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I-T department to recover Rs 500 Crore from BSE brokers
By siliconindia
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Saturday, 28 February 2009, 00:52 IST |
1 Comments
Mumabi: As stock brokers avoid paying income tax of about 
500 crore on the pretext of claiming depreciation on their Bombay Stock Exchanges (BSE) membership card, Income Tax (I-T) department has approached the Bombay High Court to recover the amount. According to the I-T officials, nearly 60 percent of the BSE card-holders have been claiming a 25 percent depreciation benefit using the written down value on the BSE membership card.
The maximum value of an exchange membership card was 2.25 before BSE was de-mutualised in 2008 and brokers claimed depreciation on this every year, which is debited to their profit and loss account.
However, as per I-T department's view, depreciation benefits can be claimed on items like plant and machinery, which suffer wear-and-tear with time, and not on the card, the value of which fluctuates and can also appreciate. I-T department is also looking to charge interest of 12 percent to the brokers now for all those years for which they have claimed depreciation and paid lower taxes.
Meanwhile, brokers say that their cards fall in the list of intangible asset, and are used as a license to conduct trading activity on which depreciation can be claimed under section 32 of the I-T Act, which was amended in 2000.
The section 32 of the Income Tax Act (Act) introduced, with effect from the assessment year 1999-2000, "intangible assets" viz "know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial right of similar nature" in the eligible category of depreciable assets.
500 crore on the pretext of claiming depreciation on their Bombay Stock Exchanges (BSE) membership card, Income Tax (I-T) department has approached the Bombay High Court to recover the amount. According to the I-T officials, nearly 60 percent of the BSE card-holders have been claiming a 25 percent depreciation benefit using the written down value on the BSE membership card.
The maximum value of an exchange membership card was 2.25 before BSE was de-mutualised in 2008 and brokers claimed depreciation on this every year, which is debited to their profit and loss account.
However, as per I-T department's view, depreciation benefits can be claimed on items like plant and machinery, which suffer wear-and-tear with time, and not on the card, the value of which fluctuates and can also appreciate. I-T department is also looking to charge interest of 12 percent to the brokers now for all those years for which they have claimed depreciation and paid lower taxes.
Meanwhile, brokers say that their cards fall in the list of intangible asset, and are used as a license to conduct trading activity on which depreciation can be claimed under section 32 of the I-T Act, which was amended in 2000.
The section 32 of the Income Tax Act (Act) introduced, with effect from the assessment year 1999-2000, "intangible assets" viz "know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial right of similar nature" in the eligible category of depreciable assets.