H. KAPADIA,J. Heard learned counsel on both sides.

Leave granted.

Assessee(s) is a cooperative credit society.

During the relevant assessment years in question, it had surplus funds which the assessee(s) invested in short-term deposits with the Banks and in Government securities.

On 2/- - 2 - such investments, interests accrued to the assessee(s).

Assessee(s) provides credit facilities to its members and also markets the agricultural produce of its members.

The substantial question of law which arises in this batch of civil appeals is - Whether such interest income would qualify for deduction as business income under Section 80P(2)(a)(i) of the Income Tax Act, 1961? According to the impugned judgement, which affirms the decision of the Income Tax Appellate Tribunal Tribunal, for short, such interest income would fall under the Head Income from other sources under Section 56 and not under Section 28 of the Income Tax Act, 1961 Act, for short, and, consequently, the assessee- Society would not be entitled to deduction under Section 80P(2)(a)(i) of the Act.

The bunch of civil appeals filed by the assessee-Society concerns Assessment Years 1991-1992 to 1999-2000 excluding Assessment Year 1995-1996 however, the lead matter is civil appeal arising out of S.L.P. (C) No.7572 of 2009 which relates to Assessment Year 1991- 1992.

The assessee-Society was assessed to tax as a cooperative society.

The assessee is the appellant in all eight civil appeals.

For all the above Assessment Years 1991-1992 to 1999-2000 except Assessment Year 1995- 1996, assessee(s) filed its Returns disclosing income from business, i.e., marketing of agricultural produce of its members and providing credit facilities to them.

Assessee(s) also filed its Profits and Loss Accounts and its balance-sheets along with its Returns.

In respect of 3/- - 3 - above-mentioned interest income, assessee(s) claimed deduction under Section 80P(2)(a)(i) of the Act.

The assessment(s) for the afore-stated period stood re-opened by issue of notice(s) under Section 148 of the Act.

In this case, we are only concerned with interest income on short-term Bank deposits and securities.

On the basis of the balance-sheets for the relevant assessment years, under instructions from the Assessing Officer, assessee(s) submitted a chart to the Assessing Officer giving break-up of assets and liabilities.

We re-produce hereinbelow the said chart See Annexure B under the caption Liabilities: LIABILITIES Asstt.

Capital Asami A c Deposits, Other Total (3), (4) Year Reserve Fund Purchasers A c Loans, Interest Liabilities (5) Other Funds Payable Expenditure Profits 1 2 3 4 5 6 1991-92 79,200,553.00 39,341,647.00 45,772,398.00 3,948,442.00 89,176,115.00 1992-93 97,769,923.00 41,684,890.00 59,071,490.00 902,856.00 101,659,132.00 1993-94 116,354,655.00 37,674,924.00 68,927,247.00 2,893,519.00 109,494,694.00 1994-95 133,817,620.00 42,882,786.00 86,462,118.00 1,440,446.00 142,886,414.00 1995-96 156,948,290.00 46,898,160.00 107,201,490.00 4,189,923.00 158,289,580.00 1996-97 180,468,526.00 53,274,684.00 125,289,995.00 3,568,644.00 182,133,326.00 1997-98 211,686,266.00 52,510,175.00 142,529,130.00 46,694,814.00 241,734,125.00 1998-99 253,295,055.00 66,074,107.00 175,757,230.00 17,342,956.00 259,174,281.00 1999-00 269,520,510.00 124,571,325.00 209,202,203.00 25,199,555.00 358,973,088.00 The Assessing Officer held, on the facts and circumstances of these cases, that the interest income which the assessee(s) had disclosed under the Head Income from business was liable to be taxed under the Head Income from other sources.

In this connection, the 4/- - 4 - Assessing Officer held that the assessee-Society had invested the surplus funds as, and by way of, investment by an ordinary investor, hence, interest on such investment has got to be taxed under the Head Income from other sources.

Before the Assessing officer, it was argued by the assessee(s) that it had invested the funds on short-term basis as the funds were not required immediately for business purposes and, consequently, such act of investment constituted a business activity by a prudent businessman therefore, such interest income was liable to be taxed under Section 28 and not under Section 56 of the Act, and, consequently, the assessee(s) was entitled to deduction under Section 80P(2)(a)(i) of the Act.

This argument was rejected by the Assessing Officer as also by the Tribunal and the High Court, hence, these civil appeals have been filed by the assessee(s).

It was the case of the assessee(s) before us that the assessee(s) is a cooperative credit society.

Its business is to provide credit facilities to its members and to market the agricultural produce of its members.

According to the assessee(s), its activity constituted eligible activity under Section 80P(2)(a)(i) of the Act, hence, it was entitled to the benefit of deduction from its gross total income.

In this connection, it was urged that, under Section 80P(2) of the Act, the whole of the amount of business profits attributable to any one of the enumerated activities is entitled to deduction.

According to the assessee(s), one need not go by the source head of such interest income because no sooner 5/- - 5 - interest income accrued to the assessee(s) on above- mentioned specified deposits securities, it became business income attributable to the activity carried on by the assessee(s) by providing credit facilities to its members or marketing of agricultural produce of its members and no sooner such interest income falls under the head business profits attributable to one or more of such eligible activities, such interest income became eligible for deduction under the said section.

The assessee(s) further contended, before us, that, under Regulations 23 and 28 read with Sections 57 and 58 of the Karnataka Cooperative Societies Act, 1959, a statutory obligation was imposed on cooperative credit societies to invest its surplus funds in specified securities and, in view of such statutory obligation, the above-mentioned interest income derived from short-term deposits and securities must be considered as income derived by the assessee(s) from its business activities.

In the alternative, it was submitted that, even assuming for the sake of argument that such interest income is held to be covered by Section 56 of the Act under the head Income from other sources, even then the assessee-Society was entitled to the benefit of Section 80P(2)(a)(i) of the Act.

In this connection, learned counsel for the assessee(s) submitted, placing reliance on numerous judgements, that the source or head of income was irrelevant for deciding the question as to whether a given item is eligible for deduction under Section 80P of the Act.

According to the assessee(s), once interest income 6/- - 6 - accrues on specified investments, particularly when a local enactment makes it statutorily incumbent on the society to invest in specified investments, the interest income is automatically eligible for deduction irrespective of the source or head under which such income would fall.

In this connection, learned counsel for the assessee(s) submitted that one needs to compare the language of Section 80P(2)(a)(i) and (iii) of the Act with Explanation (baa) to Section 80HHC, the language used in Section 80HHD(3) and the words used in Section 80HHE(5) of the Act.

In this connection, it was urged that there is a wide contrast in the language between Section 80P(2)(a) on one hand and the language used in Section 80HHC read with Explanation (baa), Section 80HHD(3) and Section 80HHE(5) as also the language used in Sections 72 and 32AB of the Act.

According to the assessee(s), if one keeps this contrast in mind, it is clear that the concept of head of income or source of income will not apply to the provisions of Section 80P(2) of the Act because wherever Parliament intended to emphasise the applicability of such concept, it has expressly so stated in the relevant section.

According to the assessee(s), by way of illustration, under Explanation (baa) to Section 80HHC or under Section 80HHD(3) or under Section 80HHE(5), etc., the words used are, profits of the business means the profits of the business as computed under the head Profits and gains of business.

Therefore, according to the assessee(s), when such words do not find place in Section 80P(2) of the Act, it is clear that the concept of 7/- - 7 - source of income or head of income is not inbuilt in Section 80P(2) of the Act and, consequently, such a concept cannot be read into the said section.

As stated above, according to the assessee(s), no sooner surplus funds are invested in specified securities, interest income from such investment is automatically eligible for deduction under Section 80P(2)of the Act.

In order to determine the issue involved in these civil appeals, we need to re-produce hereinbelow the relevant provision of Section 80P of the Act, as it stood at the material time.

It reads thus: Deduction in respect of income of co- operative societies.

80P.(1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub- section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub- section (2), in computing the total income of the assessee.

2 The sums referred to in sub-section (1) shall be the following, namely:-- a in the case of a co-operative society engaged in-- i carrying on the business of banking or providing credit facilities to its members, or ii a cottage industry, or iii the marketing of the agricultural produce of its members, or 8/- - 8 - iv the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or v the processing, without the aid of power, of the agricultural produce of its members, or vi the collective disposal of the labour of its members, or vii fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities.

At the outset, an important circumstance needs to be highlighted.

In the present case, the interest held not eligible for deduction under Section 80P(2)(a)(i) of the Act is not the interest received from the members for providing credit facilities to them.

What is sought to be taxed under Section 56 of the Act is the interest income arising on the surplus invested in short- term deposits and securities which surplus was not required for business purposes.

Assessee(s) markets the produce of its members whose sale proceeds at times were retained by it.

In this case, we are concerned with the tax treatment of such amount.

Since the fund created by such retention was not 9/- - 9 - required immediately for business purposes, it was invested in specified securities.

The question, before us, is - whether interest on such deposits securities, which strictly speaking accrues to the members account, could be taxed as business income under Section 28 of the Act? In our view, such interest income would come in the category of Income from other sources, hence, such interest income would be taxable under Section 56 of the Act, as rightly held by the Assessing Officer.

In this connection, we may analyze Section 80P of the Act.

This section comes in Chapter VI-A, which, in turn, deals with Deductions in respect of certain Incomes.

The Headnote to Section 80P indicates that the said section deals with deductions in respect of income of cooperative Societies.

Section 80P(1), inter alia, states that where the gross total income of a cooperative Society includes any income from one or more specified activities, then such income shall be deducted from the gross total income in computing the total taxable income of the assessee-Society.

An income, which is attributable to any of the specified activities in Section 80P(2) of the Act, would be eligible for deduction.

The word income has been defined under Section 2(24)(i) of the Act to include profits and gains.

This sub-section is an inclusive provision.

The Parliament has included specifically business profits into the definition of the word income.

Therefore, we are required to give a precise meaning to the words profits and gains of business mentioned in Section 80P(2) of the Act.

In the present case, as stated above, 10/- - 10 - assessee-Society regularly invests funds not immediately required for business purposes.

Interest on such investments, therefore, cannot fall within the meaning of the expression profits and gains of business.

Such interest income cannot be said also to be attributable to the activities of the society, namely, carrying on the business of providing credit facilities to its members or marketing of the agricultural produce of its members.

When the assessee-Society provides credit facilities to its members, it earns interest income.

As stated above, in this case, interest held as ineligible for deduction under Section 80P(2)(a)(i) is not in respect of interest received from members.

In this case, we are only concerned with interest which accrues on funds not required immediately by the assessee(s) for its business purposes and which have been only invested in specified securities as investment.

Further, as stated above, assessee(s) markets the agricultural produce of its members.

It retains the sale proceeds in many cases.

It is this retained amount which was payable to its members, from whom produce was bought, which was invested in short-term deposits securities.

Such an amount, which was retained by the assessee-Society, was a liability and it was shown in the balance-sheet on the liability-side.

Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i) of the Act or in Section 80P(2)(a)(iii) of the Act.

Therefore, looking to the facts and circumstances of this case, we are of the view that the 11/- - 11 - Assessing Officer was right in taxing the interest income, indicated above, under Section 56 of the Act.

An alternative submission was advanced by the assessee(s) stating that, if interest income in question is held to be covered by Section 56 of the Act, even then, the assessee-Society is entitled to the benefit of Section 80P(2)(a)(i) of the Act in respect of such interest income.

We find no merit in this submission.

Section 80P(2)(a)(i) of the Act cannot be placed at par with Explanation (baa) to Section 80HHC, Section 80HHD(3) and Section 80HHE(5) of the Act.

Each of the said sections has to be interpreted in the context of its subject-matter.

For example, Section 80HHC of the Act, at the relevant time, dealt with deduction in respect of profits retained for export business.

The scope of Section 80HHC is, therefore, different from the scope of Section 80P of the Act, which deals with deduction in respect of income of cooperative Societies.

Even Explanation (baa) to Section 80HHC was added to restrict the deduction in respect of profits retained for export business.

The words used in Explanation (baa) to Section 80HHC, therefore, cannot be compared with the words used in Section 80P of the Act which grants deduction in respect of the whole of the amount of profits and gains of business.

A number of judgements were cited on behalf of the assessee(s) in support of its contention that the source was irrelevant while construing the provisions of Section 80P of the Act.

We find no merit because all the judgements cited were cases relating to Cooperative Banks 12/- - 12 - and assessee-Society is not carrying on Banking business.

We are confining this judgement to the facts of the present case.

To say that the source of income is not relevant for deciding the applicability of Section 80P of the Act would not be correct because we need to give weightage to the words the whole of the amount of profits and gains of business attributable to one of the activities specified in Section 80P(2)(a) of the Act.

An important point needs to be mentioned.

The words the whole of the amount of profits and gains of business emphasise that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the Society.

In this particular case, the evidence shows that the assessee- Society earns interest on funds which are not required for business purposes at the given point of time.

Therefore, on the facts and circumstances of this case, in our view, such interest income falls in the category of Other Income which has been rightly taxed by the Department under Section 56 of the Act.

Apart from the substantial question of law which we have answered, assessee-Society has challenged the re-opening of assessment under Section 148 of the Act.

In this connection, it was urged on behalf of the assessee(s) that, for the relevant assessment years in question, the Assessing Officer was required to obtain prior approval of the Joint Commissioner of Income Tax before issuance of notice under Section 148 of the Act.

According to the assessee(s), the proposal for re-opening 13/- - 13 - was made on 31st May, 2001, it was not sent through fax to the office of the Additional Commissioner of Income Tax, Panaji, and the fax report indicates the time of 5.18 p.m., which establishes the fact that service of notice on 31st May, 2001, on the assessee(s) was done prior to the sending of fax for approval.

According to the assessee(s), the approval was given by the Additional Commissioner of Income Tax on 8th June, 2001.

The notice under Section 148 of the Act was served on 31st May, 2001, i.e., prior to the approval of the Additional Commissioner of Income Tax.

In the circumstances, it was urged that the notice under Section 148 of the Act was invalid and consequential re-assessment under Section 147 read with Section 144A of the Act was bad in law.

We find no merit in this argument.

At the outset, we may state that the point raised on validity of the notice under Section 148 of the Act essentially concerns factual aspect.

The Tribunal is the final fact finding Authority under the Income Tax Act.

It has given a finding of fact that, though the written communication of the sanction, which has no prescribed format, was received by the Assessing Officer on 8th June, 2001, yet, it cannot be said that sanction was not accorded prior to 31st May, 2001.

The Tribunal has recorded a finding of fact that there was a detailed correspondence between the concerned officers prior to 31st May, 2001, in the context of re-opening of assessment.

It may also be mentioned that there is a vital difference between grant of sanction and communication of such sanction.

As stated by the Tribunal, no particular form has been prescribed in the 14/- - 14 - matter of grant of sanction.

For the afore-stated reason, the Tribunal came to the conclusion that approval sanction for re-opening of assessment in terms of Section 148 of the Act read with Section 151 existed even prior to 31st May, 2001.

We see no reason to interfere with this finding of fact given by the Tribunal.

In this matter, one question advanced by the assessee(s) before the Authorities below has remained un-answered.

That question is as follows: Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the income by way of interest on deposits held with scheduled banks, bonds and other securities was chargeable to tax under section 56 under the head Income from other sources without allowing any deduction in respect of cost of funds and proportionate administrative and other expenses under section 57? The above question requires an answer.

It involves interpretation of Section 56 and Section 57 of the Act.

It also involves applicability of the said sections to the facts of the present case.

We, accordingly, remit the said question to the High Court for consideration in accordance with law.

Subject to what is stated above, these civil appeals filed by the assessee(s) are dismissed with no order as to costs.

J. H. KAPADIA J. AFTAB ALAM New Delhi, February 08, 2010.

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 1622 OF 2010 (Arising out of S.L.P. (C) Number7572 of 2009) M section The Totgars Cooperative Sale Society Limited Appellant(s) Versus Income Tax Officer, Karnataka Respondent(s) W I T H Civil Appeal Number1623/2010 S.L.P. (C) Number10489 of 2009 Civil Appeal Number1624/2010 S.L.P. (C) Number10490 of 2009 Civil Appeal Number1625/2010 S.L.P. (C) Number10491 of 2009 Civil Appeal Number1626/2010 S.L.P. (C) Number10492 of 2009 Civil Appeal Number1627/2010 S.L.P. (C) Number10494 of 2009 Civil Appeal Number1628/2010 S.L.P. (C) Number10497 of 2009 Civil Appeal Number1629/2010 S.L.P. (C) Number10498 of 2009 J U D G M E N T H. KAPADIA,J. Heard learned counsel on both sides.

Leave granted.

Assessee(s) is a cooperative credit society.

During the relevant assessment years in question, it had surplus funds which the assessee(s) invested in short-term deposits with the Banks and in Government securities.

On 2/- - 2 - such investments, interests accrued to the assessee(s).

Assessee(s) provides credit facilities to its members and also markets the agricultural produce of its members.

The substantial question of law which arises in this batch of civil appeals is - Whether such interest income would qualify for deduction as business under Section 80P(2)(a)(i) of the Income Tax Act, 1961? According to the impugned judgement, which affirms the decision of the Income Tax Appellate Tribunal Tribunal, for short, such interest income would fall under the Head Income from other sources under Section 56 and not under Section 28 of the Income Tax Act, 1961 Act, for short, and, consequently, the assessee- Society would not be entitled to deduction under Section 80P(2)(a)(i) of the Act.

The bunch of civil appeals filed by the assessee- Society concerns Assessment Years 1991-1992 to 1999-2000 excluding Assessment Year 1995-1996 however, the lead matter is civil appeal arising out of S.L.P. (C) Number7572 of 2009 which relates to Assessment Year 1991-1992.

The assessee-Society was assessed to tax as a cooperative society.

The assessee is the appellant in all eight civil appeals.

For all the above Assessment Years 1991-1992 to 1999-2000 except Assessment Year 1995-1996, assessee(s) filed its Returns disclosing income from business, i.e., marketing of agricultural produce of its members and providing credit facilities to them.

Assessee(s) also filed its Profits and Loss Accounts and its balance-sheets along with its Returns.

In respect of 3/- - 3 - above-mentioned interest income, assessee(s) claimed deduction under Section 80P(2)(a)(i) of the Act.

The assessment(s) for the afore-stated period stood re-opened by issue of notice(s) under Section 148 of the Act.

In this case, we are only concerned with interest income on short-term Bank deposits and securities.

On the basis of the balance-sheets for the relevant assessment years, under instructions from the Assessing Officer, assessee(s) submitted a chart to the Assessing Officer giving break-up of assets and liabilities.

We re-produce hereinbelow the said chart See Annexure B under the caption Liabilities: LIABILITIES Asstt.

This argument was rejected by the Assessing Officer as also by the Tribunal and the High Court, hence, these civil appeals have been filed by the assessee(s).

It was the case of the assessee(s) before us that the assessee(s) is a cooperative credit society.

Its business is to provide credit facilities to its members and to market the agricultural produce of its members.

According to the assessee(s), its activity constituted eligible activity under Section 80P(2)(a)(i) of the Act, hence, it was entitled to the benefit of deduction from its gross total income.

In this connection, it was urged that, under Section 80P(2) of the Act, the whole of the amount of business profits attributable to any one of the enumerated activities is entitled to deduction.

As stated above, according to the assessee(s), no sooner surplus funds are invested in specified securities, interest income from such investment is automatically eligible for deduction under Section 80P(2)of the Act.

In order to determine the issue involved in these civil appeals, we need to re-produce hereinbelow the relevant provision of Section 80P of the Act, as it stood at the material time.

It reads thus: Deduction in respect of income of co- operative societies.

At the outset, an important circumstance needs to be highlighted.

In the present case, the interest held not eligible for deduction under Section 80P(2)(a)(i) of the Act is not the interest received from the members for providing credit facilities to them.

What is sought to be taxed under Section 56 of the Act is the interest income arising on the surplus invested in short-term deposits and securities which surplus was not required for business purposes.

Assessee(s) markets the produce of its members whose sale proceeds at times were retained by it.

In this case, we are concerned with the tax treatment of such amount.

Since the fund created by such retention was not 9/- - 9 - required immediately for business purposes, it was invested in specified securities.

In this connection, we may analyze Section 80P of the Act.

This section comes in Chapter VI-A, which, in turn, deals with Deductions in respect of certain Incomes.

The Headnote to Section 80P indicates that the said section deals with deductions in respect of income of cooperative Societies.

An income, which is attributable to any of the specified activities in Section 80P(2) of the Act, would be eligible for deduction.

The word income has been defined under Section 2(24)(i) of the Act to include profits and gains.

This sub-section is an inclusive provision.

The Parliament has included specifically business profits into the definition of the word income.

Therefore, we are required to give a precise meaning to the words profits and gains of business mentioned in Section 80P(2) of the Act.

In the present case, as stated above, 10/- - 10 - assessee-Society regularly invests funds not immediately required for business purposes.

Interest on such investments, therefore, cannot fall within the meaning of the expression profits and gains of business.

When the assessee-Society provides credit facilities to its members, it earns interest income.

As stated above, in this case, interest held as ineligible for deduction under Section 80P(2)(a)(i) is not in respect of interest received from members.

In this case, we are only concerned with interest which accrues on funds not required immediately by the assessee(s) for its business purposes and which have been only invested in specified securities as investment.

Further, as stated above, assessee(s) markets the agricultural produce of its members.

It retains the sale proceeds in many cases.

It is this retained amount which was payable to its members, from whom produce was bought, which was invested in short-term deposits securities.

Such an amount, which was retained by the assessee-Society, was a liability and it was shown in the balance-sheet on the liability-side.

Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i) of the Act or in Section 80P(2)(a)(iii) of the Act.

Therefore, looking to the facts and circumstances of this case, we are of the view that the 11/- - 11 - Assessing Officer was right in taxing the interest income, indicated above, under Section 56 of the Act.

We find no merit in this submission.

Section 80P(2)(a)(i) of the Act cannot be placed at par with Explanation (baa) to Section 80HHC, Section 80HHD(3) and Section 80HHE(5) of the Act.

Each of the said sections has to be interpreted in the context of its subject- matter.

For example, Section 80HHC of the Act, at the relevant time, dealt with deduction in respect of profits retained for export business.

The scope of Section 80HHC is, therefore, different from the scope of Section 80P of the Act, which deals with deduction in respect of income of cooperative Societies.

Even Explanation (baa) to Section 80HHC was added to restrict the deduction in respect of profits retained for export business.

The words used in Explanation (baa) to Section 80HHC, therefore, cannot be compared with the words used in Section 80P of the Act which grants deduction in respect of the whole of the amount of profits and gains of business.

A number of judgements were cited on behalf of the assessee(s) in support of its contention that the source was irrelevant while construing the provisions of Section 80P of the Act.

We find no merit because all the judgements cited were cases relating to Cooperative Banks 12/- - 12 - and assessee-Society is not carrying on Banking business.

We are confining this judgement to the facts of the present case.

An important point needs to be mentioned.

In this particular case, the evidence shows that the assessee- Society earns interest on funds which are not required for business purposes at the given point of time.

Therefore, on the facts and circumstances of this case, in our view, such interest income falls in the category of Other Income which has been rightly taxed by the Department under Section 56 of the Act.

Apart from the substantial question of law which we have answered, assessee-Society has challenged the re- opening of assessment under Section 148 of the Act.

According to the assessee(s), the approval was given by the Additional Commissioner of Income Tax on 8th June, 2001.

The notice under Section 148 of the Act was served on 31st May, 2001, i.e., prior to the approval of the Additional Commissioner of Income Tax.

In the circumstances, it was urged that the notice under Section 148 of the Act was invalid and consequential re-assessment under Section 147 read with Section 144A of the Act was bad in law.

We find no merit in this argument.

At the outset, we may state that the point raised on validity of the notice under Section 148 of the Act essentially concerns factual aspect.

The Tribunal is the final fact finding Authority under the Income Tax Act.

The Tribunal has recorded a finding of fact that there was a detailed correspondence between the concerned officers prior to 31st May, 2001, in the context of re-opening of assessment.

It may also be mentioned that there is a vital difference between grant of sanction and communication of such sanction.

As stated by the Tribunal, no particular form has been prescribed in the 14/- - 14 - matter of grant of sanction.

For the afore-stated reason, the Tribunal came to the conclusion that approval sanction for re-opening of assessment in terms of Section 148 of the Act read with Section 151 existed even prior to 31st May, 2001.

We see no reason to interfere with this finding of fact given by the Tribunal.

In this matter, one question advanced by the assessee(s) before the Authorities below has remained un- answered.

It involves interpretation of Section 56 and Section 57 of the Act.

It also involves applicability of the said sections to the facts of the present case.

We, accordingly, remit the said question to the High Court for consideration in accordance with law.

Subject to what is stated above, these civil appeals filed by the assessee(s) are dismissed with no order as to costs.

J. H. KAPADIA J. AFTAB ALAM New Delhi, February 08, 2010.

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H. KAPADIA, CJI Leave granted.

In this batch of cases the question which arises for determination is: whether BSE Membership Card can be considered an intangible asset for the purpose of depreciation under Section 32(1)(ii) of the Income Tax Act, 1961 (for short the 1961 Act)? Facts in M s Techno Shares Stocks Limited Lead matter In this case, we are concerned with the Assessment Years 1999-2000, 2000-2001, 2001-2002 and 2002-2003.

The assessee company filed its Return of income for the Assessment Year 1999-2000 disclosing a loss of Rs. 10,77,276/-.

The return was processed under Section 143(1) on November 8, 2000.

The case stood reopened under Section 147 and Notice u s 148 stood issued to the assessee on 16.7.2002.

The assessee filed its return of income under protest.

The assessee filed its return of income pursuant to the Notice u s 148 once again declaring loss of Rs. 10,77,276/-, the same as was in the original return of income.

The main reason for reopening of assessment under Section 147 was the claim of depreciation by the assessee on BSE membership card amounting to Rs. 23,65,000/-.

The claim of depreciation of the assessee was based on Section 32(1)(ii) which stood inserted by Finance (No. 2) Act, 1998 w.e.f. 1.4.1999.

However, the said Section deals with claim for depreciation of items acquired on or after 1.4.1998.

The assessee claimed before the A.O. that the BSE membership card is a licence or business or commercial right of similar nature u s 32(1)(ii) and is, therefore, an intangible asset eligible for depreciation u s 32(1)(ii) which submission was not accepted by the O. It was held that membership is only a personal permission which is non-transferable and which does not devolve automatically on legal heirs and, therefore, it is not a privately owned asset.

That, there is no ownership of an asset and that what ultimately can be sold is only a Right to Nomination.

Further, according to the A.O., in the case of BSE membership, there is no obsolescence, wear and tear or diminution in value by its use, hence, the assessee was not entitled to claim depreciation u s 32(1)(ii).

This decision of the A.O. stood affirmed by I.T. (A) in the appeal filed by the assessee.

Aggrieved by the said decision of CIT (A), the assessee carried the matter in appeal to the Tribunal which took the view that since the assessee had acquired a right to trade on the floor of BSE through the membership card, it was not entitled to depreciation u s 32(1)(ii) of the 1961 Act.

That, the said Card is a capital asset through which right to trade on the floor of BSE is acquired and since it is intangible asset the said assessee was entitled to depreciation u s 32(1)(ii).

Against the said decision, the Department carried the matter in appeal to the High Court which came to the conclusion, following certain decisions of this Court, that the BSE membership card is only a personal privilege granted to a member to trade in shares on the floor of the Stock Exchange that, such a privilege cannot be equated with the expression licence or any other business or commercial rights of similar nature u s 32(1)(ii) that, there is a difference between acquiring a know-how, patent, copyright or trademark and acquiring a licence to use such know-how, patent, copyright, trademark or franchise that the expression business or commercial rights of similar nature in Section 32(1)(ii) of the 1961 Act would take its colour from the preceding words, namely, know-how, patent, copyright, trademark and franchise which belong to a class of intellectual property rights and applying the rule of ejusdem generis, the High Court held that the expression licence as well as the expression business and commercial rights of similar nature in Section 32(1)(ii) of the 1961 Act are referable to IPRs such as know-how, patent, copyright, trademark and franchise and since the BSE membership card does not fall in any of the above categories, the claim for depreciation was not admissible on the BSE membership card acquired by the assessee u s 32(1)(ii).

Consequently, the appeals filed by the Department stood allowed, hence, these civil appeals.

Importance of BSE: BSE is recognized by the Government of India under Securities Contracts (Regulation) Act, 1956.

Approximately 70000 deals are executed on a daily basis.

There are about 3500 companies which are listed on BSE.

The market capitalization of the BSE is Rs. 5 trillion.

The main aim and object of the BSE is to provide a market place for the purchase and sale of securities.

It aims to promote, develop and maintain a well regulated market for dealing in securities and to safeguard the interests of the members and the investing public having dealings in the Exchange.

It helps industrial development of the country through resources mobilization.

It is set up to establish and promote just practices in securities transactions.

In November, 1996, the BSE constituted a Trade Guarantee Scheme under which all trades carried out on online trading are guaranteed by the clearing house of BSE.

Similarly, a depository has been set up as a joint venture between BSE and Bank of India etc.

BSE has introduced trading also in fixed income securities to give impetus to trading in debentures and corporate debt instruments to increase trading in Government owned securities.

Question arising in the Present Matters: Is depreciation allowable on the cost of a Stock Exchange Membership Card under Section 32(1)(ii) of the Income Tax Act, 1961, which was enacted and inserted by Finance (No. 2) Act, 1998? Answer to the above Question: To answer the above question, we need to quote hereinbelow certain relevant provisions of the 1961 Act: In this Act, unless the context otherwise requires,-- (14)capital asset means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include-- any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him.

Depreciation.

(1) In respect of depreciation of-- (i) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed-- Explanation 3.- For the purposes of this sub- section, the expressions assets and block of assets shall mean- (a) tangible assets, being buildings, machinery, plant or furniture (b) intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature.

We also quote hereinbelow relevant Rules of Bombay Stock Exchange Limited as they stood at the relevant time: Membership a Personal Privilege The membership shall constitute a personal permission from the Exchange to exercise the rights and privileges attached thereto subject to the Rules, Bye-laws and Regulations of the Exchange.

Right of Membership Inalienable A member shall not assign, mortgage, pledge, hypothecate or charge his right of membership or any rights or privileges attached thereto and no such attempted assignment, mortgage, pledge, hypothecation or charge shall be effective as against the Exchange for any purpose nor shall any right or interest in any membership other than the personal right or interest of the member therein be recognized by the Exchange.

The Governing Board shall expel any member of the Exchange who acts or attempts to act in violation of the provisions of this Rule.

Right of Nomination Subject to the provisions of these Rules a member shall have the right of nomination which shall be personal and non- transferable.

Right of Nomination of Deceased or Defaulter Member On the death or default of a member his right of nomination shall cease and vest in the Exchange.

Forfeited or Lapsed Right of Membership When a right of membership is forfeited to or vest in the Exchange under any Rule, Bye-law or Regulation of the Exchange for the time being in force it shall belong absolutely to the Exchange free of all rights, claims or interest of such member or any person claiming through such member and the Governing Board shall be entitled to deal with or dispose of such right of membership as it may think fit.

Nomination by Member 11(a) A member of not less than three years standing who desires to resign may nominate a person eligible under these Rules, for admission to membership of the Exchange as a candidate for admission in his place: Provided that a member of less than three years standing who desires to resign may with the sanction of the Governing Board nominate his own son eligible under these Rules for admission to membership of the Exchange as a candidate for admission in his place Provided further that the Governing Board may, at its absolute discretion and in exceptional cases and for cogent reasons to be recorded in writing, permit by a special resolution, a member of less than three years standing, who desires to resign, to nominate a person as a candidate for admission in his place, subject to such terms and conditions as the Governing Board may in its absolute discretion think fit to impose.

Nomination in Case of Deceased Member The legal representatives of a deceased member or his heirs or the persons mentioned in Appendix C to these Rules may with the sanction of the Governing Board nominate any person eligible under these Rules for admission to membership of the Exchange as a candidate for admission in the place of the deceased member.

In considering such nomination the Governing Board shall be guided so far as practicable by the instructions set out in Appendix C to these Rules.

Nomination in case of Defaulter The forfeited right of membership of a defaulter shall be restored to him if he be re-admitted as a member within six months from the date of default but if an application by a defaulter for re- admission be rejected by the Governing Board or if no such application be made within six months of the declaration of default the Governing Board may at any time exercise the right of nomination in respect of such membership.

Dues and Claims The Governing Board shall not approve a nomination unless the nominating member or in the case of a deceased member his legal representatives or heirs or the persons mentioned in Appendix C to these Rules or any other person on his behalf shall have paid and satisfied in full.

Dues of the Exchange Such subscriptions, debts, fines, fees, charges and other monies as shall have been determined by the Governing Board to be due to the Exchange or the Clearing House by the nominating or deceased member and Liabilities relating to Contracts Such debts, liabilities, obligations and claims arising out of any contracts made by such member subject to the Rules, Bye-laws and Regulations of the Exchange as shall have been admitted by the Governing Board and all amounts due or payable by the nominating or deceased member to the Trade Guarantee Fund.

Allocation in Order of Priority 16.

(1) When as provided in these Rules the Governing Board has exercised the right of nomination in respect of a membership vesting in the Exchange the consideration received therefor shall be applied to the following purposes and in the following order of priority, namely- Dues of Exchange and Clearing House first - the payment of such subscriptions, debts, fines, fees, charges and other monies as shall have been determined by the Governing Board to be due to the Exchange, to the Clearing House or to the Trade Guarantee Fund by the former member whose right of membership vests in the Exchange.

Liabilities relating to Contracts second-the payment of such debts, liabilities, obligations and claims arising out of any contracts made by such former member subject to the Rules, Bye-laws and Regulations of the Exchange as shall have been admitted by the Governing Board: Provided that if the amount available be insufficient to pay and satisfy all such debts, liabilities, obligations and claims in full they shall be paid and satisfied pro rata, and Surplus third - the payment of the surplus, if any, to the funds of the Exchange: provided that the exchange in general meeting may at its absolute discretion direct that such surplus be disposed of or applied in such other manner as it may deem fit.

The provisions of clause (1) of this Rule shall not apply in cases where the Governing Board has exercised the right of nomination in respect of a membership which has vested in the Exchange upon a member having been declared a defaulter on or subsequent to such date as the Governing Board may specify in this behalf.

Application of Consideration 16A When the Governing Board has exercised the right of nomination in respect of a membership which has vested in the Exchange upon a member having been declared a defaulter on or subsequent to the date to be specified by the Governing Board as referred to in clause (2) of Rule 16, the consideration received therefor shall be paid by the Governing Board to the Defaulters Committee to be applied for the purposes and in the order of priority specified in the Bye-laws and the Regulations of the Exchange.

We also quote hereinbelow Bye-law 400 of BSE, which reads as under: Application of Defaulters Assets and Other Amounts Subject to the provisions of Bye-law 398, the Defaulters Committee shall realise and apply all the money, rights and assets of the defaulter which have vested in or which have been received by the Defaulters Committee (other than the amount paid by the Governing Board to the Defaulters Committee pursuant to Rule 16A in respect of the consideration received by the Governing Board for exercising the right of nomination in respect of the defaulters erstwhile right of membership) and all other assets and money of the defaulter in the Exchange or the market including the money and securities receivable by him from any other member, money and securities of the defaulter lying with the Clearing House or the Exchange, credit balances lying in the Clearing House, security deposits, any bank guarantees furnished on behalf of the defaulter, fixed deposit receipts discharged or assigned to or in favour of the Exchange, Base Additional Capital deposited with the Exchange by the defaulter, any security created or agreed to be created by the defaulter or any other person in favour of the Exchange or the Defaulters Committee for the obligations of the defaulter to the following purposes and in the following order of priority , viz.:- First - to make any payments required to be made under Bye-law 391 and 394 Second - the payment of such subscriptions, debts, fines, fees, charges and other money as shall have been determined by the Defaulters Committee to be due to the Securities and Exchange Board of India, to the Exchange or to the Clearing House by the defaulter Third - the rectification or replacement of or compensation for any bad deliveries made by or on behalf of the defaulter to any other member in the settlement in which the defaulter has been declared a defaulter or in any prior or subsequent settlement (unless the Governing Board has otherwise determined in respect of such settlement or settlements under Bye-law 394) provided the conditions of Bye-law 153 and all other applicable Rules, Bye-Laws and Regulations and instruc- tions of the Governing Board are complied with Fourth - the balance, if any, shall be paid into the Fund to the extent of the money paid out of the Fund (other than payments made out of Members refundable contributions) and not recovered by the Fund and the interest payable by the defaulter to the Fund in respect thereof Fifth - the balance, if any, shall be paid into the Fund to the extent of the money paid out of the Fund out of the refundable contributions of members (other than the refundable contribution of the defaulter) and not recovered by the Fund and the interest payable by the defaulter to the Fund in respect thereof Sixth - subject to the Rules, Bye-Laws and Regulation of the Exchange, including in particular Bye-Law 343, the balance, if any, shall be applied by the Defaulters Committee for the payment of such unpaid outstandings, debts, liabilities, obligations and claims to or of members of the Exchange arising out of any contracts made by the defaulter with such members subject to the Rules, Bye-laws and Regulations of the Exchange as shall have been admitted by the Defaulters Committee provided that if the amount available be insufficient to pay and satisfy all such debts, liabilities, obligations and claims in full they shall be paid and satisfied pro rata Seventh - subject to the Rules, Bye-Laws and Regulation of the Exchange, including in particular Bye-Law 343, the balance, if any, shall be applied by the Defaulters Committee for the payment of such unpaid debts, liabilities, obligations and claims to or of the defaulters constituents arising out of any contracts made by such defaulter subject to the Rules, Bye-laws and Regulations of the Exchange as shall have been admitted by the Governing Board provided that if the amount available be insufficient to pay and satisfy all such debts, liabilities, obligations and claims in full they shall be paid and satisfied pro rata Eighth - the balance, if any, shall be paid into the Exchanges Customers Protection Fund to the extent of any and all amounts paid out of the Customers Protection Fund towards the obligations or liabilities of the defaulter and interest thereon at the rate of 2.5 per month (or such other rate as the Governing Board may specify) from the date of payment out of the Customers Protection Fund to the date of repayment to the Fund and Ninth - the surplus, if any, shall be paid to the defaulter.

Clarification: It is clarified that this Bye-law 400 does not apply to the amount paid by the Governing Board to the Defaulters Committee pursuant to Rule 16A in respect of the consideration received by the Governing Board for exercising the right of nomination in respect of the defaulters erstwhile right of membership as the same does not belong to the defaulter and the defaulter has no claim, right, title or interest therein.

At the outset we wish to clarify that our present judgment is confined to the Rules and Bye-laws of BSE, as they stood during the relevant assessment years.

Section 32 of the 1961 Act provides for a deduction of allowance being made in respect of depreciation of building, machinery, plant or furniture, being a tangible asset.

Vide Finance (No.2) Act, 1998, the Parliament thought it fit to extend the benefit of depreciation also to intangible assets enumerated in Section 32(1)(ii) in respect of know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after 1st April, 1998.

In the lead matter, the assessee bought the membership card of BSE for Rs. 95 lakhs.

In the case of M section HDFC Securities Limited v. The Commissioner of Income Tax-4 (Civil Appeal arising out of SLP (C) Numbers 5656-5657 of 2010), the assessee bought the membership card of BSE for Rs. 2.80 crores.

Appellant before us claims that the membership card enables him to trade on the floor of BSE and, consequently, it is a business or commercial right in the nature of a licence under Section 32(1)(ii).

On the other hand, it is the case of the Department that membership is a personal privilege that it is not an asset that it is not owned by the assessee, therefore, the claim of the assessee for depreciation was not admissible under Section 32(1)(ii).

To decide the above controversy, we need to examine the Rules of BSE.

Rule 5, quoted above, states that membership shall constitute a personal permission from the Exchange to exercise the rights and privileges attached thereto.

Rule 6 inter alia states that membership shall not be alienable.

Rule 7 confers right of nomination on the member of the Exchange.

However, that Rule clarifies that although a member has a right of nomination, such right shall be personal and non-transferable.

Rule 9 inter alia states that on the demise or default of a member the said right of nomination shall cease and vest in the Exchange.

Rule 10 refers to forfeited or lapsed right of membership.

It inter alia states that when a right of membership is forfeited to or when such right vests in the Exchange under any Rule or Bye-law, it shall belong absolutely to the Exchange free of all rights, claims or interests of such member or any person claiming through such member and the Governing Board alone shall be entitled to deal with or dispose of such right of membership as it may think fit.

Rule 15 inter alia states that the Governing Board shall not approve a nomination unless the nominating member or in the case of a deceased member his legal representatives satisfy in full all dues of the Exchange all liabilities relating to contracts and all amounts due and payable to the Trade Guarantee Fund.

Rule 16 deals with allocation in the Order of Priority.

It inter alia states that when the Board has exercised the right of nomination in respect of a membership vesting in the Exchange the consideration received thereof shall be applied to the specified purposes.

On reading Rules 5 to 10 it becomes clear that the right of nomination is conferred on the member of the Exchange that, the said right shall cease and vest in the Exchange when his membership gets forfeited to the Exchange that on such forfeiture the right of membership gets vested in the Exchange and on such vesting the Exchange has the right to deal with it as it may think fit.

That, on forfeiture even the right of nomination vests in the Exchange.

Thus, a non-defaulting continuing member owns the right of nomination with respect to the membership of the Exchange till his right of membership is forfeited to the Exchange.

The question which we are required to examine is - whether the right of nomination in the non-defaulting continuing member comes within the expression business or commercial right of similar nature in Section 32(1)(ii) of the 1961 Act? On the analysis of the Rules of BSE, it is clear that the right of membership (including right of nomination) gets vested in the Exchange on the demise/ default committed by the member that, on such forfeiture and vesting in the Exchange the same gets disposed of by inviting offers and the consideration received thereof is used to liquidate the dues owed by the former defaulting member to the Exchange, Clearing House, etc.

see Rule 16 and Bye-law 400.

It is this right of membership which allows the non-defaulting member to participate in the trading session on the floor of the Exchange.

Thus, the said membership right is a business or commercial right conferred by the Rules of BSE on the non-defaulting continuing member.

The next question is - whether the membership right could be said to be owned by the assessee and used for the business purpose in terms of Section 32(1)(ii).

Our answer is in the affirmative for the reason that the Rules and the Bye-laws analysed hereinabove indicate that the right of membership (including the right of nomination) vests in the Exchange only when a member commits default.

Otherwise, he continues to participate in the trading session on the floor of the Exchange that he continues to deal with other members of the Exchange and even has the right to nominate subject to compliance of the Rules.

Moreover, by virtue of Explanation 3 to Section 32(1)(ii) the commercial or business right which is similar to a licence or franchise is declared to be an intangible asset.

Moreover, under Rule 5 membership is a personal permission from the Exchange which is nothing but a licence which enables the member to exercise rights and privileges attached thereto.

It is this licence which enables the member to trade on the floor of the Exchange and to participate in the trading session on the floor of the Exchange.

It is this licence which enables the member to access the market.

Therefore, the right of membership, which includes right of nomination, is a licence or akin to a licence which is one of the items which falls in Section 32(1)(ii) of the 1961 Act.

The right to participate in the market has an economic and money value.

It is an expense incurred by the assessee which satisfies the test of being a licence or any other business or commercial right of similar nature in terms of Section 32(1)(ii).

Since heavy reliance is placed by the Department on the judgments of this Court in the following cases, we need to discuss those judgments and clarify the position in law: Vinay Bubna v. Stock Exchange, Mumbai (1999) 6 SCC 215 Stock Exchange, Ahmedabad v. Assistant Commissioner of Income-Tax (2001) 248 ITR 209 In the case of Vinay Bubna (supra), one Yogesh Mehta who was a member of BSE was declared a defaulter by the Exchange.

An amount of Rs. 21.81 crores was due and payable by the defaulter to Vinay Bubna who had moved the Bombay High Court by way of an arbitration petition against Yogesh Mehta (defaulter).

In the said proceedings, an application was filed for appointing a court receiver.

The High Court did not grant to Vinay Bubna any relief in respect of the membership card of the defaulter - member.

In the said proceedings, Rule 16 was challenged on the ground that membership of BSE was an asset of the share-broker and on its sale from the proceedings thereof payment should be made to creditors like Vinay Bubna and proceeds should not be allowed to be distributed by BSE in the manner indicated by Rule 16.

On behalf of the Stock Exchange, it was submitted that after respondent Number 3, Yogesh Mehta stood declared to be a defaulter he ceased to be the member of the Stock Exchange whereupon his rights of membership vested in the Exchange free of all rights, claims and interests and, therefore, the Exchange was at liberty to invite applications from other persons and to admit anyone who offers to pay the highest amount.

It was argued that the said proceeds so received did not belong to the ex-member and the order of priority contained in Rule 16 was just and fair and was not illegal, wrong or arbitrary.

The contention of the Stock Exchange was accepted by this Court observing that when the defaulting member is expelled from the Exchange no interest in his membership card remains in himself and none can pass to his assignee.

It was held that once the membership ceases to be an asset of the share-broker the question of Rule 16 being contrary to the insolvency law does not arise.

In our view, the judgment in Vinay Bubnas case supports our reasoning in this case.

The judgment in Vinay Bubnas case clearly indicates that it was a case dealing with the rights of a defaulting non- continuing member.

The judgment in Vinay Bubnas case clearly indicates that membership card is an asset of a non-defaulting continuing member.

However, the membership card ceases to be an asset only when the member commits a default in which event the card vests in the Exchange free from all encumbrances and once it so vests in the Exchange then the Exchange is free to allocate the consideration in the order of priority indicated by Rule 16.

In the case of Stock Exchange, Ahmedabad (supra), the question which arose for determination was whether after the demise of a stock-broker could he be declared a defaulter by the Exchange? In that case the facts were as follows.

Ahmedabad Stock Exchange (ASE) admitted Rajesh Shah as its member on 19th February, 1988.

He died on 7th February, 1994.

On February 12, 1994, his legal representatives wrote to the Stock Exchange that they were unable to meet the liabilities of the deceased.

Thereafter, the Governing Board of ASE passed a resolution on 12th February, 1994 declaring Rajesh Shah, the deceased member, as a deemed defaulter.

By the said resolution, the Board resolved that the membership rights of the deceased member who was declared to be a deemed defaulter should vest in the Stock Exchange and the said membership rights be disposed of by inviting offers within a minimum floor price of Rs. 25 lakhs.

It is the said declaration dated 12th February, 1994 by which Rajesh Shah was declared to be a deemed defaulter came to be challenged.

Another interesting fact which needs to be mentioned was that on 15th February, 1994 a provisional attachment order was passed under Section 281B of the 1961 Act in respect of the membership card in the name of Rajesh Shah.

On 16th February, 1994, the Stock Exchange issued advertisement inviting claims from member creditors to lodge their claims within 30 days.

They invited offers for purchase of membership also within the minimum floor price of Rs. 25 lakhs.

On 5th December, 1994, ASE passed a resolution disposing of the membership right of the deceased in favour of UTI Security Limited for Rs. 27 lakhs.

However, a garnishee notice was issued by the Department under Section 226(3) of the 1961 Act in the sum of Rs. 12.25 lakhs.

That notice was addressed to the Executive Director of the Stock Exchange by the Department.

Under the said circumstances, ASE filed a writ petition in the High Court challenging the orders of provisional attachment as well as the garnishee notice.

The question for determination which arose in the said judgment was as to the nature of the rights of the deceased or his legal representatives in the membership card.

It was held by this Court, after examining the Rules and the Bye-laws, that the right of nomination which earlier vested in Rajesh Shah stood vested in the Exchange under the Rules when he committed default.

On default, that right vested in the Stock Exchange absolutely and, therefore, the consideration received by the Stock Exchange of Rs. 27 lakhs from UTI Security Limited could not be attached by the Income Tax Department because on vesting, such right of nomination belonged to the Exchange absolutely.

For the afore-stated reasons, we are of the view that both the afore-stated judgments support the reasoning given by us hereinabove.

Before concluding, we wish to clarify that our present judgment is strictly confined to the right of membership conferred upon the member under the BSE membership card during the relevant assessment years.

We hold that the said right of membership is a business or commercial right which gives a non-defaulting continuing member a right to access the Exchange and to participate therein and in that sense it is a licence or akin to licence in terms of Section 32(1)(ii) of the 1961 Act.

That, such a right vests in the Exchange only on default/ demise in terms of the Rules and Bye-laws of BSE, as they stood at the relevant time.

Our judgment should not be understood to mean that every business or commercial right would constitute a licence or a franchise in terms of Section 32(1)(ii) of the 1961 Act.

Conclusion We answer the question at page 6 in the affirmative by holding that on the facts and circumstances of these cases the Tribunal was right in holding that depreciation was allowable on the cost of the membership card under Section 32(1)(ii) of the 1961 Act.

Accordingly, the impugned judgment(s) of the Bombay High Court is set aside and the appeal(s) filed by the nominated non-defaulting continuing member stands allowed with no order as to costs.

CJI H. Kapadia) J. section Radhakrishnan) New Delhi September 09, 2010

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