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Showing contexts for: Infrastructure Development in Commissioner Of Income Tax vs S.Venkatasubramaniam on 27 September, 2006Matching Fragments
P.P.S.Janarthana Raja, J.
T.C.(A) Nos.67 & 68 of 2003:
The present appeals in T.C. (A) Nos.67 & 68 of 2003 are filed under Section 260A of the Income Tax Act, 1961 by the Revenue against the order passed in I.T.A. Nos.100/Mds/97 and 325/Mds/99 dated 03.01.2003 by the Income Tax Appellate Tribunal, Madras, 'A' Bench. On 17.10.2003, this Court admitted the appeal and formulated the following question of law.
"1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that the admission fee and contribution to infrastructure development fund paid by the assessee to become a member of the stock exchange is a revenue expenditure?"
ii) For the assessment year 1994-95, the assessee filed Return of income admitting a total income of Rs.1,49,830/-. The Assessing Officer completed the assessment on a total income of Rs.4,44,061/-. While completing the assessment, the Assessing Officer disallowed the claim of a sum of Rs.1,84,234/- paid to the Coimbatore Stock Exchange as infrastructure development charges. The Assessing Officer was of the view that the amount was paid for acquisition of the capital asset, namely, the Membership Card. Aggrieved by the order, the assessee filed an appeal to the C.I.T.(A). The said C.I.T.(A) allowed the appeal. Aggrieved by the order, the Revenue filed an appeal to the Appellate Tribunal. All the appeals relating to both the assessment years were taken up together and the same was dismissed by the Tribunal by a common order.
a) 276 ITR 567 (Cal.) in the case of Rajendra Kumar Bachhawat Vs. Commissioner of Income-tax.
b) 272 ITR 138 (Raj.) in the case of Satya Narain Modani Vs. Income-tax Officer and Another.
c) 263 ITR 368 (Raj.) in the case of Ravindra Kumar Jain Vs. Commissioner of Income-tax and Others.
d) 225 ITR 792 (SC) in the case of Punjab State Industrial Development Corporation Ltd. Vs. Commissioner of Income-tax.
4. Learned counsel for the assessee submitted that the admission fee and contribution to Infrastructure Development Fund is only to become a member of the Coimbatore Stock Exchange and the same cannot be treated as capital expenditure due to the fact that there is no acquisition of any asset. The Coimbatore Stock Exchange had sought to provide certain facilities to its members by developing infrastructure facilities for due conduct of the business of the stock broking and hence the amount paid towards Admission fee as well as Infrastructure Development Fund is only allowable as revenue expenditure. He further drew our attention to the respective Articles of the Memorandum of Stock Exchange that the Stock Exchange does not confer any ownership right in the Stock Exchange.
(b) The Council may levy and collect a service charge of 0.1% of the volume of transactions of each member subject to a minimum of Rs.1,000/- (Rupees one thousand only) per month or any higher amount to meet the data processing charges, administrative expenses and the capital expenditure on infrastructure development."
From a reading of the above, it is clear that a member has to pay a sum of Rs.1,00,000/- as well as contribution for Infrastructure Development for becoming a member. Further it is also stated that the member has to pay an annual subscription for Rs.2,000/-. Without making these payments, the assessee cannot become a member. The assessee is a stock-broker, without becoming a member, he cannot carry on the business. It is an admitted fact that the Stock Exchange allowed only their members to carry on business on the floor of the Stock Exchange. As per the Articles cited above, a member cannot carry on business unless he pays the admission fee, contribution to infrastructure development and annual fee. So, payment is necessary for the assessee to carry on the business. By becoming a member, the assessee is also entitled to the benefit of using all the facilities of the Stock Exchange. The assessee is not the owner of any of the assets in the Stock Exchange. It cannot, therefore be said that any enduring benefit had accrued to the assessee. It is also very difficult to say how the amount paid for becoming a member can possibly be regarded as a capital expenditure.