Membership Fees Paid to Stock Exchange Allowed as Capital Expenditure

BGSE Financials Ltd. Vs DCIT (ITAT Banglore)

The issue under consideration is whether the sum of admission fees paid to stock exchange will be allowed as capital expenditure?

ITAT states that, ‘Capital expenditure’ is closely akin to the concept of securing something, whether tangible or intangible property, or corporeal or incorporeal rights, which confer lasting or enduring benefit to the enterprise. An expense made by a business to derive a long-term benefit is, therefore, generally treated as capital expenditure. The cases relied on by the learned A.R., had proceeded on the basis that assessee on incurring the expenditure for acquiring membership of a stock exchange has not become owner of any asset and therefore cannot be said that any enduring benefit had accrued to the assessee. Whereas in light of Hon’ble Supreme Court judgement in the case of Techno Shares and Stocks Limited (supra) membership of stock exchange is to be treated as a capital asset. Therefore, CIT(A) has rightly treated the admission fee as a membership of the stock exchange capital asset and allowed alternative plea of assessee that depreciation is to be granted on the same. Hence, ITAT see no reason to interfere with the order of CIT(A) and  ITAT affirm the same. It is ordered accordingly. In the result, the appeal filed by the assessee is dismissed.

FULL TEXT OF THE ITAT JUDGEMENT

This appeal at the instance of assessee is directed against CIT(A) Order dated 4.9.2018. The relevant assessment year is 2013-14.

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