TaxTMI 
TaxTMI 
2001 (6) TMI 166
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....on under section 35D of the Act. 4. During the course of the proceedings before the Assessing Officer the assessee also made a claim that it was a fee and consequently, the expenditure was revenue in nature. The Assessing Officer did not agree with the contention of the assessee. He held that the payment was made for acquiring membership of a Stock Exchange and the term used as fee does not change the nature of the expenditure from capital to revenue. He, accordingly, disallowed the claim of the assessee. The CIT(A) held that since the payment was made for earning of income by way of doing business in the Stock Exchange for which fees were paid, the same was revenue in nature and directed the Assessing Officer to allow the claim. The revenue is in appeal. 5. We have heard the parties and considered the rival submissions. Under the provisions of Securities Contracts (Regulation) Act, 1956, to transact a business at the Stock Exchange, one has to be a Member of the Stock Exchange. He has to get himself registered in the Register as one or more shares in the Association. As per clause 5 of the Articles of Association of the Calcutta Stock Exchange Association Ltd. every applican....
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....ion (5) of section 4 of the Securities Contracts (Regulation) Act and individuals who will be entitled to shares on sub-division of shares) or Company or Financial Corporation shall be eligible for membership of the Association until elected as eligible for admission by the Committee and as regards such election the following provisions shall have effect, subject however, to the provisions of the Securities Contracts (Regulation) Act, 1956, and the rules made thereunder: (1) Every applicant for election must be proposed and seconded by Members of the Association in a letter or letters addressed to the Secretary and signed by the proposer and by the seconder and such letter or letters shall state the names in full of the candidate and must be accompanied by a letter signed by the candidate in such form as may be prescribed by the Committee in that behalf specimen whereof is set out in annexure hereto. (2) On receipt of every such application the Secretary shall paste the name of the candidate and that of his proposer and seconder on the notice board of the Association for 7 days at least before his application is brought before the Committee for consideration, during which per....
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.... to any member at any time. (ii) he succeeds to the established business of a deceased or retiring member who is the father, mother, uncle or any other person who is, in the opinion of the Committee, a close relative : Provided, however, the Committee may waive compliance with any of the foregoing condition if the person seeking admission is, in respect of means, position, integrity, knowledge and experience of business in securities considered by the Committee to be otherwise qualified for membership. (6) A company as defined in the Companies Act, 1956 (1 of 1956) shall also be eligible to be elected as a member of a Stock Exchange if: (i) Such Company is formed in compliance with the provisions of section 12 of the said Act : Provided further that an existing Company which is a member of the Association on the date of adoption of this Article shall have the option to convert the Company into a Company under section 12 of the Companies Act, 1956 under this Article, subject to complying with the requirements of this Article and approval of SEBI. The said adoption to convert the existing Company into a Company under section 12 of the Companies Act, 1956 should be exer....
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....being obtained or if the Association in its discretion accepts such nomination or alteration without such Probate. If any alteration in the nomination is made by Will, a copy of the Will duly certified by a Notary Public is to be delivered to the. Association against acknowledgement to make such alteration binding on the Association. The Committee has the absolute right to accept/or not to accept the nomination. 6. A member with no authorised assistant will be entitled to take a substitute to act on his behalf on payment of an entrance fee of Rs. 100 for three months only from the date of granting of the application. A member with one or more authorised assistants may also apply for a substitute in case of his own absence as also in the absence of all his authorised assistants and the Committee may grant a substitute to act in such a case for a maximum period for two months on payment of a consolidated entrance fee of Rs. 500. No substitute shall be appointed unless he holds a Power of Attorney from the member concerned and is at least 21 years of age and in all other respects eligible for membership of the Exchange and is approved by the Committee. Any such Power of Attorney gr....
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....tion by the Committee of a member as eligible for admission as such shall be void unless the full entrance fee payable by such member is paid within one month of the date of his election. (3) Until otherwise prescribed by the Committee pay to the Association such sum as a fee/levy towards development activities as may be prescribed by the Committee from time to time which said sum shall immediately upon the registration of the candidate as a member become the absolute property of the Association: Provided that the Committee may waive payment of Development Fee towards development activities prescribed by the Committee from time to time on admission of a Corporate Member if such Corporate Member has purchased any share of the Association which has been forfeited and sold by the Association in exercise of the powers conferred on the Association.' 9. Article 10 provides for payment of development fee and it reads as under : 'Such members operating on the floor of the Exchange shall have to pay immediately at the time of enrolment as a member the following sum as development fee which said sum shall become the absolute property of the Association: &nb....
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....n asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital. 14. This was followed by the Supreme Court in the later decision in the case of Punjab State Industrial Development Corpn. Ltd. v. CIT[1997] 225 ITR 792. This was a case for fees paid to the Registrar of Companies for expansion of the capital base of the company and it was directly related to the capital expenditure incurred by the assessee and although incidentally that would certainly help in the business of the company and may also help in profit making, it still retains the character of capital expenditure since the expenditure is directly related to the expansion of the capital base of the company. 15. The Calcutta High Court in the case of Brooke Bond India Ltd v. CIT [1983] 140 ITR 272 observed that it is not the acquisition of a right of a permanent character alone, the creation of which is a condition for the carrying on of the business, that could be rightly treated as an expenditure on capital account. It....