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TMI Blog2018 (2) TMI 1294X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeal was admitted for hearing vide order dated 7th March, 2006, on the following substantial question of law:- "Whether in the facts and circumstances of the case, the ITAT was correct in law in holding that members' fee of Rs. 5 Lacs paid by the appellant to the National Stock Exchange was in the nature of a capital expenditure?" 3. The appellant-assessee, a company, was incorporated on 28th September, 1994 with the main objective to deal in shares in stock markets, merchant banking and other financial services. 4. During the period relevant to the assessment year 1996-97, the appellant had acquired membership of the National Stock Exchange, and as per the rules had paid an amount of Rs. 5,00,000/- to the said Exchange as a non-adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) on payments/deposits made under the Own Your Telephone (OYT) scheme. Appellant company, he observed, had completed first year of business in the year ending 31st March, 1995, i.e. assessment year 1995-96, and accordingly the year in question, i.e. 1996-97, was the second year of business. Expenditure, it was held, was for expansion of business in the same line. Rs. 5,00,000/- was like subscription fee paid to the National Stock Exchange, which should not be treated as capital expenditure. 8. The Tribunal, however, reversed the said finding and restored the order passed by the Assessing Officer, after referring to earlier decisions. The expenditure, it was observed, was for addition to the capital assets held by the assessee. It was incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the exchange. The membership right could be said to be owned by the member and used for the purpose of business. It was similar to a licence or franchise and was to be treated as an intangible asset. Assessee was entitled to claim depreciation on the same being the owner and as the said asset was used for the purpose of business. Counsel for the appellant has submitted that this decision did not examine the issue whether expenditure incurred to acquire the membership was capital or revenue expenditure. We would only observe that the Supreme Court in the said case had examined the nature and character of membership card, which enables an assessee to trade on the floor or as a broker of the stock exchange. It was held that this membershi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was on acquisition of the said card/membership that the appellant could carry on business as a stock-broker, subject to other compliances including annual fee payment. 13. The appellant submits that the card/membership was non-transferable. Respondent-revenue, on the other hand, submits that the card/membership could be transferred as was held by the Supreme Court in Premium Global Securities Pvt. Ltd. & Ors. Vs. Securities & Exchange Board of India & Anr. (2015) 16 SCC 83. Right to transfer in the present facts, according to us, would not be the determinative test, for there can be capital assets on which there is restriction on transfer. Expenditure to acquire a capital asset would not become a revenue expense or consumable material bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the position in Commissioner of Income Tax, Bombay Vs. Ciba of India Ltd. (1968) 69 ITR 692 (SC). In the said case, the license, which was for a limited period, had given access to the assessee to better technical know-how in running operations. The assessee had not acquired ownership rights in the technical know-how and thus, acquisition of a fresh asset or advantage of enduring nature was missing. Technical knowledge was not acquired by the assessee absolutely and for all times. 16. In Honda Siel Cars India Limited Vs. Commissioner of Income Tax, Ghaziabad, (2017) 8 SCC 170, Supreme Court upheld the decision of the Allahabad High Court that consideration/lump-sum fee payable in five yearly equal instalments from third year from commenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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