2015 (6) TMI 133 - HC - Income Tax

Demutualization Scheme of the Bombay Stock Exchange - protective addition was made on the issue of BSE membership card and A.O. held that the original cost of card is allotted on computing capital gain of sale of card - ITAT deleted the addition - Held that - The conceded position is that the card has not been transferred in the year under consideration. That it would be or it may be transferred in future is the assumption on which the A.O. and the Commissioner have proceeded. The Tribunal has held that if what has been transpired in the year under consideration viz. the assessment year in question is the acquisition of 10,000 shares of BSEL in lieu of the membership card, then, that is by itself and without anything more not a case of transfer in the year under consideration. If the transfer has not taken place now but may occur in future then all the issues that have been raised and considered by us in the appeal of Walfort (2014 (10) TMI 184 - BOMBAY HIGH COURT) are identical. It is precisely this basis on which we have proceeded and, therefore, as held in the other case of Walfort Shares and Stock Broking Private Limited that the question of law had projected is purely academic. - No substantial question of law - Decided against revenue. Disallowance made under section 14A - ITAT deleted the addition - Held that - Question answered by a Division Bench of this Court in the case of Godrej & Boyce Manufacturing Co. Ltd. V/s. DCIT reported in 2010 (8) TMI 77 - BOMBAY HIGH COURT - Decided against revenue

Summary

Issues:
1. Protective addition made by the Assessing Officer on account of the demutualization Scheme of the Bombay Stock Exchange.
2. Failure to grant an opportunity before making the protective addition.
3. Justification of protective addition and applicability of Section 55(ab) of the Income Tax Act.
4. Similarity of the present case with the Walfort Shares and Stock Broking Private Limited case.
5. Deletion of protective addition towards depreciation claimed by the assessee.
6. Applicability of the judgment in the case of Deputy Commissioner of Income tax v. Godrej & Boyce Manufacturing Company.

Issue 1: Protective Addition -
The judgment challenges the order passed by the Income Tax Appellate Tribunal regarding the protective addition made by the Assessing Officer on account of the demutualization Scheme of the Bombay Stock Exchange. The revenue argued that the protective addition was justified due to the corporatization and demutualization of the stock exchange, resulting in benefits to members. The Assessing Officer concluded that even though the transfer of shares had not occurred in the assessment year, the benefit accrued under Section 55(ab) of the Income Tax Act. The Tribunal upheld the addition based on future implications, distinguishing it from other cases.

Issue 2: Opportunity for Hearing -
The appeal raised concerns about the failure to grant an opportunity before making the protective addition, alleging a violation of the principles of natural justice. However, the Assessing Officer and the Commissioner justified the addition based on the benefits accrued from the demutualization scheme, leading to the conclusion that two deductions for the same expenses cannot be allowed.

Issue 3: Applicability of Section 55(ab) -
The judgment delves into the applicability of Section 55(ab) of the Income Tax Act concerning the protective addition made by the Assessing Officer. It discusses the implications of the demutualization of the Bombay Stock Exchange and the allocation of shares to members, emphasizing the need for protective assessments to address future challenges regarding depreciation claims.

Issue 4: Similarity with Previous Case -
The argument presented by the assesses relied on the similarity of the present case with the Walfort Shares and Stock Broking Private Limited case. The assesses contended that the order passed in the previous case should cover the current scenario, leading to the dismissal of the appeal.

Issue 5: Deletion of Protective Addition -
The judgment addresses the deletion of the protective addition towards depreciation claimed by the assessee, focusing on the acquisition of shares in lieu of the membership card of the Bombay Stock Exchange. The Tribunal's decision to delete the protective addition was challenged, emphasizing the need to consider future transfer possibilities and the implications of Section 55(2)(ab) of the Income Tax Act.

Issue 6: Applicability of Precedent Judgment -
The judgment also references the case of Deputy Commissioner of Income tax v. Godrej & Boyce Manufacturing Company to address one of the reframed questions. It concludes that the appeal is dismissed on both reframed questions, aligning with the precedent judgment.

In conclusion, the judgment extensively analyzes the issues related to the protective addition, opportunity for hearing, applicability of relevant tax provisions, similarity with previous cases, deletion of protective addition, and the applicability of precedent judgments to reach a comprehensive decision dismissing the appeal.