TaxTMI 
TaxTMI 
TaxTMI 
2020 (10) TMI 790
X X X X Extracts X X X X
X X X X Extracts X X X X
....hange was disallowed as capital expenditure (Although the CIT(A) allowed depreciation on the same). 3. Brief facts of the case are as follows: Assessee is a Private Limited company. It is engaged in stock exchange operations. During the relevant assessment year, the assessee had made payment of Rs. 11,34,836/- to MCX-SX Stock Exchange towards admission fees and processing charges. Assessee had claimed it as a deduction. In the assessment order completed u/s 143(3) of the Income-tax Act,1961 ['the Act' for short] (Order dated 29-1-2016), the admission fees was disallowed as a capital expenditure. The relevant observations of the A.O. are as follows: "4.3 -------------The amount paid in the nature of license fee/acquisition of any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rcumstances of the case and law applicable, it will be thereto, the payment was made to carry on the trading activities and hence revenue in nature and allowable as business expenditure as claimed by the appellant. 2.2 The Authorities below have erred in not appreciating the fact that the payment to stock exchange was one time non refundable payment in the nature of fees to enable trade activities and not a deposit to acquire any right. The disallowance as made being contrary to facts and law applicable is to be deleted. 2.3 In any case, without further prejudice, the learned Authorities below have erred in treating the fees paid as license/right/membership. On proper appreciation of facts and the law applicable, the conclusions drawn b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s proof of having been admitted to the benefits and privileges of trading membership of exchange. Such a certificate or entitlement slip shall not be transferable or transmittable except as mentioned therein." As per rule 18(b) of the said rules a certificate or entitlement slip is transferable for nomination subject to requisite approvals. Rule 20 prohibits a trading member from assigning, mortgaging, pledging, hypothecating or charging his right of membership or any rights or privileges attached thereto. The said rule makes it quite clear that acquisition of membership in stock exchange by the assessee creates intangible right in its favour, which was also transferable by nomination. It is this membership of the stock exchange which enabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as to lands or tenements, goods or chattels which does not depend on another's courtesy; it includes ownership, estates and interests in corporeal things, and also rights such as trade-marks, copy-rights, patents and even rights in personam capable of transfer or transmission, such as debts; and signifies a beneficial right to or a thing considered as having a money value, especially with reference to transfer or succession, and to their capacity of being injured'. It is, thus, clear that the term 'property' includes even rights in personam capable of being transferred or transmitted. Rights conferred by the Stock Exchange on its members are in the nature of rights in personam which are capable of being transferred and trans....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t they get exhausted or consumed (like raw materials) in the process of securing the return or limited number of returns. Expenditure incurred on establishing, replacing and/or enlarging the profit/yield (income-earning asset) is generally of capital nature while expenditure incurred in the process of earning of the profits is of revenue nature. 8.3 The Hon'ble Apex Court in the case of Techno Shares and Stocks Limited v. CIT (supra) had held that membership of stock exchange was business or commercial right conferred by the rules of exchange. The membership right could be said to be owned by the member and used for the purpose of business. It was similar to a license or franchise and was to be treated as an intangible asset. Hon'b....