2023 (1) TMI 283 - HC - Income Tax

Nature of expenditure - Depreciation on purchase of stock exchange membership card being the development fee paid for admission to the Calcutta Stock Exchange u/s 32 - whether the amount of expenditure incurred by the assessee to purchase stock exchange membership card is to be considered as a tool to trade in the business of share trading and broking business and hence akin to a plant and eligible for depreciation as Plant under section 32(1)(i) - AO held the expenditure to be of revenue expenditure. HELD THAT - Tribunal has given a categorical finding that the claim for depreciation made by the assessee has to be considered and for such purpose the matter has been restored to the file of the Assessing Officer. Admittedly, before the Assessing Officer such a plea was not raised as the assessee contended that the expenditure was revenue in nature. No doubt, before the CIT(A) an alternative plea was raised which was considered and negatived but the order of the Special Bench enures in favour of the appellant which has held that the development fee paid to the Stock Exchange is capital in nature. Therefore, we are of the view that the issue has to be verified by the Assessing Officer in terms of the directions issued by the Tribunal and hence we find there is no substantial question of law arising for the consideration in this appeal. Accordingly, the appeal stands disposed of by affirming the order passed by the learned Tribunal with a further direction to the AO to afford an opportunity of personal hearing to the authorised representative of the appellant, who shall be entitled to place all the decisions which they seek to rely upon. Since the assessment is of the year 1995-96, the Assessing Officer is directed to give an early hearing in the matter and preferably, conclude the proceedings and pass an order within a period of 12(twelve) weeks from the date of receipt of the server copy of this order.

Summary

Issues:
1. Consideration of expenditure incurred to purchase stock exchange membership card as a 'tool to trade' eligible for depreciation.
2. Whether the membership card qualifies as 'a plant' for depreciation under section 32(1)(i) of the Income Tax Act.

Issue 1:
The primary issue in this case is whether the expenditure incurred by the assessee to purchase a stock exchange membership card should be considered a 'tool to trade' in the business of share trading and broking, making it eligible for depreciation under section 32 of the Income Tax Act. The Assessing Officer initially treated the expenditure as revenue expenditure. However, the Special Bench of the Tribunal later deemed the expenditure as capital in nature. The assessee contended that the membership card should be considered 'a plant' for depreciation purposes under section 32(1)(i) of the Act. The CIT(A) rejected this contention, but the Tribunal accepted it, directing the matter to be reconsidered by the Assessing Officer in accordance with the provisions of the Act.

Issue 2:
The second issue revolves around whether the membership card purchased by the assessee qualifies as 'a plant' for depreciation under section 32(1)(i) of the Income Tax Act. The appellant argued that a similar case in the High Court of Bombay supported their claim for depreciation. The respondent, on the other hand, cited Supreme Court and High Court decisions to argue that stock exchange membership is a personal permission and not a private asset. The Tribunal limited the scope of the direction to consider only the claim for depreciation, and emphasized that the Assessing Officer should verify the issue based on the Tribunal's directions. The Court affirmed the Tribunal's order, directing the Assessing Officer to provide a personal hearing to the appellant's representative and conclude the proceedings within twelve weeks.

In conclusion, the Court dismissed the appeal, finding no substantial question of law arising for consideration. The judgment underscores the importance of considering the nature of expenditure, the specific provisions of the Income Tax Act, and the directions given by the Tribunal in determining the eligibility of depreciation for expenses incurred in acquiring assets like stock exchange membership cards.