TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Tribunal partially allows appeal on BSE Membership Card depreciation, upholds disallowance but permits cost calculation for capital gains.</h1> <h3>M/s. Rosy Blue Securities Pvt. Ltd. Versus Addl. CIT – Range – 4 (2), Mumbai</h3> M/s. Rosy Blue Securities Pvt. Ltd. Versus Addl. CIT – Range – 4 (2), Mumbai - TMI Issues Involved:1. Disallowance of depreciation on WDV of BSE Membership Card.2. Computation of cost of shares for long-term capital gains arising from the sale of shares of Bombay Stock Exchange Limited.3. Withdrawal of depreciation allowed on BSE Card for previous assessment years.Issue-wise Detailed Analysis:1. Disallowance of Depreciation on WDV of BSE Membership Card:The assessee claimed depreciation of Rs. 9,38,281/- on the WDV of the BSE Membership Card, arguing it is a capital asset eligible for depreciation under section 32 of the Income Tax Act. The disallowance was upheld by the Commissioner of Income Tax (Appeals) and the Assessing Officer. The Tribunal noted that the issue was already decided against the assessee in a previous case (ITA.No. 6710/Mum/2011 dated 15.02.2017). The Tribunal reiterated that after the demutualization of BSE, the membership card ceased to exist as an asset, and thus, no depreciation was allowable. The Tribunal referenced the case of Sino Securities Pvt. Ltd. vs. ITO, which concluded that trading rights are equivalent to a refundable deposit, and therefore, no depreciation can be granted. Consequently, the Tribunal upheld the disallowance of depreciation.2. Computation of Cost of Shares for Long-term Capital Gains:The assessee contested the computation of the cost of shares for long-term capital gains, arguing that the cost should be the original acquisition cost of the BSE membership rights (Rs. 2,98,51,108/-) instead of the WDV on 01.04.2005 (Rs. 66,72,217/-). The Tribunal referred to the provisions of section 55(2)(ab) of the Act, which deems the cost of acquisition of the membership rights as the cost of shares received on demutualization. The Tribunal cited the case of M/s Techno Shares & Stocks Ltd. (ITA.No. 5938/Mum/2012 dated 30.08.2019), which held that the cost of acquisition of shares should be the original cost of the membership card, even if depreciation was claimed in earlier years. The Tribunal agreed with this precedent and allowed the ground raised by the assessee, thus determining the cost of shares based on the original cost of the membership card.3. Withdrawal of Depreciation Allowed on BSE Card for Previous Assessment Years:The Commissioner of Income Tax (Appeals) directed the Assessing Officer to withdraw depreciation allowed on the BSE Card for the assessment years 2006-07 (Rs. 16,68,054/-) and 2007-08 (Rs. 12,51,041/-). Both counsels agreed that this issue is directly connected with the disallowance of depreciation on the WDV of the BSE Membership Card (Issue 1). Since Issue 1 was decided against the assessee, the Tribunal deemed it fit to dismiss this ground as well.Conclusion:The Tribunal partly allowed the appeal filed by the assessee. The disallowance of depreciation on the WDV of the BSE Membership Card was upheld, and the withdrawal of depreciation for previous years was also confirmed. However, the Tribunal allowed the computation of the cost of shares for long-term capital gains based on the original cost of the BSE membership card, in line with section 55(2)(ab) of the Act and relevant case law precedents. The order was pronounced in the open court on 06.04.2022.
TaxTMI 