The Income-Tax (I-T) department seeks to raise Rs 125 crore from stock brokers, who hold membership cards with the stock exchanges.
The decision to send demand notices to card-holding brokers came after a recent high court ruling, which held that depreciation cannot be claimed on membership cards, while calculating tax liabilities.
Over 100 applications were filed before high court, which includes Techno Shares and Stocks, Credit Suisse, ICICI Brokerage Services, JM Morgan Stanley Fixed Income Services, Tata TD Warehousing Securities, Kotak Securities and Net Worth Stock Broking.
While the I-T department has been disallowing claim of depreciation, many stock brokers have secured relief from the Income-Tax Appellate Tribunal (ITAT) the second appellate authority on tax matters.
However, the high court ruling has nullified those ITAT orders that ruled in favour of the brokers.
Now, the I-T department will approach ITAT, citing the high court ruling, to issue an order in favour of the department. The high court orders are binding on ITAT.
The I-T departments contention was that the membership cards cannot diminish in value due to wear and tear and obsolescence. The card was a personal privilege, not a licence or a commercial right; the brokers are not owners of the card and therefore, the cards cannot be classified under the head capital assets, said the I-T department.
The Section 32 of the I-T Act provides for depreciation claims on tangible assets or certain intangible assets such as patents, copyrights, trademarks, or similar intangible assets. High court held that the Section 32 of the I-T Act provides for depreciation allowance, only on the listed categories.