Stock Exchange membership card treated as capital asset; depreciation under section 32 denied for lack of depreciable character.

Expenditure incurred to acquire Stock Exchange membership was treated as capital expenditure because the membership card conferred transferable rights and an enduring business advantage, so the deduction claim failed. Depreciation under section 32 was denied because the card was not shown to be an asset capable of wear, deterioration or obsolescence, and the later intangible-asset provision was not applicable to the relevant assessment year. The Revenue's objection to depreciation therefore succeeded, while the assessee could not claim revenue deduction for the acquisition cost.

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Issues: (i) Whether the expenditure incurred for acquiring membership of the Stock Exchange was capital expenditure or revenue expenditure. (ii) Whether depreciation was allowable on the Stock Exchange membership card under section 32.

Issue (i): Whether the expenditure incurred for acquiring membership of the Stock Exchange was capital expenditure or revenue expenditure.

Analysis: The membership card enabled the assessee to carry on the business and conferred transferable rights and privileges. The expenditure brought into existence an asset or advantage of an enduring nature, and the card was treated as intrinsically capital in character.

Conclusion: The expenditure was capital expenditure and not revenue expenditure, against the assessee.

Issue (ii): Whether depreciation was allowable on the Stock Exchange membership card under section 32.

Analysis: Depreciation under section 32 is allowable only for assets owned and used in business that are capable of diminution in value by wear, deterioration or obsolescence. The membership card had no fixed life and no material was shown to establish that it was a depreciable asset. The later intangible-asset clause in section 32(1)(ii) was held inapplicable to the assessment year in question.

Conclusion: Depreciation was not allowable on the membership card, in favour of the Revenue.

Final Conclusion: The assessee's claim for deduction of the acquisition cost failed, and the Revenue's objection to depreciation succeeded, so the order of the lower authority was reversed to the extent of disallowing depreciation.

Ratio Decidendi: Depreciation under section 32 is admissible only where the asset is capable of diminishing in value by wear, deterioration or obsolescence; a Stock Exchange membership card, absent an applicable statutory provision treating it as depreciable, is not such an asset.

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