TMI Blog2009 (10) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... . RAMACHANDRAN NAIR and V.K. MOHANAN JJ. K.B. Mohamedkutty and K.M. Firoz for the appellant. P.K.R. Menon and Jose Joseph for the respondent. JUDGMENT The judgment of the court was delivered by 1. C. N. Ramachandran Nair J.- The question raised in the appeal filed by the assessee is whether the Income-tax Appellate Tribunal was justified in holding that the sale of membership card of the appellant by the Cochin Stock Exchange attracts liability for capital gains under section 45 of the Income-tax Act, 1961 (hereinafter referred for short. "the I. T. Act".) 2. We have heard Sri K. B. Mohamedkutty, senior counsel appearing for the appellant and the standing counsel appearing for the respondent. 3. The appellant-asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embership card of stock exchange is not an item excluded under the said clause. However, it is pertinent to note that section 47(xiiia) of the Income-tax Act provides for exclusion of capital gains on the sale of membership right held by a member of a recognized stock exchange in India for the purpose stated therein, that is, for acquisition of shares and trading or clearing rights acquired by such member in that recognized stock exchange in accordance with a scheme for demutualisation or corporatisation which is approved by the Securities and Exchange Board of India. A membership card which confers right on the member to trade in stock and shares in the exchange, is certainly a property. So much so, it falls within the definition of "capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebts and obligations due to exchange and Department/Clearing House. Finally, it is made very clear in the said clause that if any balance is left after making payments as stated therein, the same shall be paid to the defaulting member or to his nominee or his legal heirs, if the member is dead. In other words, the appellant happens to be the beneficiary of the sale of his membership by stock exchange because the sale proceeds are adjusted to discharge his debts and the balance if any is also payable to him. Since the stock exchange membership card which is sold in auction is property covered by the description "capital asset" under section 2(14) of the Income-tax Act, its sale by stock exchange amounts to "transfer" within the meaning of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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