2009 (9) TMI 18
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....e Tax Act, 1961 is allowable on the stock exchange membership card acquired by an assessee on or after 1/4/1998? 2. 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 allowable on the BSE Card. These appeals are filed by the revenue to challenge the aforesaid orders passed by the ITAT. 3. Since the question of law set out hereinabove is common in all these appeals, by consent, all these appeals are heard finally on the aforesaid substantial question of law and disposed of by this common judgment. 4. Mr. Gupta and Mr. Sahadevan, learned counsel for the revenue submit that depreciation under section 32 of the Act is allowable on depreciable asset. They contend that the BSE card is neither an asset nor a capital asset which is subject to wear and tear and therefore depreciation is not allowable on the BSE Card. In this connection, reliance is placed by them on the decision of the Apex Court in the ....
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....al. They contend that by amending section 32 of the Act with effect from 1/4/1998 the legislature has considerably enlarged the scope of the depreciation allowance. They contend that by amending section 32 of the Act, the depreciation which was hitherto restricted only on buildings, machinery, plant or furniture has now been extended to knowhow, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature acquired by the assessees on or after 1-4-1998. It is contended that the expression 'licences' in section 32 of the Act has been deliberately used in a wider sense so as to allow depreciation on all types of licences, except personal licences which are purely regulatory in nature. 7. Referring to various Dictionaries, it is contended by the counsel for the assessees that the expression 'licence' would ordinarily mean a permission to carry on any trade, business or profession which in the absence of such licence, would be illegal. It is contended that the BSE card is nothing but a 'licence' which permits or entitles an assessee to carry on the business of trading in shares on the floor of the Stock Exchange. BSE card is a sour....
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.... It is contended that since the expression 'licences' in section 32 of the Act is applicable to all types of licences (except personal licences) it is clear that the expression 'business or commercial rights of similar nature' would apply to all business or commercial rights which are akin to licences. It is contended that neither the rule of noscitur a sociis nor the rule of ejusdem generis are applicable in the present case, because the legislature has intentionally used the expression 'licences' which has a wider meaning and the said intention has been reiterated in the Memorandum explaining the amendment to section 32 of the Act by Finance Act, 1997. Accordingly, it is submitted that the BSE card being a business or commercial right, the Tribunal has rightly allowed depreciation on the BSE card. 10. Dealing with the argument of the revenue that the BSE card is neither a 'depreciable asset' nor a 'capital asset', it is contended by the counsel for the assessees that the legislature by inserting clause (xi) to section 47 of the Act with effect from 1/4/1998 has made it abundantly clear that the membership of a recognised stock exchange is a capital asset and liable to capital ga....
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....as until then restricted to buildings, machinery, plant or furniture. It is pertinent to note that even after the amendment, the depreciation under section 32 of the Act is restricted to the tangible / intangible assets which are specifically enumerated therein and depreciation is not allowable on all tangible / intangible assets. In other words, depreciation even under the amended section 32 of the Act is allowable only on the restricted categories of tangible / intangible assets which are specifically enumerated in the section. 15. The intangible assets on which depreciation is made allowable under section 32(1)(ii) of the Act are, knowhow, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature acquired on or after 1/4/1998. 16. In all the appeals before us, the specific case of the assessees is that the BSE card acquired by them on or after 1/4/1998 is an intangible asset covered under the expression 'licences' or alternatively covered under the expression 'any other business or commercial rights of similar nature' enumerated in section 32(1)(ii) of the Act and therefore, depreciation is allowable on the BSE card acq....
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....to the said Act. If the goods manufactured by the industries enumerated in the First Schedule to the Industries (Development & Regulation) Act, 1951 are excisable, then, licence by way of registration under section 6 of the Central Excise Act, 1944 is also mandatory. The Export-Import Policy framed by the Government from time to time requires the importer to obtain licence before importing certain goods. To deal in securities, licence under section 17 of the Securities Contracts (Regulation) Act, 1956 is mandatory. To carry on banking business, licence is mandatory under section 22 of the Banking Regulation Act, 1949. Under the Cantonments Act, 2006, licence is mandatory for establishment of a private market or slaughter house in the cantonment area. To carry on food business licence under section 31 of the Food Safety & Standards Act, 2006 is mandatory. To manufacture, sale and distribution of insecticides, licence is mandatory under section 13 of the Insecticides Act, 1968. To explore minerals, licence is necessary under the Off-shore Areas Mineral (Development & Regulation) Act, 2002. To manufacture, sale, purchase, possession, consumption or use of intoxicant for bonafide....
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..... The sole right granted by the owner of a trademark or tradename to engage in business or to sell a good or service in a certain are area. 4. The business or territory controlled by the person or entry that has been granted such a right. commercial franchise. A franchise using local capital and management by contracting with third parties to operate a facility identified as offering a particular brand of goods or services. sports franchise. 1. A franchise granted by a professional sports league to field a team in that league. 2. The team itself. trial franchise. A franchise having an initial term of limited duration, such as one year. franchise, vb. To grant (to another) the sole right of engaging in a certain business or in a business using a particular trademark in a certain area. " Thus, franchising is a kind of business where franchisor grants a licence to the franshisee to use franchisor's intellectual property rights such as knowhow, patents, trademarks, brand name, etc. to market the franchisor's products or services for consideration. 24. From the above, it is clear that the expression 'licences' is a very wide term and it would embrace within its sweep not only the p....
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....lude even a Consulting room where a doctor examines his patients with the help of a solitary nurse or attendant. But, in our opinion, in the matter of construing the language of Section 2(4) of the Act we must adopt the principle of noscitur a sociis. This rule means that, when two or more words which are susceptible of analogous meaning are coupled together they are understood to be used in their cognate sense. The words take as it were their colour from each other that is, the more general is restricted to a sense analogous to a less general. "Associated words take their meaning from one another under the doctrine of a noscitur a sociis the philosophy of which is that the meaning of a doubtful word may be ascertained by reference to the meaning of words associated with it; such doctrine is broader than the maxim Ejusdem Generis." 28. Similarly, the Apex Court, in the case of Rohit Pulp & Paper Mills Ltd. V/s. Collector of Central Excise reported in (1990) 3 SCC 447 was called upon to consider the scope of word 'Coated Paper' in the second proviso to Notification No.25 of 1984 issued under the Central Excise Rules 1944, which read thus :- "Provided further that the exemption con....
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....They take, as it were, their colour from and are qualified by each other, the meaning of the general word being restricted to a sense analogous to that of the less general. As said in Maxwell on the Interpretation of Statutes, 12th Edn., p.289 : "Words, and particularly general words, cannot be read in isolation; their colour and their content are derived from their context." 30. More recently, the Apex Court in the case of Leelabai V/s. Oriental Insurance Co. Limited reported in (2008) 9 SCC 720, while construing the expressions `Public Sector Undertakings' in Section 3(1)(b) of the Maharashtra Rent Control Act 1999, held thus :- "74. Thirdly, we are of the view that, in this case, the principle of noscitur a sociis is clearly applicable. According to this principle, when two or more words which are susceptible to analogous meanings are coupled together, the words can take their colour from each other. Applying this test, we hold that Section 3(1)(b) clearly applies to different categories of tenants, all of whom are capable of paying rent at market rates. Multinational companies, international agencies, statutory corporations, government companies, public sector companie....
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....gible assets. Therefore, it is reasonable to construe that the expression 'licences' is used in section 32(1)(ii) of the Act to apply to licences relatable to intellectual properties only and not to all licences. 33. The above reasoning of ours is further fortified by the expression 'any other business or commercial rights of similar nature' used in section 32(1)(ii) of the Act. The said expression clearly postulates that the business or commercial rights which are not similar to the categories specified in section 32(1)(ii) of the Act are not entitled to depreciation. In other words, the expression 'business or commercial rights of similar nature' clearly shows that all business or commercial rights are not entitled to depreciation. Therefore, construing the expression 'licences' widely so as to apply to all licences / permissions and all business or commercial rights would be ex-facie contrary to express intention of the legislature. Accordingly, the alternative argument of the assessees that the BSE card is a business or commercial right and therefore entitled to depreciation is liable to be rejected, because, what section 32(1)(ii) of the Act contemplates is the business....