2010 (5) TMI 99 - HC - Income Tax

Depreciation on membership card membership card of Bombay Stock Exchange - The petitioner acquired a membership card of the Bombay Stock Exchange for a consideration of Rs.1.81 crores which was paid to an existing member of the Stock Exchange. The Assessing Officer did not accept the case of the assessee that it would be entitled to depreciation on the cost of the membership card. CIT(A) allowed the claim of depreciation on the cost of the membership card treating it as a plant ITAT disallowed the claim of depreciation saying that membership card could not be considered as an asset for allowing depreciation. Held that it would be necessary to note that the distinguishing features in the case of Khandwala Finance Limited (a decision of the tribunal) which have been pointed out during the course of submissions by Counsel for the assessee are sufficient for this Court to hold that an opportunity should be granted to the petitioner to place its case on the applicability or otherwise of the decision in Khandwala Finance Limited before the Tribunal. matter remanded back to tribunal

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal on depreciation claim for membership card cost.

Analysis:
The petitioner challenged an order by the Income Tax Appellate Tribunal regarding the depreciation claim on a membership card acquired for Rs.1.81 crores from the Bombay Stock Exchange for assessment year 1997-1998. The Assessing Officer initially rejected the depreciation claim, but the Commissioner (Appeals) allowed it treating the card as a plant under Section 32(1). The Revenue appealed against this decision, leading to the Tribunal reversing the Commissioner's order, stating the membership card was not depreciable. The Tribunal also rejected the alternative claim for revenue expenditure under Section 37(1) based on their decision in a similar case. The petitioner filed a Miscellaneous Application under Section 254(2) citing lack of opportunity to address the Tribunal's reliance on a decision not presented during arguments.

During the proceedings, it was revealed that the decision the Tribunal relied on was not available during the original hearing. The petitioner argued that the facts in their case differed from the precedent case, emphasizing the non-refundable nature of the expenditure. The Court acknowledged the distinctions and granted the petitioner an opportunity to present their case before the Tribunal on the applicability of the precedent decision. The Court clarified that remand on a Miscellaneous Application is not automatic but depends on the presence of prima facie distinctions that should have been considered by the Tribunal. As prejudice would result from denying the petitioner a chance to address the differences, the Court allowed the petition, setting aside the Tribunal's order and remanding the case for fresh consideration.

In conclusion, the Court allowed the petition, recalling the Tribunal's order and restoring the appeal and cross objections for a fresh decision. The rights and contentions of the parties on merits were preserved for further arguments before the Tribunal. The Court made no order as to costs in this matter.