Tribunal allows Assessee's appeal, reversing disallowances on expenses & permitting depreciation on Stock Exchange card.

The Tribunal allowed the Assessee's appeal, directing the deletion of disallowances on administrative expenses and interest expenses under section 14A. Additionally, depreciation on the Stock Exchange membership card was allowed based on legal precedents and interpretations of relevant provisions.

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Issues:
1. Disallowance under section 14A of the Income Tax Act, 1961
2. Disallowance of depreciation on the membership of the Stock Exchange card

Issue 1 - Disallowance under section 14A of the Income Tax Act, 1961:
The appeal was against the order of the Ld. Commissioner of Income Tax(Appeals) for Assessment Year 2006-07. The Assessing Officer made disallowances under section 14A and depreciation on the Stock Exchange membership card. The CIT(A) partly allowed the appeal, restricting the disallowance under section 14A to Rs. 2,10,000 and sustaining the depreciation disallowance. The Assessee contended that there were sufficient interest-free funds and challenged the application of Rule 8D. The Hon'ble Kerala High Court's judgment was cited to argue against proportionate disallowance of administrative costs until Rule 8D came into force. The Tribunal directed the AO to delete the addition of Rs. 50,000 for administrative expenses and Rs. 1,50,000 for interest expenses, as the disallowance was not justified for the assessment year 2006-07.

Issue 2 - Disallowance of depreciation on the membership of the Stock Exchange card:
The contention was whether depreciation was allowable on the Stock Exchange membership card. The CIT(A) upheld the disallowance based on the cost of acquisition and the provisions of section 55(2)(ab) of the Act. However, a judgment by a Coordinate Bench in a similar case held that the Stock Exchange card was akin to a license and depreciation was allowable under section 32(1)(ii). Following this judgment, the Tribunal allowed the claim of the Assessee, setting aside the CIT(A)'s order. The facts being identical, the Tribunal allowed the appeal on this ground as well.

In conclusion, the Tribunal allowed the Assessee's appeal, directing the deletion of disallowances on administrative expenses and interest expenses under section 14A and allowing depreciation on the Stock Exchange membership card based on legal precedents and interpretations of relevant provisions.

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