These are cross-appeals filed by assessee and Department, against order passed by CIT(A) on 2nd May, 2001. appeal relates to asst. yr. 1994-95. We find it convenient to dispose of both of them by consolidated order. ITA No. 5478/Mum/2001: Assessee s Appeal assessee has taken following ground of appeal: "On facts and in circumstances of case and in law, learned CIT(A) has erred in not allowing sum of Rs. 56,00,000 paid as entrance fees and admission fees to stock exchange, Mumbai, as revenue expenses." short question in this appeal is whether expenditure of Rs. 56 lakhs incurred by assessee towards acquisition of membership of Bombay Stock Exchange by way of entrance fee and admission fee is capital expenditure or revenue expenditure. AO and CIT(A) have held that impugned expenditure is capital expenditure. In support of appeal, learned counsel for assessee has reiterated submissions which were earlier made before CIT(A). According to him, t h e membership card issued by Bombay stock exchange is personal privilege and not property as defined under s. 12 of Transfer of Property Act. He has relied upon decisions of Hon ble Bombay High Court in Vinay Bubna vs. Stock Exchange, Mumbai (W.T. No. 1117 of 1997, dt. 23rd Dec., 1999), Ms. Sejal R. Dalai vs. Stock Exchange, Mumbai AIR 1991 Bom. 30, Vinay Bubna vs. Stock Exchange, Mumbai (1999) 155 CTR (SC) 519: (1999) 21 SCL 216 (SC), Dy. CIT vs. Ashwin C. Shah (2002) 76 TTJ (Mumbai) 823: (2002) 82 ITD 573 (Mumbai) and Stock Exchange vs. Custodian (MA No. 710 of 1999- Special Court) to support aforesaid submission. His second submission was that expenditure towards entrance fee and admission fee amounting to Rs. 56 lakhs was in nature of revenue expenditure in view of decision in Pearless Securities Ltd. vs. Jt. CIT (2005) 93 TTJ (Kol)(SB) 325: (2005) 94 ITD 89 (Kol)(SB) and decision of Hon ble Calcutta High Court in CIT vs. Naskapara Jute Mills Co. Ltd (1982) 28 CTR (Cal) 365: (1983) 141 ITR 384 (Cal). Without prejudice to aforesaid submissions, alternative submission of assessee was that expenditure towards admission fee was in any case in nature of revenue expenditure in view of decisions of this Tribunal in Dy. CIT vs. Shaunak J. Shah (ITA No. 111/Mum/1998, dt. 23rd April, 2003) and in Dy. CIT vs. Magnum Equity Broking Ltd. (ITA No. 1765/Mum/2000, dt. 4th March, 2002). In reply, learned Departmental Representative has relied upon decision of Special Bench of this Tribunal in R.M. Valliappan vs. Asstt. CIT (2006) 104 TTJ (Chennai)(SB) 756: (2006) 103 ITD 63 (Chennai)(SB) and submitted that membership rights obtained from stock exchange were in nature of capital asset and, therefore, order passed by learned CIT(A) treating membership card as capital asset should be upheld. We have heard parties. It is by virtue of membership card issued by Bombay Stock Exchange that assessee is authorized to carry on his business. It is by virtue of holding membership card that assessee could exercise rights and privileges attached thereto. membership card is transferable on fulfilment of conditions stipulated under rules of stock exchange. All these facts have been examined in detail by Special Bench of this Tribunal in R.M. Valliappan s case (supra). It has been held by Special Bench that membership card is capital asset. We are in respectful agreement with aforesaid decision. impugned expenditure has been incurred for acquiring or bringing into existence asset or advantage of enduring nature to business, which is evident from fact that it would not have been possible for assessee to carry on his business without acquiring membership card. membership card is intrinsically in nature of capital asset. In this view of matter, we have no hesitation to hold that impugned expenditure is in nature of capital expenditure. appeal filed by assessee is dismissed. ITA No. 5139/Mum: Department s Appeal Department has taken following grounds of appeal: "1. On facts and in circumstances of case and in law, learned CIT(A) has erred in allowing depreciation on membership card acquired for Rs. 55,00,000. On facts and in circumstances of case and in law, learned CIT(A) has erred in treating BSE membership card, as plant within meaning of s. 32 of IT Act and allowing depreciation on same. On facts and in circumstances of case and in law, learned CIT(A) has erred in allowing depreciation on BSE Membership Card as same being intangible asset acquired before 1st April, 1998 against express provisions of s. 32(1)(ii) which allow depreciation on intangible assets acquired on or after 1st April, 1998." In support of appeal, learned Departmental Representative submitted that assessee was not entitled to depreciation, as he has not satisfied requisite conditions of s. 32. According to him, membership cards were neither depreciable nor were they owned by assessee and hence assessee was not entitled to depreciation under s. 32. Per contra, learned Authorized Representative for assessee supported order of learned CIT(A) and submitted that order passed by CIT(A) was in conformity with decision of this Tribunal in Techno Shares & Stocks Ltd. vs. ITO (2006) 101 TTJ (Mumbai) 349. He further submitted that order of learned CIT(A) holding that membership card was capital asset was in conformity with decision of this Tribunal in R.M. Valliappan s case (supra) and V.G. Gajjar vs. Dy. CWT (2005) 93 TTJ (Ahd) 70: (2005) 93 ITD 624 (Ahd) and, therefore, assessee was entitled to claim depreciation on said capital asset. We have heard parties. Sec. 32 provides for conditions required to be satisfied for claiming depreciation. Sub-s. (1) of s. 32, insofar as it is relevant to us in present case, reads as under: "32. Depreciation. (1) In respect of depreciation of buildings, machinery, plant or furniture owned by assessee and used for purposes of business or profession, following deductions shall, subject to provisions of s. 34, be allowed -...." It is evident on bare perusal of aforesaid provisions that allowance under s. 32 is given to assessee to compensate him for depreciation suffered in respect of buildings, machinery, plant or furniture owned, wholly or partly, by assessee and used for purposes of business or profession. allowance under s. 32 of IT Act is given to compensate assessee for depreciation suffered by him in respect of specified assets. If assessee does not suffer any depreciation by way of decrease in value of property through wear, deterioration or obsolescence, assessee cannot claim depreciation for reason that nothing would be available in respect of which assessee would need compensation by way of allowance under s. 32 of I T Act. Like every other animate and inanimate object, business premises, machinery, plant, furniture and other specified assets employed by assessee in course of his business, profession etc., have limited effective life. vigor, strength, capability, etc. of every such asset gradually exhaust by factors of use and time. They undoubtedly aid assessee to earn "income" from such business or profession, which is subjected to levy of tax. Sec. 32 incorporates provision for proper recompense of such diminution in vigor, strength, capability, etc., in order to give correct picture of profits from business, profession etc. Depreciation is thus measure of effective life of asset owing to use or obsolescence during given period. object of providing for depreciation is to spread expenditure incurred on asset over its effective lifetime, and amount written off during accounted period is intended to represent proportion of such expenditure which has expired during year, As held by Hon ble Madras High Court in G.R. Govindarajulu Naidu vs. CIT (1973) 90 ITR 13 (Mad), allowable depreciation amount is capital loss to depreciable asset which must be replaced first to give true or correct picture as otherwise there is bound to be distorted picture in P&L a/c. depreciation, in essence, represents allowance to compensate for assets capable of depreciating over given period. If assets are not capable of depreciating, question of allowance in such case will not arise. In taking this view, we are supported by following observations made by Hon ble Gujarat High Court in CIT vs. Elecon Engg. Co. Ltd. (1974) 96 ITR 672 (Guj). [Affirmed by Supreme Court in CIT vs. Elecon Engg. Co. Ltd. (1987) 166 ITR 66 (SC)]: "The allowance can be claimed if asset in question is shown to be capable of diminishing in value on account of any factor known to prevailing accounting or commercial practice. It is now recognised fact that principal factors responsible for retirement of capital asset and, therefore, responsible for depreciation are: (i) ordinary wear and tear, (ii) unusual damage, (iii) inadequacy, and (iv) obsolescence. factors listed above include not only those relating to physical deterioration but also those referring to suitability of asset as economically productive unit after period of time. In depreciation accounting, cost of asset is spread over years of its usefulness in systematic and sensible manner and in so doing all aforesaid agents or causes of depreciation are taken into account before true profits are ascertained (vide Accountancy by William Pickles, third. edition, p. 168, Accountant s Hand Book by Dickson, fourth edition, s. 17.2 and Principles of Accountancy by Filney and Miller, fifth edition, pp. 282-90)." It is quite clear from aforesaid observations which have since been affirmed by Supreme Court that depreciation is admissible only when asset in question is shown to be capable of diminishing in value on account of any factor mentioned above. Mere existence of capital asset is not sufficient to claim allowance for depreciation. Allowance under s. 32 is for depreciation of specified assets. What is important for claiming depreciation is fact that asset in question is capable of diminishing in value over given period of time, i.e., life-time of asset. assessee has placed no material before us to show as to how there can be any depreciation in respect of membership card issued by stock exchange or that membership card is at all depreciable. membership card has no fixed life either. We, therefore, hold that membership card issued by stock exchange is not at all depreciable and, therefore, there is no question of granting any allowance under s. 32 on such cards. principles laid down in aforesaid authorities as also in CIT vs. Alps Theatre (1967) 65 ITR 377 (SC); CIT vs. Indian Oil Corpn. Ltd. (1996) 134 CTR (Bom) 416: (1996) 218 ITR 511 (Bom), CIT vs. Heredilla Chemicals Ltd. (1997) 140 CTR (Bom) 181: (1997) 225 ITR 532 (Bom) and Chemicals Ltd. (1997) 140 CTR (Bom) 181: (1997) 225 ITR 532 (Bom) and Hardiallia Chemicals Ltd. vs. CIT (1996) 134 CTR (Bom) 35: (1996) 218 ITR 598 (Bom), 604-605 are quite apposite. In this view of matter, order of CIT(A) in this behalf is vacated. We are conscious of decision taken by co-ordinate Bench of this Tribunal in Techno Shares & Stocks Ltd. s case (supra) in which it has been held that BSE card is "intangible asset" within meaning of s. 32(1)(ii) and hence eligible for depreciation under s. 32 of IT Act. aforesaid decision was rendered in context of provisions of s. 32(1)(ii). Clause (ii) in sub-s. (1) of s. 32 was inserted by Finance Act, 1998 w.e.f. 1st April, 1999. present case relates to asst. yr. 1994-95 when aforesaid provisions namely s. 32(1)(ii) did not exist. Therefore, decision in Techno Shares & Stocks Ltd. s case (supra) would not be applicable to case under appeal. In view of foregoing, appeal filed by Revenue is allowed. *** MANOJ M. SHAH v. JOINT COMMISSIONER OF INCOME TAX