M/S.GEOJIT SECURITIES LIMITED, vs. THE ASST.COMMISSIONER OF INCOME TAX,

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ITA/424/2010HC KeralaKLHC01027116201022 January 2019Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON8 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the membership card of the Bombay Stock Exchange (BSE) is an intangible asset and depreciation can be claimed thereon. This finding is based on the binding declaration made by the Honourable Supreme Court in Techno Shares and Stocks Ltd. v. Commissioner of Income Tax (2010) 327 ITR 323 (SC). Consequently, the question of law is answered in favour of the assessee and against the Revenue. The orders of the lower authorities disallowing the claim for depreciation on the BSE membership for all the assessment years are set aside. The appeals are allowed, with parties to bear their own costs.

What were the facts?

The assessee, M/s Geojit Securities Limited (formerly Geojit Financial Services Ltd.), a company dealing in stocks and securities, claimed deduction for membership fees paid to the Bombay Stock Exchange (BSE) as depreciation under Section 32(1)(ii) of the Income Tax Act, 1961. The Assessing Officer and the Income Tax Appellate Tribunal (ITAT) disallowed this claim for the assessment years in question. The assessee filed appeals before the High Court of Kerala against the orders of the ITAT, Cochin Bench, dated March 25, 2009. The appeals were heard together.

What were the issues?

1. Whether the membership card of the Bombay Stock Exchange (BSE) is an intangible asset eligible for depreciation under Section 32(1)(ii) of the Income Tax Act, 1961? Assessee's contention: The assessee argued that the membership card of the BSE qualifies as an intangible asset and therefore, depreciation should be allowed on the membership fees paid. The assessee relied on the Supreme Court's decision in Techno Shares and Stocks Ltd. v. Commissioner of Income Tax. Revenue's contention: The Revenue contended that the membership fees are not eligible for depreciation. The judgment does not record specific arguments from the Revenue beyond their consistent disallowance in lower authorities.

Which sections of the Income-tax Act were involved?

Section 32(1)(ii)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY ,THE 22ND DAY OF JANUARY 2019 / 2ND MAGHA, 1940 ITA.No. 421 of 2010 AGAINST THE ORDER/JUDGMENT IN ITA 294/(COCH)2006 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 25-03-2009 APPELLANT/S:/APPELLANT/ASSESSEE: M/S GEOJIT SECURITIES LIMITED, (GEOJIT FINANCIAL SERVICES LTD.), 5TH FLOOR, FINANCE TOWERS,KALOOR,KOCHI-17. BY ADVS. SRI.E.K.NANDAKUMAR (SR.) SMT.PREETHA S.NAIR SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS SRI.P.GOPINATH (SR.) RESPONDENT/S:/RESPONDENT/REVENUE: THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1(2), ERNAKULAM. BY ADVS. SRI.JOSE JOSEPH, SC, FOR INCOME TAX SRI.P.K.RAVINDRANATHA MENON, SR. COUNSEL, GOI (TAXES) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 22.01.2019, ALONG WITH ITA.423/2010 AND ITA.424/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY ,THE 22ND DAY OF JANUARY 2019 / 2ND MAGHA, 1940 ITA.No. 423 of 2010 AGAINST THE ORDER/JUDGMENT IN ITA 296(COCH)/2006 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 25-03-2009 APPELLANT/S:/APPELLANT/ASSESSEE: M/S. GEOJIT SECURITIES LTD. (GEOJIT FINANCIAL SERVICES LTD.) 5TH FLOOR,, FINANCE TOWERS, KALOOR, KOCHI-17. BY ADVS. SRI.E.K.NANDAKUMAR (SR.) SMT.PREETHA S.NAIR SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS SRI.P.GOPINATH (SR.) RESPONDENT/S:/RESPONDENT/REVENUE: THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1 (2), ERNAKULAM. BY ADVS. SRI.P.K.RAVINDRANATHA MENON, SR.COUNSEL, GOI (TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 22.01.2019, ALONG WITH ITA.421/2010 AND ITA.424/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY ,THE 22ND DAY OF JANUARY 2019 / 2ND MAGHA, 1940 ITA.No. 424 of 2010 AGAINST THE ORDER/JUDGMENT IN ITA 295(COCH)/2006 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 25.3.2009 APPELLANT/S:/APPELLANT/ASSESSEE: M/S.GEOJIT SECURITIES LIMITED, (GEOJIT FINANCIAL SERVICES LTD) 5TH FLOOR, FINANCE, TOWERS, KALOOR, KOCHI-17. BY ADVS. SRI.E.K.NANDAKUMAR (SR.) SMT.PREETHA S.NAIR SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS SRI.P.GOPINATH (SR.) RESPONDENT/S:/RESPONDENT/REVENUE: THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE 1(2), ERNAKULAM. BY ADVS. SRI.JOSE JOSEPH, SC, FOR INCOME TAX SRI.P.K.RAVINDRANATHA MENON, SR.COUNSEL, GOI (TAXES) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 22.01.2019, ALONG WITH ITA.421/2010 AND ITA.423/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- ITA Nos.421, 423 and 424 of 2010 ------------------------------------------- Dated this the 22nd day of January, 2019

J U D G M E N T Vinod Chandran, J.

The assessee is a Company incorporated, inter alia, with the object of dealing in stocks and securities. The assessee had taken membership in the Bombay Stock Exchange (BSE). The membership fees was sought to be claimed as deduction under Section 32(1) (ii) of the Income Tax Act, 1961 as depreciation. The lower authorities consistently disallowed the claim for all the three assessment years. As of now, the finding of the lower authorities stands vitiated by the reason of the binding declaration made by the Honourable Supreme Court in (2010) 327 ITR 323 (SC) [Techno Shares and Stocks Ltd. v. Commissioner of Income Tax].

The Honourable Supreme Court had held that the membership card of the BSE is an intangible asset and depreciation can be claimed thereon. The issue raised in the above cases is also with respect to the membership taken in the BSE. Hence, the question of -5- law has to be answered in favour of the assessee and against the Revenue. The orders of the lower authorities for all the assessment years would stand set aside on that aspect. In view of the above, these ITAs would stand allowed leaving the parties to suffer their respective costs. K.VINOD CHANDRAN JUDGE ASHOK MENON JUDGE -6-

Appendix — schedule of exhibits
APPENDIX OF ITA 421/2010 APPELLANT'S/S EXHIBITS: ANNEXURE-A TRUE COPY OF THE ORDER FOR THE YEAR 2001-02 UNDER SECTION 154 DATED 7/9/2005 ISSUED BY THE RESPONDENT TO THE APPELLANT. ANNEXURE-B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 23/2/2006 ISSUED TO THE APPELLANT. ANNEXURE-C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 25/3/2009 ISSUED TO THE APPELLANT. ANNEXURE-D TRUE COPY OF THE ORDER IN MISCELLANEOUS PETITION DATED 9/9/2009 [True Copy] jg ITAs421,423&424/10 -7- APPENDIX OF ITA 423/2010 APPELLANT'S/S EXHIBITS: ANNEXURE-A TRUE COPY OF THE ORDER FOR THE YEAR 2003-04 UNDER SECTION 143(3) DATED 26/8/2005 ISSUED BY THE RESPONDENT TO THE APPELLANT ANNEXURE-B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 23/2/2006 ISSUED TO THE APPELLANT. ANNEXURE-C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 25/3/2009 ISSUED TO THE APPELLANT. ANNEXURE-D TRUE COY OF THE ORDER IN MISCELLANEOUS PETITION DATED 9/9/2009 [True Copy] jg ITAs421,423&424/10 -8- APPENDIX OF ITA 424/2010 APPELLANT'S/S EXHIBITS: ANNEXURE-A TRUE COPY OF THE ORDER FOR THE YEAR 2002-03 UNDER SECTION 154 DATED 20/9/2005 ISSUED BY THE RESPONDENT TO THE APPELLANT. ANNEXURE-B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 23/2/2006 ISSUED TO THE APPELLANT. ANNEXURE-C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 25/3/2009 ISSUED TO THE APPELLANT. ANNEXURE-D TRUE COPY OF THE ORDER IN MISCELLANEOUS PETITION DATED 9/9/2009 [True Copy] jg

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