Full Judgment
1. The appellant, who is an assessee under the IT Act 1961 (for short 'the Act') is a partnership firm doing business of stock broking. It is a member of the Cochin Stock Exchange; During the accounting period 1992-93 the assessee had debited a sum of Rs. 1,50,000 in the P&L; a/c as non-refundable compulsory contribution to the Cochin Stock Exchange as building fund. According to the assessee, this building fund is charged @ 0.05 per cent of the turnover of share-brokers and was compulsorily collected by the Cochin Stock Exchange towards the contribution for building fund and that unless the appellant pays the said sum, the Cochin Stock Exchange would not permit the appellant to do business. It was also the case of the appellant that a member of the Cochin Stock Exchange does not obtain any property right in the building that the exchange proposed to construct, nor did this payment bring into the existence any assets in the name of the assessee. The appellant had also obtained a letter from the Cochin Stock Exchange (No. SE/838/93 dt. 21st April, 1993) to the effect that the amount being collected is non-refundable and would be utilised towards infrastructure and building of the Cochin Stock Exchange. The AO however, treated the sum of Rs. 1,50,000 paid by the appellant to the Cochin Stock Exchange as capital expenditure. The appellant, being aggrieved by the assessment order, filed an appeal before the CIT(A), who found that the expenditure is a revenue expenditure and directed deletion of the said amount. The Department took up the matter in appeal before the Tribunal, Cochin Bench and the Tribunal relying on its earlier decision in ITA 22/Coch/2000, dt. 14th March, 2003, wherein it was held that contribution made by assessee towards building fund to the Stock Exchange is a capital expenditure and therefore, not eligible to be deducted in compounding the taxable income. The Tribunal accordingly set aside the order of the CIT(A) and restored the order of the AO on this question.
2. Sri Premjit Nagendran, learned counsel appearing for the appellant reiterate the contentions raised before the authorities and the Tribunal and further submitted that at present, the Cochin Stock Exchange does not have any proposal for construction of the building for which the appellants and others have donated and, therefore, the Cochin Stock Exchange is bound to return the money to the appellant and others from whom it was collected. The counsel further submitted that the Cochin Stock Exchange does not have any funds at present for the reason that all the amounts available with them have been attached by other creditors and, therefore, no question of it being returned to the petitioner also. The counsel also submitted that an additional affidavit to that effect along with IA No. 1289/2003 was filed and this matter requires consideration by the AO itself, for it has got a strong bearing on the question of law raised in this appeal.
3. We have heard Sri George K. George, learned standing counsel appearing for Government of India (Tax). We find that the assessing authority and the Tribunal has taken the view that the contribution made by the appellant to the Cochin Stock Exchange as building fund is a capital expenditure whereas the first appellate authority has taken the view that this is a revenue expenditure liable to be deducted in the computation of total income. In view of the subsequent developments narrated in the affidavit filed along with IA No. 1289/2003, we are of the view that this matter requires to be considered by the AO himself. According to us, this question has got a bearing in the case. In the circumstances we set aside the orders of the assessing authority and the two appellate authorities on these issues and direct the AO to pass fresh orders on this issue in accordance with law taking into account the matters stated in the affidavit mentioned above.
This appeal is disposed of as above. In this view of the matter, we are not answering the question of law formulated at the time of admission.