Mumbai vs.M/s. Techno Shares & Stocks Limited, ITA(L) No.971 of 2006 and ITA No.218 of2007, dated 11[th] September, 2009. These decisions have been relied upon to contend that membership ofStock Exchange is a personal permission from the Exchange to exercise therights and privileges attached thereto, it is not a private asset. In our consideredview, the applicability of these decisions need not be gone into for the simplereason that as against the decision of the Special Bench nor as against thedecision of the Tribunal impugned this appeal, revenue had not preferred anyappeal. That apart, we note that in the impugned order the learned Tribunal haslimited the scope of the direction by directing the plea of depreciation alone to beconsidered. In our considered view, the learned Tribunal has given a categoricalfinding that the claim for depreciation made by the assessee has to beconsidered and for such purpose the matter has been restored to the file of theAssessing Officer. Admittedly, before the Assessing Officer such a plea was notraised as the assessee contended that the expenditure was revenue in nature.No doubt, before the CIT(A) an alternative plea was raised which was consideredand negatived but the order of the Special Bench enures in favour of theappellant which has held that the development fee paid to the Stock Exchange iscapital in nature. Therefore, we are of the view that the issue has to be verified by theAssessing Officer in terms of the directions issued by the Tribunal and hence wefind there is no substantial question of law arising for the consideration in thisappeal. Accordingly, the appeal stands disposed of by affirming the order passed by the learned Tribunal with a further direction to the Assessing Officer to affordan opportunity of personal hearing to the authorised representative of theappellant, who shall be entitled to place all the decisions which they seek to relyupon. Since the assessment is of the year 1995-96, the Assessing Officer isdirected to give an early hearing in the matter and preferably, conclude theproceedings and pass an order within a period of 12(twelve) weeks from the dateof receipt of the server copy of this order. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.) SN/S.Pal