Income Tax Appellate Tribunal (ITAT) Ahmedabad in a recent judgment has allowed depreciation on NSE card following Supreme Court judgment which held that stock exchange card is akin to a license and therefore it is covered under section 32(1)(ii) and depreciation is allowable.

Case Details:
ITA No. 1924 & 2065/Ahd/2011 ; Assessment Year:2008-09
Asstt . Commissioner of Income Tax (Appellant) vs Anagram Stock Broking Ltd (Respondent)
Date of Order: 08-01-2016

Brief facts of the Case:
The Assessee Company was engaged in the business of stock broking, depository participant and distribution of financial products. The Assessing Officer (AO) on perusing the details furnished by the assessee noticed that assessee had claimed depreciation of Rs.41,36,396/- on stock exchange card. AO was of the view that after the implementation of Corporatization and Demutualization Scheme, 2005, the membership card did not exist as the same stands cancelled and therefore, no depreciation could be allowed on the same. He, accordingly, disallowed the claim of depreciation. On appeal, CIT(A) also upheld the disallowance.

Important Excerpt from ITAT Judgment:

We have heard the rival submissions and perused the material on record. We find that issue of depreciation of stock exchange card was before the Co-ordinate Bench in assessee’s own case in A.Y. 2006-07 was decided in favour of assessee by holding as under:

“6. Ground No.2 is against disallowance of depreciation on the membership of the Stock Exchange card. The ld.counsel for the assessee reiterated the submissions as were made in the statement of facts-cum- synopsis. The ld.counsel for the assessee submitted that the issue is squarely covered by the judgement of Coordinate Bench (ITAT Mumbai "G" Bench Ahmedabad) rendered in the case of M/s.Grishma Securities Pvt.Ltd. vs. ITO in ITA No.6098/M/2010 for AY 2007-08, dated 29/03/2011.

6.1. On the contrary, ld.Sr.DR supported the orders of the authorities below.

7. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the decision relied upon by the ld.counsel for the assessee.

ITA No.1168/Ahd/2011 Edelweiss Stock Broking Ltd. vs. Addl.CIT Asst.Year -2006-07 The ld.CIT(A) has decided this issue in para-8 of his order by observing as under:-

"8. The trading rights which have been conferred upon the erstwhile card hold of BSE after its corporatization and demutualization has no value is evident from the provisions of proviso to section 55(2)(ab) of the Act which has been brought on a statue by the Finance Act 2003 w.e.f. 01/04/2004. In present case under consideration, it is admitted fact that the assessee has been allotted equity shares under the BSE corporatization and Demutulization Scheme 2005 and same is evident from the balance sheet where under the head investment of Rs.10000 equity shares of BSE limited has been reflected. Once the assessee has been allotted equity shares of BSE limited under scheme then as per provisions of section 55(2)(ab), the cost of acquisition of trading and clearing right shall be deemed to be NIL hence depreciation cannot be allowed. Considering the same, disallowance made by AO is upheld and related ground of appeal is dismissed."

7.1. We find that the Coordinate Bench in ITA No.6098/M/2010 for AY 2007-08 in the case of M/s.Grishma Securities Pvt.Ltd. vs. ITO (supra), has held as under:-

"2. We have heard both the parties, perused the records and considered the matter carefully. The dispute is regarding allowability of depreciation on a stock exchange card. Under the provisions of section 32(1)(ii) depreciation is allowable on certain intangible assets such as know how, patents, copy rights and license etc. Earlier the Hon'ble High Court of Mumbai in case of Techno Shares and Stock Ltd. (supra) had held that stock exchange card was not covered under section 32(1)(ii) and therefore depreciation was not allowable. However the said judgment of the Bombay High Court has recently been considered by the Hon'ble Supreme Court in the same case and it was held that stock exchange card is akin to a license and therefore it is covered under section 32(1)(ii) and depreciation is allowable . We therefore respectfully following the said judgment of Hon'ble Supreme Court, set aside the order of CIT(A) and allowed the claim of the assessee."

7.2. Since the facts are identical and no change into the facts and circumstances has been pointed out by the ld.Sr.DR, we have no reason ITA No.1168/Ahd/2011 Edelweiss Stock Broking Ltd. vs. Addl.CIT Asst.Year-2006-07 to take a different view than taken by the Coordinate Bench in the case of M/s.Grishma Securities Pvt.Ltd.(supra). Thus, this ground of assessee's appeal is allowed.

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