Case Law Details
M/s Abhipra Capital Limited Vs. DCIT (Investigation) (Delhi High Court)
It is an accepted and admitted position that Rs. 5,00,000/- was paid by the appellant- assessee to acquire membership of the National Stock This was a fixed amount, which was paid at one time and is not an annual subscription fee. Without payment of the said amount, the appellant- assessee could not have acquired membership of the National Stock Exchange. On acquisition of membership, the appellant acquired right to trade in shares and act as a broker. Deposit of this amount was sine-qua-non for issue of and entitlement to the broker’s card. With the said card and having acquired membership, the assessee could enjoy benefits and privileges of a member which would enable it to carry on trade in said capacity.
Section 2 (14) of the Act defines “capital asset” as property of any kind held by the assessee, whether or not connected with the business or profession, but does not include any stock-in-trade, consumable stores or raw materials held for the purpose of business or profession. It is not the case of the appellant- assessee that the membership deposit was stock-in-trade, consumable or raw material for the purchase of business. The membership card was an asset or a property which the petitioner had acquired on non-refundable payment of Rs. 5,00,000/-. It was on acquisition of the said card/membership that the appellant could carry on business as a stock-broker, subject to other compliances including annual fee payment.
13. The appellant submits that the card/membership was non-transferable. Respondent-revenue, on the other hand, submits that the card/membership could be transferred as was held by the Supreme Court in Premium Global Securities Pvt. Ltd. & Ors. Vs. Securities & Exchange Board of India & (2015) 16 SCC 83. Right to transfer in the present facts, according to us, would not be the determinative test, for there can be capital assets on which there is restriction on transfer. Expenditure to acquire a capital asset would not become a revenue expense or consumable material because there are restrictions or strict stipulations on when transfer of capital asset can be made. There cannot be any doubt that one-time and lump-sum payment made to acquire membership right by a company or person engaged in business of trading in stocks, brings into existence an asset or an advantage of enduring nature. Membership card is not an addition to the stock-in-trade or consumable stock. This expenditure enabled the assessee to acquire an asset to earn income in that year and in future. It was a payment by the appellant assessee to acquire a source which enabled the appellant- assessee to do business. Membership brought into existence an advantage for all times. In the context in question, Rs 5,00,000/- represents money paid to procure a permanent right in the form of a license to carry on trade. This expenditure would not be revenue but capital in nature.
FULL TEXT OF HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:
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