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TMI Blog2012 (4) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... Exchange; whereas the cost of the capital asset being trading or clearing rights of recognized Stock Exchange acquired under the said scheme shall be deemed to be nil. As regards the membership of FEDAI is concerned, despite specific query from the Bench about the status of the membership card of FEDAI; whether the same development/charges as taken place as in the case of membership card of BSE, the ld AR has expressed his inability to say anything and requested that the matter may be remanded to the record of the CIT(A) for consideration of all the relevant facts and decide the same – Decided in favor of the assessee by way of remand to AO Deduction for payment of penalty on violation of bye-laws of Stock Exchange - held that:- penalty for short payment of margin money was a compensatory payment under rule of stock exchange which is allowable as revenue expenditure. Membership fee paid to Dubai Gold and Commodity exchange. - Held that:- the membership expenditure is undoubtedly a capital in nature. The membership of DGCX was once for all and the expenditure would have an enduring benefit. Therefore, in case the assessee would have taken membership, the entire membership f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ej Boyce Manufacturing Co. Ltd., after providing reasonable opportunity of to the assessee in the matter. 5. Accordingly, we restore this issue to the record of the Assessing Officer for fresh adjudication in the light of the decision cited supra and in accordance with law after giving due opportunity of being heard to the assessee. 6. Ground no. 2 is regarding addition by treating the loss as speculation loss. 7. We have heard the ld AR of the assessee as well as the ld DR and considered the relevant material on record. At the out set we note that this issue is covered against the assessee by the decision of the Hon'ble jurisdictional High Court in the case of Prasad Agents (P.) Ltd. v. ITO [2011] 333 ITR 275/[2009] 180 Taxman 178 (Bom.) wherein the Hon'ble High Court while considering the explanation to sec. 73 of the I T Act has held in para 18 as under: 18 In our opinion there can be no difference between the losses suffered in the course of trading by delivery and losses in terms of the book value. As long as the assessee is carrying on business of trading by way of purchase and sale of shares even if in respect of any financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and was of the view that all these expenses are personal in nature. The Assessing Officer relied upon the decision of the Hon'ble Madras High Court in the case of CIT v. R.K.K.R. Steels (P.) Ltd. [2002] 258 ITR 306/[2003] 131 Taxman 830 (wrongly mentioned in the assessment order as Hon'ble Karnataka High Court) as well as the decision in the case of Mac Explotec (P.) Ltd. v. CIT [2006] 286 ITR 378/155 Taxman 247. The Assessing Officer has also relied upon the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Hindustan Hosiery Industries [1994] 209 ITR 383/73 Taxman 521 (Bom.) and the decision of the Pune Bench of the Tribunal in the case of Dr. S.N. Naik v. Asstt. CIT [2007] 104 ITD 516. Accordingly, the Assessing Officer disallowed the said expenditure of ₹ 28,91,198/-. 9.3 On appeal the CIT(A) concurred with the action of the Assessing Officer while passing the impugned order. 10. Before us, the ld AR has submitted that there is an agreement between the assessee company and Mr Rishab Parekh whereby Mr Rishab Parekh has agreed and undertaken to take the employment of the assessee company for at lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... policy of the assessee company but only because Mr Rishib Parekh is the son of one of the Directors of the assessee company; therefore, the expenditure is not for the purpose of the business of the assessee. The ld DR has supported the orders of the lower authorities as well as the decisions of the Hon'ble Madras High Court in the case of M. Subramaniam Bros. v. CIT [2001] 250 ITR 769/119 Taxman 600, in the case of R.K.K.R. Steels (P.) Ltd. ( supra ) and also the decision of the Hon'ble Jurisdictional High Court in the case of Hindustan Hosiery Industries ( supra ). 11. We have heard the rival contention as well as the relevant material on record. It is an undisputed fact that Mr Rishib Parekh was not an employee of the assessee company when he went for higher studies in USA. There is no dispute that any expenditure incurred by the assessee company for the training and higher education of its employees for reaping the benefit of the said training and higher education then the said expenditure would be a business expenditure and allowable. It is clear that the decision for sending Mr Rishib Parekh to USA for higher education was taken because he is the son o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of employment with the assessee company subsequent to the completion of the education is a motivated act of shifting the education expenditure to the accounts of the assessee company as there is no policy or past practice of sending employees for studies or training for reaping the benefit. 14. In the case of M. Subramaniam Bros. v. CIT [2001] 250 ITR 769/119 Taxman 600 (Mad.), the Hon. Madras High Court after following the decision of the Hon'ble. Bombay High Court in the case of Hindustan Hosiery Industries ( supra ) has taken a similar view when the assessee firm founded by the father admitted his children even when they were minor to the benefit of the firm, the children continued their studies even after attaining the age of majority. One of the sons was sent abroad for further study could not be regarded as a deputation made by the firm of one of its partners in connection with the business of the assessee-firm. The Hon. High Court has observed it was in substance, only a step taken by the father who was naturally interested in giving the best possible education to his son, and had sent him abroad to get a higher degree after he completed his degree. An ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case because in those cases, the expenditure was incurred on the son of the director of the assessee while they were already working as an employee of the assessee or the circumstances were so strong to establish that higher education was wholly for the purpose of the business of the assessee and there was no other option but to takeover the business of the assessee only by heir of the director. 18. In view of the above discussion, we find that the expenditure on higher education of the son of the director, in the facts and circumstances of the case cannot be said to be wholly and exclusively for the purpose of the business of the assessee and without any extra commercial circumstance. Accordingly, we do not find any error or illegality in the orders of the lower authorities on this issue. 19. In ITA No.3855/Mum/2009, the revenue has raised the following effective grounds: ( i ) On the facts and in the circumstances of the case and in law, the ld CIT(A) erred in deleting the disallowance of ₹ 3,50,395/ (wrongly mentioned as ₹ 18,82,031) and ₹ 15,82,031/- (wrongly mentioned as 3,50,395/-) on account of depreciation on BSE card and FED ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/- each. As per the scheme of de-mutualisation, the card ceased to exist and in lieu of Member Ship, the Card Holder has been issued 10000 shares of BSEL. As per section 55(2)(ab), the cost of the shares allotted to the card holders of a recognized Stock Exchange under a scheme of demutualization shall be the cost of acquisition of his original Membership of the exchange. As per proviso to the said clause, the cost of the capital asset being trading or clearing rights of the recognized Stock Exchange acquired by a share holder on allotment of equity or under the scheme of demutualization or corporatisation shall be deemed to be nil. 20.3 It is clear from the developments of BSE as well as from the amended provisions of the Act that after corporatisation of BSE and corresponding amendment in the relevant provisions of the Income Tax Act, the Membership Card of the erstwhile BSE ceased to exist and the cost of shares of the recognized Stock Exchange allotted in lieu of the card under the scheme of demutualization shall be the cost of acquisition of original membership of the Stock Exchange; whereas the cost of the capital asset being trading or clearing rights of recognize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions is that the entire value of the BSE card as stands in the books of account of the assessee on the date of de-mutualisation/corporatisation of BSE would be assigned to 10000 shares allotted to such members. Accordingly, when the membership ceased to exist and in lieu of the card, new capital asset came into existence being 10000 shares as well as right to trade and clearing in the Stock Exchange and the acquisition cost of trade and clearing has been explicitly provided as nil by the statute then the entire cost of Membership as stands in the books of account of the assessee would be treated as cost of acquisition of 10000 shares which is not a depreciable asset. 22. As per clause (3) of Explanation 5 to sec. 32(2), if any short fall of amount between the value realised and written down value of a particular asset, the same is allowable. 22.1 In the case in hand, the assessee received the shares in lieu of BSE Membership card then whatever written down value was standing in the books of account of the assessee has been received by the assessee by way of shares and therefore, no shortfall arises to be claimed as depreciation. 23. As regards the membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned representatives of the parties agreed that this issue is covered by the decision of ITAT in assessee's own case for Assessment Year 2003-04 cited supra wherein the ITAT held that the Tribunal bad taken a view that penalty for short payment of margin money was a compensatory payment under rule of stock exchange which is allowable as revenue expenditure and the same is not penal in nature and for infraction of any law. The said view was taken in the following decisions: 1 ACIT v. Ramesh Damani , ITA No 5143/Mum/2006 (Mum) 2. Classic Shares and Stock Broking Services Ltd. v. DCIT , 11 SOT 377 (Mum). 3. Goldcrest Capital Markets Ltd. v. ITO , 2 ITR 355 (Mum) 23. Since the issue in the year under consideration is identical to that of Assessment Year 2003-04, we respectfully follow the decision of ITAT and in the light of that we confirm the order of CIT(A) on this count. Accordingly, we decide this issue against the revenue. 29. Next issue is regarding claim of club membership charges. 30. We have heard the ld DR as well as the ld AR and considered the relevant material on record. At the o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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