2007 (1) TMI 197 - AT - Income Tax

Summary

Issues involved: Denial of depreciation on Membership Card issued by the Bombay Stock Exchange.

For ITA No. 7804/Mum/2003:
The assessee appealed against the denial of depreciation on the Membership Card issued by the Bombay Stock Exchange. The Assessing Officer and the CIT(A) had rejected the claim for depreciation. The main contention was whether the Membership Card qualified as an intangible asset eligible for depreciation under section 32 of the Income-tax Act. The assessee argued that the Membership Card was an intangible asset used for business purposes and hence depreciation should be allowed. The Departmental Representative supported the order of the CIT(A).

The Tribunal analyzed the provisions of section 32 which allow depreciation for tangible and intangible assets used for business purposes. It emphasized that depreciation is meant to compensate for the decrease in value of assets over time due to wear, deterioration, or obsolescence. The Tribunal highlighted that for depreciation to be claimed, the asset must be capable of diminishing in value. Ownership of the asset is also crucial for claiming depreciation. The Tribunal referred to previous court decisions and affirmed that the Membership Card issued by a Stock Exchange qualifies as a capital asset. However, mere existence of a capital asset is not enough; it must also be shown that the assessee owns the asset and uses it for business purposes. The Tribunal set aside the orders of the Departmental authorities and remanded the matter to the Assessing Officer for a fresh decision based on these observations.

For ITA No. 7805/Mum./2003:
The issue raised by the assessee in this appeal was identical to that in ITA No. 7804/Mum./2003 regarding the denial of depreciation on the Membership Card issued by the Bombay Stock Exchange. Following the decision made for the first appeal, the Tribunal also remanded this issue to the Assessing Officer for a fresh decision. The appeal filed by the assessee was treated as allowed for statistical purposes.