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TMI Blog2006 (9) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, the Tribunal was right in holding that the admission fee and contribution to infrastructure development fund paid by the assessee to become a member of the stock exchange is a revenue expenditure?" 2. The facts leading to the above question of law are as under: (i) The assessee is a share broker. The relevant assessment years are 1993-94 and 1994-95 and the corresponding accounting years ended on March 31, 1993, and March 31, 1994, respectively. For the assessment year 1993-94, the assessee filed the return of income admitting a total income of Rs. 1,20,340. Later, the assessment was taken up for scrutiny and notice was issued under section 143(2) of the Income-tax Act (hereinafter referred to as "the Act"). The assessment was completed on a total income of Rs. 2,45,344. While completing the assessment, the Assessing Officer disallowed the admission fee of Rs. 1,25,000 as payment to Coimbatore Stock Exchange on the ground that the said payment was made only for acquisition of capital asset. Aggrieved by the order, the assessee filed an appeal to the Commissioner of Income-tax (Appeals). The said Commissioner of Income-tax (Appeals) allowed the appeal by following another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Coimbatore Stock Exchange and the same cannot be treated as capital expenditure due to the fact that there is no acquisition of any asset. The Coimbatore Stock Exchange had sought to provide certain facilities to its members by developing infrastructure facilities for due conduct of the business of stock broking and hence the amount paid towards admission fee as well as infrastructure development fund is only allowable as revenue expenditure. He further drew our attention to the respective articles of the memorandum of stock exchange that the Stock Exchange does not confer any ownership right in the Stock Exchange. 5. Heard counsel. The assessee has incurred expenditure towards the admission fee of the Coimbatore Stock Exchange as well as contribution of development charges. By incurring these expenditure the assessee had acquired the right of trading in shares and securities at the terminals of the Coimbatore Stock Exchange. To acquire the said membership card, the condition precedent is that the assessee shall pay admission fee as well as the contribution to infrastructure facilities, and only after paying the same, the assessee will become entitled to trade at the terminals of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative expenses and the capital expenditure on infrastructure development." 8. From a reading of the above, it is clear that a member has to pay a sum of Rs. 1,00,000 as well as contribution for infrastructure development for becoming a member. Further, it is also stated that the member has to pay an annual subscription for Rs. 2,000. Without making these payments, the assessee cannot become a member. The assessee is a stockbroker, without becoming a member, he cannot carry on the business. It is an admitted fact that the Stock Exchange allowed only their members to carry on business on the floor of the Stock Exchange. As per the articles cited above, a member cannot carry on business unless he pays the admission fee, contribution to infrastructure development and annual fee. So, payment is necessary for the assessee to carry on the business. By becoming a member, the assessee is also entitled to the benefit of using all the facilities of the Stock Exchange. The assessee is not the owner of any of the assets in the Stock Exchange. It cannot, therefore be said that any enduring benefit' had accrued to the assessee. It is also very difficult to say how the amount paid for becomi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. But even if this test were applied in the present case, it does not yield a conclusion in favour of the revenue. Here, by purchase of loom hours no new asset has been created. There is no addition to or expansion of the profit-making apparatus of the assessee. The income-earning machine remains what it was prior to the purchase of loom hours. The assessee is merely enabled to operate the profit making structure for a longer number of hours. And this advantage is clearly not of an enduring nature. It is limited in its duration to six months and, moreover, the additional working hours per week transferred to the assessee have to be utilised during the week and cannot be carried forward t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id by the assessee to the stock exchange by becoming a member, is only revenue expenditure. Learned counsel for the Revenue strongly placed reliance on the Supreme Court judgment reported in the case of Punjab State Industrial Development Corporation Ltd. v. CIT [1997] 225 ITR 792 (SC), wherein it was held as follows: "We do not consider it necessary to examine all the decisions in extenso because we are of the opinion that the fee paid to the Registrar for expansion of the capital base of the company was directly related to the capital expenditure incurred by the company and although incidentally that would certainly help in the business of the company and may also help in profit-making, it still retains the character of a capital expenditure since the expenditure was directly related to the expansion of the capital base of the company. We are, therefore, of the opinion that the view taken by the different High Courts in favour of the Revenue in this behalf is the preferable view as compared to the view based on the decision of the Madras High Court in Kisenchand Chellaram's case [1981] 130 ITR 385. We, therefore, answer the question raised for our determination in the affir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Appellate Tribunal, Chennai, "D" Bench. On October 26, 2005, this court admitted the appeal and formulated the following questions of law. "1. Whether the Income-tax Appellate Tribunal was right in law in holding that the payments made to the Coimbatore Stock Exchange towards infrastructure development fund of Rs. 3,32,166 and towards guarantee fund of Rs. 25,000 were capital expenditure? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in following the decision of a Chandigarh Bench of the Tribunal Joint CIT v. Master Capital Services Ltd. [2004] 88 ITD 496, in preference to the decision of the Single Member Bench of the Chennai Tribunal wherein the identical issues of another member of the same stock exchange were decided in favour of the appellant of that case?" 18. In respect of question No.1, we answer the question in favour of the assessee, against the Revenue by following Tax Case (A) Nos. 67 and 68 of 2003, as discussed above. In view of answering question No.1, the second question becomes academic and does not require our consideration. 19. In view of the above observation, the tax case filed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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