Nearly 100 stockbroker members of the Bombay Stock Exchange (BSE) would move the Supreme Court (SC) to save a combined tax liability of around Rs 125 crore, which they have claimed as depreciation on their stock exchange membership card.
Some of the top players who have been claiming a 25 per cent depreciation benefit using the written down value method on the BSE membership card include the brokerage arm of Citi Group, ICICI, Morgan Stanley, Enam Securities, Techno Shares and Edelweiss Capital, among others.
When asked, an executive at a large brokerage said the brokers would approach the Supreme Court over the next couple of weeks.
Brokers had converted their member cards to corporate cards in 1997, after the government gave a one-time exemption from capital gains tax to encourage speedy corporatisation of the broking business. Before BSE was de-mutualised in 2008, the maximum value of an exchange membership card was Rs 2.25 crore and brokers claimed depreciation on this every year, which is debited to their profit and loss account.
Last week, the High Court here had ruled in favour of the income tax (I-T) department and stated in its order that the BSE broker card is not an intangible asset, eligible for depreciation.
Stockbrokers argued it was, as it has been used as a licence to conduct trading activity, on which depreciation can be claimed under section 32 of the I-T Act, as amended in the year 2000. The section introduced, with effect from the assessment year 1999-2000, “intangible assets” viz “know-how, patents, copyrights, trademarks, licences, franchises, or any other business or commercial right of similar nature” in the eligible category of depreciable assets.
The High Court, however, says BSE card is not a “business or commercial right”, because what section 32(1)(ii) says is “business or commercial rights” relating to intellectual properties and not all categories of business or commercial rights. Since a BSE card is not a business or commercial right relating to intellectual property rights, depreciation cannot be allowed on it,” said the court in its order.
