Whether Stock Exchange Card is an asset for the purpose of Depreciation was always a matter of interpretation differently by assessee and income tax department.While the Department had all along treated memebrship card of stock exchange as not an asset for depreciation claim , the assessee claimed otherwise. Till now various benches of Tribunal have given verdict in favour of assessee and allowed depreciation claim on cost of memebrship of stock exchange. Some of these rulings were in follwowing case laws:
Techno Shares & Stock Ltd vs ITO [2006]101 ITR 349
Peninsular Capital Market vs ACIT [2008] 19 SOT 421
R.M Valippan vs ACIT [2006] 103 ITD 63 (CH)
Peninsular Capital Market vs ACIT [2008] 19 SOT 421
R.M Valippan vs ACIT [2006] 103 ITD 63 (CH)
However, now the Bombay High Court has given verdict overruling many Tribunals judgement including in Techno Shares , regarding allwance of depreciation on memebrship card.The issue before,Court was
The ITAT has held that the Bombay Stock Exchange Membership Card (hereinafter referred to as the ‘BSE card’) acquired by an assessee on or after 1/4/1998, either by nomination or directly through the Stock Exchange is an intangible asset covered under Section 32 of the Income Tax Act, 1961 (`Act’ for short) and therefore, depreciation is allowableon the BSE Card. These appeals are filed by the revenue to challenge theaforesaid orders passed by the ITAT.
The Court held that
The argument of the assessees that the expression ‘licences’ in section 32(1)(ii) of the Act must be construed widely and at the same time conceding that the expression ‘licences’ in section 32(1)(ii) of the Act would
not cover personal licences is mutually contradictory. Either the expression ‘licences’ has to be construed widely as it is understood in common parlance or construed restrictively in the light of associate words used in the section. There is no other way of interpreting the said expression. As noted earlier, the expression ‘licences’ in section 32(1)(ii) of the Act cannot be construed widely, because, the expression `any other business or commercial rights of similar nature’ in Section 32(1)(ii) of the Act makes it abundantly clear that
the legislature intended to give narrower or restricted meaning to the expressions used in the Section. Therefore, while rejecting the contention of the assessees, we have no hesitation in holding that the expression ‘licences’ in section 32(1)(ii) of the Act must be construed restrictively so as to apply to licences relating to acquisition / user of intellectual property rights.
36. The argument advanced by the counsel for the assessees that since the BSE card is a capital asset and is liable for capital gains tax when sold at a profit, depreciation must be allowed on the BSE card acquired after
1/4/1998 is also without any merit, because, under section 32 of the Act depreciation is not allowed on all capital assets but is allowable on capital assets which fall in any of the categories enumerated in the Section. As we have held that the BSE card does not fall in any of the categories specified in section 32(1)(ii) of the Act, depreciation cannot be allowed on the BSE card.
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