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2007] 291 ITR 193 [2007] 165 Taxman 163 (Madras) HIGH COURT OF MADRAS Commissioner of Income-tax v. S. Venkatasubramaniam* R. BALASUBRAMANIAN AND P.P.S. JANARTHANA RAJA, JJ. TAX CASE (APPEAL) NOS. 67 AND 68 OF 2003 SEPTEMBER 27, 2006 Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment years 1993-94 and 1994-95 - Whether admission fee and contribution to infrastructure development fund paid by assessee to become a member of particular stock exchange is a revenue expenditure - Held, yes FACTS The assessee incurred expenditure towards the admission fee of stock exchange as well as contribution to infrastructure development charges. By incurring that expenditure, the assessee had acquired right of trading in shares and securities at the terminals of stock exchange. The assessee claimed said expenditure as revenue expenditure. The Assessing Officer disallowed the said expenditure on ground that it was incurred for the acquisition of a capital asset namely, membership card. On appeal, the Commissioner (Appeals) allowed the appeal. On appeal by the revenue, the Tribunal dismissed the same. On appeal : HELD As per the articles of association of stock exchange, a member cannot carry on business unless he pays the admission fee, contribution to infrastructure development and annual fee. So, the payment was necessary for the assessee, in the instant case, to carry on the business. By becoming a member, the assessee was also entitled to the benefit of using all the facilities of the stock exchange. The assessee was not the owner of any of the assets in the stock exchange. It could not, therefore, be said that any enduring benefit had accrued to the assessee. It also could not be said that the amount paid for becoming a member could possibly be regarded as a capital expenditure. [Para 7] In the instant case, no new assets had been created and there was no addition to or expansion of the profit-making apparatus of the assessee. Said payments were like licence fee and were made only for carrying on the business. If any payment is made for the purpose of running the business effectively and efficiently, it is only a revenue…

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