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TMI Blog2010 (8) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... A) erred in relying on ITATs decision in the case of M/s. Techno Shares and Stocks Ltd., as in that case :- (i) The Hon'ble ITAT was not correct in holding that the BSE card is capital asset even though as per the decision of Hon'ble Supreme Court in the case of Stock Exchange, Ahmedabad Vs. ACIT, membership of the Stock Exchange is only a personal privilege granted by the Stock Exchange to the member. (ii) The Hon'ble ITAT was not correct in holding that the BSE card is an intangible asset within the definition of section 32(1)(ii) of the Act as the personal permission granted by the BSE is not a descendent of common ancestry or akin to know-how patents, trademarks, copyright, franchises in origin, nature and quality but far away from intangible assets mentioned in section 32(1)(ii) of the Act. (iii) The Hon'ble ITAT had failed to consider that as the basic ingredients of ownership are not present in the membership card, the assessee cannot claim that it is owner of the asset and is entitled to deprecation on the same. (iv) The Hon'ble ITAT had failed to consider the findings of the Supreme Court in the case of Stock Exchange, Ahmedabad Vs. ACIT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a capital asset and liable for capital gains tax is irrelevant because s. 32 does not allow depreciation on all capital assets but only on capital assets which fall in the enumerated categories. 5. In view of the above decision of the Hon'ble Bombay High Court, the assessee is not entitled to claim deprecation on BSE card. We therefore reverse the order of learned CIT(A) and restore the order of the Assessing Officer. The same reasoning will apply to the claim of depreciation of ₹ 37,50,000/- on account of depreciation on membership card of the Foreign Exchange Dealers Association of India (FEDAI) and the Assessee will not be entitled to claim depreciation on the membership card of the Foreign Exchange Dealers Association of India (FEDAI). Ground No.1 and 2 are accordingly allowed. 6. Ground No. 3 raised by the revenue reads as follows :- 3(i) In the facts on circumstances of the case and in law, learned CIT(A) erred in deleting the addition made on account of disallowance of bad debts amounting to ₹ 3,26,549/-. (ii) In the facts and on circumstances of the case and in law, learned CIT(A) erred in ignoring the finding of the Assessing Officer that pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ojected its grievance in this regard in Ground No. 3. 9. We have considered the rivals submissions. It is not in dispute before us that Special Bench of ITAT Mumbai in the case of DCIT Vs. Shri Shreyas S. Morakhia, in ITA no. 3374/Mum/2004 dealt with the following question :- Whether on the facts and circumstances of the case and in law, the assessee who is a share broker, is entitled to deduction by way of bad debts under section 36(1)(vii) read with section 36(2) of the Income Tax Act, 1961 in respect of the amount which could not be recovered from its clients in respect of transactions effected by him on behalf of his clients apart from the commission earned by him. The Special Bench held as follows :- Keeping in view all the facts of the case and the legal position emanating from the various judicial pronouncements as discussed above, we are of the view that the amount receivable by the assessee, who is a share broker, from his clients against the transactions of purchase of shares on their behalf constitutes debts which is a trading debt. The brokerage commission income arising from such transaction very much forms part of the said debt and when the amount of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of business of the assessee and the prevailing business climate demanded the use by the directors and managerial staff of the assessee with clients, business associates, jobbers and other people connected with the business. The assessee relied on the decision of Hon'ble Bombay High Court in the case of Otis Elevator Co. (India) Ltd. Vs. CIT, 195 ITR 682; wherein club fees paid was allowed as a deduction. Reliance was also placed on the decision of Hon'ble Gujarat High Court in the case of Gujarat State Export Corporation Ltd. Vs. CIT, 209 ITR 649 (Guj); wherein it was held that by paying entrance fees to become member of a club, no advantage of enduring benefit accrues, which can be said to be capital expenditure. Reliance was also placed on the decision of Hon'ble Delhi Bench of ITAT in the case of JCIT Vs. Sony India Pvt. Ltd., 4 SOT 30 (Del); wherein it was held that fees paid for acquiring membership of a golf club was business expenditure. The learned CIT(A) accepted the above submissions of the assessee and directed the Assessing Officer to allow the claim of the assessee for deduction. 14. Before us, learned DR relied on the order of the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation before the Tribunal in the following cases :- ACIT Vs. Mr. Ramesh Damani, ITA No. 5143/Mum/2006 (Mum) Classic Shares and Stock Broking Services Ltd. Vs. DCIT, 11 SOT 377 (Mum) Goldcrest Capital Markets Ltd. vs. ITO, 2 ITR 355 (Mum) The Tribunal had 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. In view of the above, ground No. 5 raised by the revenue is dismissed. 21. Ground No. 6 reads as follows :- On the facts and circumstances of the case and in law, learned CIT(A) erred in directing the Assessing Officer to allow deduction u/s. 80M of ₹ 13,63,756/-. 22. During the year, the assessee has claimed deduction of ₹ 13,63,756/- u/s. 80M. During the course of assessment proceedings, the assessee was required to justify its claim of deduction u/s. 80M. The assessee submitted that it had received dividend of ₹ 13,63,756/- from Indian companies as against which it declared and distributed dividend of ₹ 24,57,000/- to its shareholders. This dividend was paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or distributed between 1.4.2002 and 31.3.2003 were outside the purview of section 115O which was reinserted w.e.f. 1.4.2002. As per section 80M, the only condition is that the deduction claimed should not exceed the amount of dividend declared by the appellant company. As has been mentioned above, the assessee received dividend of ₹ 13,63,756/- from Indian companies in respect of which deduction u/s. 80M has been claimed and it declared and distributed dividend of ₹ 24,57,000/- to its shareholders which was more than the dividend it had received during the year. Thus, the condition of section stands satisfied and the Assessing Officer is directed to allow the deduction claimed by the appellant. 33. Before us, it is not in dispute that this issue raised by the revenue in ground No. 6 is no longer res-integra and it has been decided against the revenue in the following cases :- Neelam Mercantile P. ltd. Vs. ITO, 31 SOT 278 (Mum) Godrej Agrovet Ltd. Vs. DCIT, (Bom) in WPNo. 200 of 2010 ACIT Vs. Sunbright Cement Agencies P. Ltd., in ITA No. 4897/Mum/07 (Mum) M/s. Niharika Synthetics Trading P. ltd. Vs. CIT, in ITA No. 2086/Mum/2008 (Mum) ITO V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n other words, no company can claim the deduction of the dividend itself by virtue of tax having been paid. In other words, section 115-O prohibits the deduction of the dividend declared by the company on which the dividend tax has been paid. Since, the dividend itself is taxable during the A.Y. 2003-04, the deduction of the dividend distributed is also allowable u/s. 80-M. Learned CIT(A) accepted the plea of the assessee and in this regard, referred to Circular No. 8 of 2002 dated 27.8.2002 as well as Circular No. 4 of 2003 dated 5.9.2003 issued by CBDT. On analysis of the aforesaid Circulars, learned CIT(A) concluded that under section 115-O, incidence of taxation was shifted from the recipient to the dividend distributing company. Consequently, the dividend was made exempt u/s. 10(33) and hence deduction u/s. 80M was withdrawn and provisions of section 115-O(5) become operative. For A.Y. 2003-04, however, dividend was taxable and therefore provisions of section 115-O(5) cannot operative. Learned CIT(A), therefore, held that the assessee was entitled to claim deduction u/s. 80-M of the Act. Aggrieved by the order of the learned CIT(A), the Revenue has preferred the present ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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