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INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD

ITA.No.1820/Ahd/2015 Asstt. Year: 2007-2008
M/s.Innovate Derivative P.Ltd. (Appellant) vs. Dy. CIT (Respondent)
Date of Order: 16-02-2016

ORDER

This appeal of the assessee arose from order of the Ld.CIT(A)-10, Ahmedabad passed for the Asstt.Year 2007-2008 dated 27.2.2015.

2. The issue in the grounds of appeal raised is whether admission paid to the stock exchange is revenue expenditure or capital expenditure.

3. Brief facts of the case are that the assessee had paid Rs.5.00 lakhs to National Commodity and Derivative Exchange (NCDEX and Rs.1.00 lakh to National Multi Commodity Exchange Ltd. (NMCE) as admission fee and claimed the same as revenue expenditure, which was disallowed by AO. The action of the AO was confirmed by the ld.First Appellate Authority.

4. I have heard rival contentions and perused the facts of the case. The ld.counsel for the assessee relied upon the decision of Delhi Bench of the ITAT in ITA No.3617/Del/2012 dated 31.10.2012 in the case of M/s.Krishna Commodities Vs. DCIT on the identical issue, where, it has been held that admission fee paid by the assessee in respect of three exchanges viz. MCX, NCDEX and NMCE were necessary expenditure which had given the assessee a right to carry on the business as broker. The payments were necessary for the assessee to carry on business. By becoming a member, the assessee became entitled to the benefit of using all the facilities of stock exchange and assessee did not become owner of any of the assets of the stock exchange. It cannot be said that any enduring benefit had accrued to the assessee. No new asset has been created and there is no increase in the profit making apparatus of the assessee. The payment of admission fee is like a license fee and it is paid only for carrying on the business. Accordingly, the Delhi Tribunal, in that case, treated the admission fee paid by the assessee to the stock exchange as revenue expenditure. Similarly, Mumbai Bench of the ITAT in the case of M/s.Total Securities Ltd. Vs. DCIT in ITA No.7123/Mum/08 dated 31.12.2010 has decided the issue in assessee’s favour. Following the decisions of the ITAT cited supra, on the identical issue, I decide the issue in favour of the assessee and direct the AO to treat such expenditure as revenue expenditure, and accordingly, reverse the order of the ld.CIT(A). Thus, the sole ground raised by the assessee is allowed.

5. In the result, appeal of the assessee is allowed.

Order pronounced in the Court on 16th February, 2016 at Ahmedabad.

(B.P. JAIN)
ACCOUNTANT MEMBER

Stock exchange admission fee is revenue expenditure not capital. The payment is like a license fee and is paid only for carrying on the business-ITAT | 19-02-2016 |

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