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2017 (1) TMI 177 - RAJASTHAN HIGH COURT

2017 (1) TMI 177 - RAJASTHAN HIGH COURT - TMI - Capital asset treatment - transfer of membership ticket of stock exchange - Held that:- The membership of Stock Exchange is a personal privilege or a license and not a Capital Asset within the meaning of sec.2(14) of the Income Tax Act. As such admission fee paid by the assessee cannot be treated to be cost of acquisition. See M/s Techno Shares & Stocks Ltd. Versus The Commissioner of Income Tax IV [2010 (9) TMI 6 - SUPREME COURT OF INDIA ] and Sto .....

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reversed the order of the CIT(A) which allowed the appeal of the assessee. 2. While admitting the appeal, this Court vide order dated 28.2.2006 framed the following substantial questions of law for consideration:- 1. Whether on the facts and in the circumstances of the case the membership seat of a Stock Exchange is a property or merely a personal privilege granted to a member by the stock exchange and whether the same can be treated as Capital Asset within the meaning of section 2(14) of the Ac .....

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pital assets. 4. However, the Tribunal has allowed the appeal of the Department holding as under: 9. From the above, it is clearly emerging that the Hon'ble Supreme Court has not discussed at all the issue pertaining to long term capital gain. In that case the Supreme Court has discussed the question of nomination, their attachment etc. So the ratio laid down by the Supreme Court is not applicable in the instant case as the assessee's case is neither the case of nomination nor the death .....

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discussed that when membership of Stock Exchange is put on sale through nomination, a personal privilege is converted into an asset and consequential gain is exigible to tax. The ITAT Mumbai Bench has already discussed the ratio laid down by the Hon'ble Supreme Court in the case of Stock Exchange, Ahmedabad, supra. The Tribunal held that:- When the member puts his membership for sale and realizes a substantial value, it is difficult to deny that a valuable asset has been transferred. When m .....

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cases including Shri Pradeep Gupta vs. WTO(WTA Nos. 241/JP/99) dated 13.01.2004. 5. Now the issue is settled by the Supreme Court in 248 ITR 209 (Stock Exchange, Ahmedabad Vs. Assistant Commissioner of Income Tax) more particularly holding as under:- The appellant was a stock exchange recognised under the securities Contracts (Regulation) Act, 1956, and its rules, regulations and bye-laws were approved by the Government of India under that Act. Under rule 5 of the rules of the Stock Exchange, m .....

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free of all rights, claims or interest of the member or any person claiming through him. Though the member, and on his death his legal representatives, had a right of nomination, under rule 15, if the member was a defaulter or the legal representatives had not paid the dues in full, any nomination would not be approved by the governing body. Under Rule 16 when the governing body exercised the right of nomination vesting in the stock exchange, the consideration had to be applied first towards du .....

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he stock exchange declared R a deemed defaulter and resolved that his membership rights which vested in the stock exchange be disposed of, fixing a floor price of ₹ 25 lakhs for purchase of membership. On February 15, 1994, a provisional attachment order was issued under section 281B of the Income-tax Act, 1961, in respect of the stock exchange card in the name of R and margin money and security deposits kept with the stock exchange. The stock exchange took the stand that on the death or d .....

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not acceptable to the Department, the stock exchange filed a writ petition challenging the order of attachment and the garnishee notice; but the High Court dismissed the writ petition. On appeal to the Supreme Court : Held, reversing the decision of the High Court, that the right of membership of the stock exchange was not a private asset. It was merely a personal privilege granted to a member. It was non-transferable and incapable of alienation by the member or his legal representatives except .....

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not be attached under section 281B; and, since no amount on account of R was due from or held by the stock exchange, section 226(3) could not be invoked. 6. In view of decision of Supreme Court reported in[2010] 327 ITR 323 (SC) (Techno Shares and Stocks Ltd. Vs. Commissioner of Income Tax) wherein it has been held as under:- the question was whether the assessee-company could claim depreciation on the Bombay Stock Exchange membership card held by it on the basis that it was a licence or busine .....

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