TMI Blog2004 (9) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... in enrolling a person as a Member, what rights and duties devolve upon such member by Membership. 3. The assessees, in these appeals, are members of Ahmedabad Stock Exchange. The object of the Stock Exchange, inter alia, is to support and protect the character and status of the brokers and dealers and to further the interests both the brokers and dealers and of the public interested in securities. Under the rules of the Stock Exchange the member has got, by virtue of membership, the privilege of going to exchange and dealing in the exchange. 4. Rule 2, provides that the Stock Exchange shall be constituted of those persons who are and shall hereafter be duly admitted a member of the Exchange according to the Rules for the time being in force. Rule 18, provides the eligibility to become a member and states that no person shall be admitted unless he worked for not less than two years as partner with or as an authorised clerk or remisier or apprentice to a member; or he agrees to work for a minimum period of two years as a partner or to work for such period as a representative member with another member and enter into bargains on the floor of the Exchange not in his own name but in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... member of or a subscriber to or a shareholder or debenture holder in or is connected through a partner or employee of a member of or is a member or director of or debenture holder in a company which is a member of or debenture holder in any other organisation, institution, association, company or corporation where forward business of any kind whether in goods or commodities or otherwise is carried on unless he undertakes on admission to sever such association or connection; he has been at any time expelled or declared a defaulter by any other stock exchange; he has been previously refused admission to membership unless a period of one year has elapsed since the date of such rejection. Upon intimation of election newly elected member is to pay entrance lee as per rule 32, admission fee as per Rule 33 and fees and annual subscription fee as per rule 34 and upon payment of admission fee, entrance fee and annual subscription fee certificate of admission is issued to the member together with an intimation of date from which he shall enjoy the rights and privileges and be subject to all the duties, liabilities and obligations of a member of the Exchange. As per Rule 36, a new member on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lations of the Exchange as shall have been admitted by the Governing Board shall be paid and satisfied in full before his legal representatives or heirs or the persons mentioned in Appendix-C to these rules are allowed to exercise the right of nomination. Rule 51, provides the payment of deceased Member's obligations which states that if the legal representatives of a deceased member or his heirs or the persons mentioned in Appendix-C to these Rules or any other person on his behalf do not or are unable to pay and satisfy his dues, debts, liabilities, obligations and claims as provided in the Rules, Bye-laws and Regulations the Governing Board shall exercise the right of nomination in respect of such membership and the consideration received, therefore, shall be applied in the manner provided in these Rules. Rule 52 provides continuance of Deceased Member's business which states that if legal representatives or heirs or the persons mentioned in Appendix C to these rules desire that his business should be continued for some time for the benefit of the deceased's family by any specified person who is eligible for membership and intimate their desire by a letter to the Exchange the Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights, claims or interest of such member or any person claiming through such member and the Governing Board shall be entitled to deal with or dispose of such right of membership as it may think fit. 11(a) A member of not less than seven years' standing who desires to resign may nominate a person eligible under these Rules, for admission in his place: Provided that a member of less than seven years' standing who desires to resign may with the sanction of the Governing Board, nominate his own son eligible under these Rules for admission to membership of the Exchange a candidate for admission in his place. (b) The legal representatives of a deceased member or his heirs or the persons mentioned in Appendix C to these Rules may with the sanction of the Governing Board nominate any person eligible under these Rules for admission to membership of the Exchange as a candidate for admission in the place of the deceased member. In considering such nomination the Governing Board shall be guided so far as practicable by the instructions set out in Appendix C to these Rules. (c) The forfeited right of membership of a defaulter shall be restored to him if he be re-admitted as a member w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her manner as it may deem fit." 4.2 Rules 20 and 21 deal with nomination and recommendation, which read as under: "20. A candidate for admission except a candidate applying for a membership vesting in the Exchange must obtain a nomination in the manner provided in these Rules. 21. A candidate for admission must be recommended by two members none of whom should be a member of the Governing Board. The recommenders must have such personal knowledge of the candidate and of his past and present circumstances as shall satisfy the Governing Board." 4.3 The form of application is provided in Rule 22 and then procedure for admitting of a member is prescribed in subsequent rule. 5. The assessee was admitted to membership of the Ahmedabad Stock Exchange and claimed that the membership card was nothing but a personal right amounting to assets within the meaning of wealth-tax, and therefore, no value thereof can be added in his wealth. The Assessing Officer referred to the decision of Gujarat High Court, Stock Exchange, Ahmedabad v. Asstt. CIT [1998] 231 ITR 906 and following further reasons, added the value of stock exchange card to the wealth of the assessee by observing as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) vide his order No. CIT(A)-II/AC-2(5)/10 11/97-98 dated 10-6-1999 has held fair market value of Ahmedabad Stock Exchange card as on 31-3-1991 at Rs. 10,00,000 as reasonable. Therefore, in view of clear decision of jurisdictional High Court and the fair market value of Stock Exchange card as on 31-3-1991 which was estimated earlier in case of Member of ASE, assessee was asked to show cause vide notice served on 4-1-2000 that why the fair market value of ASE, be not taken at Rs. 10,00,000 and may not be taken as asset for computing net wealth of the assessee. The assessee was also informed about the decision of Gujarat High Court and the fact that CWT(A) had held the fair market value of card at Rs. 6,00,000 as on 31-3-1990. 6. When the appeal came before the CIT(A), the judgment of the Supreme Court was announced in the appeal against the decision of the Gujarat High Court, which is reported in Stock Exchange, Ahmedabad v. Asstt. CIT [2001] 248 ITR 209. Quoting the head-notes of the judgment of Supreme Court, the CIT(A) observed that the question for consideration before the Hon'ble Apex Court was what would be position of the card held by the member in the special circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfers ... (ix) any transfer made on or before 31st day of December, 1997 by a person (not being a company) of a capital asset being membership of a recognized stock exchange to a company in exchange of shares allotted by that company to the transferee". Following explanation was then quoted "For the purpose of this clause, the expression 'membership of a recognized stock exchange' means the membership of a stock exchange in India which is recognized under the provisions of Securities Contracts (Regulation) Act, 1956. He then referred to Section 47A of the IT Act withdrawing the exemption by reproducing sub-section (2) thereto stating that where at any time, before the expiry of a period of three years from the date of the transfer of a capital asset referred to in clause (xi) of section 47, any of the shares allotted to the transferor in exchange of a membership in a recognized stock exchange are transferred, the amount of profits and gain not charged under section 45 by virtue of the provisions contained in clause (xi) of section 47 shall, notwithstanding anything contained in the said clause be deemed to be the income chargeable under the head 'Capital gains' of the previous ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pearing in WTA No. 107/Ahd./2001 while impugning the order of the Revenue Authorities took us through the above Rules and Bye-laws of Ahmedabad Stock Exchange and contended that membership right of a Member of a Stock Exchange is not 'properly', but a mere personal permission to carry on business as a share broker with other members for and on behalf of his constituents, subject to Rules Regulations of Stock Exchange. It was contended that such personal rights or permission neither be equated with expression "assets" available in section 2(e) of the Wealth-tax Act, 1957 nor it fell within the extended definition of the Wealth-tax Act. He, further contended that in case of death and default of a member is right of nomination ceases and vests in the Stock Exchange. According to him, this is not only a right which has any value, but this right is not an absolute right. In this connection, he referred Rule 9 of Stock Exchange Rules and contended that this right of nomination is subject to Rules 5 6. These Rules prohibit a member from assigning his rights of membership or any right or privilege attached to such membership. Thus, it is only a personal permission from the Exchange to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Stock Exchange. Mr. Manish Shah appearing in WTA No. 27/Ahd./2000 adopted the earlier arguments of Mr. Sanjiv Shah and Mr. Soparkar and also submitted that in his case the reopening was made after four years and reliance on Gujarat High Court decision in the case of Stock Exchange, Ahmedabad v. Asstt. CIT [1998] 231 ITR 906 would not be any help for justifying re-opening in view of later decision of the Supreme Court reversing the decision in the above case of Gujarat High Court in Stock Exchange, Ahmedabad v. Asstt. CIT [2001] 248 ITR 209. According to him, re-opening was also invalid. Mr. Divetia appearing in WTA Nos. 17, 18, 81, 96 and 101/2001 adopting the earlier arguments further submitted that the matter was decided ex par it and there was no basis for the valuation of the card as on 31-3-1991 at Rs. 7 lakhs. He also referred to provisions of section 16A of the Wealth-tax Act. Mr. M.K. Patel in WTA No. 44/2003 adopting the earlier arguments also submitted that the valuation was not in accordance with the law. Mr. Chirag Shah appearing in WTA Nos. 86 and 88/2001 submitted that the card held by the assessee was less than seven years, and therefore, the assessee in his case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Supreme Court has considered the right devolves upon a Member from the membership card of Stock Exchange in altogether different context. Therefore, the judgment of the Supreme Court cannot give any help to the assessee to say that a membership card has no element of property. He submitted that the Bombay High Court in a recent decision in the case of Stock Exchange, Bombay v. V.S. Kandalgaonkar [2003] 261 ITR 577 has again considered the controversy elaborately which is analogous to the dispute raised before the Supreme Court in Stock Exchange, Ahmedabad's case. The Bombay High Court has upheld the attachment of the balance surplus attributable to such Member who has been relinquishing his right of membership either by way of default or death or any other form. The Stock Exchange Rules provide how the sale proceeds of a Stock Exchange card or right of nomination are to be appropriated. Such appropriation is to be according to Rules and the surplus would be given to the Member whose membership card has been put to sale or who has given up his right of nomination. The Bombay High Court has upheld the attachment of such surplus. In this way, the Id. DR submitted the depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -defaulting, surviving member has economic value and, therefore, constitute property within the meaning of section 2(e) of the W.T. Act. (ii) The decision of Apex Court in the cases of Stock Exchange, Ahmedabad and Vinay Bubna are specific to the defaulting member who ceases to be a Member of Stock Exchange and therefore, do not have any interest in their card and accordingly, the same could not be regarded as their assets. In view of this, the decision of the Apex Court has limited applicability to the specific facts of these cases and cannot be applied to all members having interest in membership cards. (iii) The right to assign membership, subject to certain rules, can be quantified in monetary terms and can constitute property. (iv) The decision of Bombay High Court in Stock Exchange, Bombay v. V.S. Kandalgaonkar [2003] 261 ITR 577 and Rajasthan High Court decision in Ravindra Kumar Jain v. CIT [2003] 132 Taxman 882 are subject to the decisions of Apex Court and in both the decisions, transfer of membership rights have been considered as valuable assets in the hands of members. In view of the above, the decision of the Supreme Court on the issue of membership right of sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s where the member is not a defaulter. Therefore, the ratio of the decision of Gujarat High Court is still applicable that the right to nominate as per Ahmedabad Stock Exchange has an economic value and, therefore, wherever such right exists and the member is not a defaulter, the corresponding membership card will be a property. 7. The Bench of ITAT, Mumbai has based its decision in the case of Ashwin Shah, 254 ITR 90 on the incorrectly understood ratio of the above-mentioned judgment of Supreme Court. The ratio incorrectly understood by the above Bench is: 'Membership of Stock Exchange is a mere personal privilege and that the right of nomination is not automatic but is hedged in by several conditions. On the right of nomination vesting in the stock exchange under the Rules, the right belongs to stock exchange absolutely.'" The Supreme Court has made the above observation but the issue whether such hedged right of nomination would not be a property has not been decided by the Supreme Court. The correct ratio of the above judgment is 'Both in case of default and death the right of nomination vests in Stock Exchange as per rule 9 of Ahmedabad Stock Exchange. Moreover, the lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the issue 'whether the said card was the property belonging to the assessee' as could be seen in point (b) above besides considering whether after his demise it devolved upon legal heirs. Therefore, it is not correct to say, as contended by learned DR, that Supreme Court was considering a proposition about Stock Exchange card to be considered as a property after the death of the member. This would get further corroborated by the ultimate conclusion drawn by the Supreme Court which is mentioned in second para on page 214 as under: 'The question whether right of a membership confers upon the member any right of property is, therefore, to be examined within the framework of the rules, bye-laws and regulations of the exchange. On a plain and combined reading of the rules, it is clear that the right of membership is merely a personal privilege granted to a member, it is non-transferable and incapable of alienation by the member of his legal representatives and heirs except to the limited extent as provided in the rules on fulfilment of conditions provided therein.' Further, the contention that the Supreme Court has not adjudicated upon the issue of possibility of nomination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof remains a valid proposition of law after the decision of Supreme Court. The learned AR further submitted that the contention of learned DR in para 7 of his note that ITAT, Mumbai in the case of Ashwin Shah 82 ITD 579 has incorrectly understood the ratio of Supreme Court decision is also, therefore, to be rejected in view of the analysis of the Supreme Court judgment made out in earlier paras. In fact the Bombay Tribunal in that case has dealt with every possible and conceivable argument from the department in point at issue and has then come to the conclusion that stock exchange card whether in respect of a dead, defaulting or living member is a personal permission and hence not asset under section 2(e) of the Wealth-tax Act liable to wealth-tax. He further submitted that recently also another Bench of Bombay Tribunal in the case of Upendra M. Dalai 89 ITD 629 had occasion to deal with a part of the above controversy in relation to chargeability to capital gain on nomination of another member in place of the existing member. The Tribunal therein decided the issue against the assessee holding that as and when an existing member nominates another person in his place and thus exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also adequately dealt with by the Mumbai Tribunal in the case of Ashwin C. Shah at paras 22 to 24 on page 589. Therefore, the Special Bench decision of Jagannath Sayal may be a good law for Delhi Stock Exchange but not with respect to the members of Ahmedabad and Bombay Stock Exchanges, where the rules are different from Delhi Stock Exchange. Lastly, the issue regarding the applicability of Mumbai Bench decisions in Ashwin C. Shah's case was recently examined in one of the cases by Ahmedabad C Bench in the matter of appeal Nos. 3347/Ahd./96 and 3429/Ahd./96 in the case of Vasudev G. Gajjar v. Asstt. CIT decided on 28-11-2003 and the ratio whereof is as under: 'We have considered the rival submissions and perused the record and also have gone through the decisions cited. After considering the totality of the case and on perusal of the decision of the Tribunal, Mumbai Bench we find that on identical set of facts it has been held that the stock exchange card of the Bombay Stock Exchange is not an asset under section 2(e) of the Wealth-tax Act. On perusal of the said decision of the Tribunal, we find that the observation about the decision of the Special Bench of Tribunal, Delhi cit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... card cannot be said to be having any value liable to wealth-tax." 11. We have heard the parties and considered the rival contentions. Much emphasis has been put on the ratio laid down by the Supreme Court in Stock Exchange, Ahmedabad's case by both the sides. Let us see the applicability of the above decision of the Supreme Court in 'exclusion' or 'inclusion' of value of Stock Exchange membership card for the purpose of Wealth-tax Act, 1957. In this case one Rajesh Shah was a member since 19-2-1988 and he died on 7-2-1994. His legal representatives declined and did not opt to exercise the rights of nomination and wrote to the Exchange that they were unable to meet the liabilities of the Stock Exchange. The Stock Exchange, therefore, passed a resolution declaring Rajesh Shah to be a deemed defaulter and assumed the membership rights which were resolved on 12-2-1994 to be disposed of for a sum of Rs. 25 lakhs as minimum floor price, but actually sold later for Rs. 27 lakhs to UTI on 5-12-1994. The Assessing Officer issued 281B order of provisional attachment in respect of (i) Stock Card, (ii) Margin Money, and (iii) Security Deposit. The Assessing Officer issued a notice under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtent provided in the rules and subject to fulfilment of certain conditions." 11.3 The right of nomination is thus there but hedged by rules. This is further evident by saying it to be a case similar to Official Assignee of Bombay v. K.R.P. Shroff [1933] 3 Comp. Cas. 12 (PC) wherein the member lost his membership for being declared as a defaulter. Vinay Bubna v. Stock Exchange [1999] 97 Comp. Cas. 874 (SC) also recognize it as personal permission from Exchange to exercise right and privileges and not a private asset. This was a case of defaulter and the Supreme Court in Stock Exchange, Ahmedabad's case observed no difference in the case of defaulter or death as in both cases they loose their right of nomination. That this was a case of death is evident from the following paragraph:- "The heirs and legal representatives of Rajesh Shah, as already noticed, had informed the stock exchange that they were unable to meet the liabilities of the deceased and the appropriate decision in that behalf may be taken by the stock exchange. It is evident that they did not exercise the right of nomination under rule 11 read with Appendix C. They did not pay or satisfy the dues and claims as req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the broker was declared a defaulter by the stock exchange on June, 1994, his membership card may be auctioned. By the said letter, the stock exchange was informed that the said broker was in arrears of income-tax to the tune of Rs. 25,43,551 and, therefore, it was necessary to apportion a part of the amount realised from the auction for the purposes of meeting outstanding income-tax dues. Accordingly, the stock exchange was called upon by the Assessing Officer to issue a cheque in favour of the RBI in respect of outstanding demands. By the said letter, the Assessing Officer further stated that he would be issuing notice under section 226(3) of the Income-tax Act on receiving intimation from the stock exchange regarding auctioning of the membership card. The stock exchange refused to pay and the Tax Recovery Officer issued a prohibitory order attaching the membership card and the credit balances in the account of the broker in the books of the stock exchange. The said card and the nomination rights were sold by the BSE and a surplus of Rs. 37,85,199.93 lying with the Exchange out of the sales proceeds thereof which had came in the hands of BSE for and on behalf of the defaulter memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conduct of trade and business [rule 4(i)]. Under rule 4(xi), the BSE is required to establish and maintain a clearing house for the object and purpose of the BSE. Under rule 5 it is declared that the membership shall constitute a personal permission from the BSE to exercise rights and privileges attached thereto subject to rules, bye-laws and regulations of the exchange. Under rule 6, the right of membership is inalienable. Under rule 7, a member has a right of nomination which is personal and non-transferable. Under rule 8, the right of nomination is not exercisable by a former member who has been expelled or who has ceased to be a member under any rule, bye-law or regulation. Under rule 9, on death or default of a member, his right of nomination shall cease and vest in the exchange. Under rule 10, when a right of membership is forfeited or vested in the BSE, such right shall belong absolutely to the exchange free of all rights, claims or interest of such member or any person claiming through such member and the governing board shall be entitled to deal with or dispose of such right of membership as it may think fit. Rule 16 deals with allocation in order of priority. It lays d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he defaulter remaining in the hands of the defaulters' committee is provided for. It lays down that the defaulters' committee shall apply the net assets in satisfying firstly the claim of the exchange and the clearing house and then rateably such admitted claims of members against the defaulters arising out of contracts entered into in the market. Bye-law No. 400 deals with application of defaulters' assets and other amounts. It lays down that the defaulters' committee shall realise and apply all the money, rights and assets of the defaulter which have vested in the defaulters' committee for the following purposes and in the order of priority mentioned therein. Sub-clause (ix) of bye-law No. 400 states that surplus, if any, shall be paid to the defaulter. It is clarified that bye-law No. 400 does not apply to the amount paid by the governing board to the defaulters' committee under rule 16A in respect of consideration received by the governing board for exercising the right of nomination in respect of the defaulters' erstwhile right of membership as the same does not belong to the defaulter and as the defaulter has no claim, right, title or interest therein. Under bye-law No. 401, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the clearing house is handled by the Bank of India Shareholding Ltd. in which the BSE holds 49 per cent and the BOI holds 51 per cent. The clearing house acts as a common agent of the members for clearing contracts between members and for delivering securities and for receiving securities from and for receiving or paying any amount payable to or payable by such members in connection with any of the contracts entered into by the members on the stock exchange. Under bye-law No. 316, grounds are given for declaring a member a defaulter. Under bye-law No. 326, the defaulters' committee is empowered to call for and realise the security and margin money and securities deposited by the defaulter. The defaulters' committee is also empowered to recover all monies, securities and other assets due, payable or deliverable to the defaulter by any other member of the stock exchange in respect of the transactions or dealings carried out on the floor of the stock exchange. Under bye-law No. 326, it is further provided that all such assets of the broker shall vest in the defaulters' committee for the benefit of creditor-members. We have already discussed the remaining bye-law Nos. 338, 342, 342A, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) read with the general body resolution dated October 13, 1999. This balance had to be paid over by the BSE to the Tax Recovery Officer in accordance with the show-cause notice under section 226(3)(i). (ii) That there is a clear dichotomy under the rules and bye-laws between the sale of membership card and recovery of the defaulter's other assets and application thereof. Even on the vesting of such other assets in the defaulter's committee, such other assets continue to belong to the member-broker for the purposes of distribution, which is for the benefit of the BSE, the clearing house and other creditor-members so that these other creditor-members dues could be recovered expeditiously. The other assets were attachable and recoverable under the provisions of section 226(3)(i) and (x) read with rule 26(1)(a) and (c) of Schedule II of the Income-tax Act, 1961. (iii) That the Government and other creditors such as the BSE, the clearing house and other creditor-members under the rules and bye-laws of the stock exchange were creditors of equal degree and under section 73(3) of the Code of Civil Procedure, 1908, the Government dues had priority over other such creditors." 13.3 Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mprehensive provisions and all assets were included in the net wealth by the very definition. Therefore, when section 3 imposed the charge of wealth-tax on the net wealth it necessarily included in it every description of property of the assessee, movable and immovable, barring the exceptions stated in section 2(3) and other provisions of the Act. We are entire concurrence with that view. There is no reason or justification to give any restricted meaning to the word 'asset' as defined by section 2(e) of the Act when the language employed shows that it was intended to include property of every description. On a proper construction of the relevant clauses in the wakf deed we are not satisfied that the aliquot share income provided for the beneficiaries was meant merely for their maintenance and support... Mr. Sen has laid emphasis on the language of section 7(1) of the Act and has contended that the right to a share the income is not capable of any valuation and the price which it would fetch, if sold in the open market, could not possibly be ascertained. Such an argument was fully examined in the Bombay case in which the High Court referred to the provisions of the English statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee has right to reside in the house for the duration of his life though it was personal and inalienable, was property which would have a market in an assumed market place. In other words, and assuming somebody would acquire this personal right in the property during the life-time of the assessee and pay a price for it. The right of the assessee had to be included in the wealth of the assessee for the purpose of wealth-tax. In the present case, it is not a mere right to live in house but a right as a member to conduct business on the floor of Stock Exchange, which would have not been possible to carry out unless he holds the membership card. It may be a personal right or a personal permission and also inalienable but in light of the aforesaid three decisions of the Supreme Court, it is a property so long as the member continues to be a member and has right to nomination thereof to transfer the card of the Stock Exchange. It would be, of course, be a different situation, if the member is declared to be a defaulter or he dies, because in that situation, Rules of Stock Exchange provides that the property in the card and right of membership card vested in Stock Exchange an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions do not take away completely, though they may restrict the value of the important right, which has been passed through nomination. Thus, rights and interests in the Stock Exchange card are not attachable in garnishee proceedings because, in the case of defaulting or deceased Member, the rights in the cards vest in the Stock Exchange. However, when such a holder of Stock Exchange card makes an application for nomination with the consent of the person to be nominated, the privilege enjoyed under the said Card does not remain a personal privilege. When the membership of Bombay Stock Exchange is put to sale through nomination, a personal privilege is concerted into an asset and the consequential gain is exigible to tax. This would be in line with the legislative intent as apparent from the provisions of section 47(xi) and the CBDT circulate and would also be in conformity with the ground realities which show that membership cards are being sold for substantial consideration. 16. In the case of Ravindra Kumar Jain before the Rajasthan High Court, a deemed gift under section 4(1)(a) was upheld by observing that there was a transfer of membership by the assessee and his member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s capital assets, and in order to know such intention the provisions of the Finance Act, 1997 has taken into consideration which came into effect from 1-4-1988. Section 47 of the Income-tax Act deals with the exempt assets whose transfer does not yield any capital assets and while listing out such assets in clause (xi), the membership of a recognized stock exchange is specifically recognized as a capital asset. The Delhi Stock Exchange is limited company and it issued shares. By virtue of holding shares, as such, Special Bench held a shareholder is not entitled to transact the business in the Stock Exchange. He should also become a member by following the prescribed formalities. It is also observed that the shareholder is different from a member of DSE according to the bye-laws of DSE. A member can co-opt several others and he can form a partnership with others and, therefore, the contention that membership does not confer any proprietary right but it represents only a personal permission, is to be repelled. It is further observed that a person purchases the shares with a view to become the member of the stock exchange. It is a condition precedent for becoming the member of the DSE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as such cease to enjoy any of the rights and privileges of membership, but the rights of his creditor members against him shall remain unimpaired. There also the share can be transferred only to a member of stock exchange or a candidate for membership of stock exchange who has been duly elected as eligible for membership by Board of Directors of the Stock Exchange and under Article 24, the share broker is given wide field to choose his associate as also his heir. A shareholder in the Articles of Association has been defined to mean any persons, individuals or firm registered in the books of the company as owner of any share in the capital of the company and the members of the stock exchange defined to mean a member authorised to operate on the stock exchange. Thus, the definition of shareholder and definition of member indicates different categories of the persons. 18. A card holder member of the Stock Exchange is given a right of nomination by Rule 11 of the Stock Exchange. That is nothing but nominating or selecting the purchaser or the transferee of the card. He enjoins and has that right until he is declared defaulter or he dies. Till then it vests only in him, though, subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the views of other Division Bench, the matter should be posted before the larger Bench for considering the question. But that principle is subject to certain limitations, as observed by the Tribunal in the case of Dy. CIT v. Mira Industries [2003] 87 ITD 475 (Ahd.) viz., (i) the facts are the same, (ii) no new facts are brought on record, (iii) no change in the circumstances under which the decision was reached is there, (iv) there is no decision of a higher court, or (v) there is no change in the statutory provision of law. A decision reached on particular facts and on consideration of the law prevailing at that time can be deviated from it some new facts are brought on record or some more cases of higher courts on the subject have come to its notice. It would be justified and indeed under a duty to take a view commensurate to the new development and also because each year and each assessee is a separate year and a separate assessee and the principle of res judicata and estoppels did not apply to income-tax proceedings even though the department is one and also because in the earlier order some of the decisions of the Supreme Court and the High Courts were not considered. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aitship and in the case of Purshottam N. Amarsay, the right of the settler to live as far as possible with the same comforts and to enjoy the life in the same manner as he was accustomed to. In all these three cases, the rights and privileges were personal and inalienable and the Supreme Court uniformly held that such interest was an asset within the meaning of section 2(e) of the Act because the language employed shall that it was intended to include the property of every description. 23. To summarise, the stock exchange card is a property and consequently an asset under section 2(e) of the Wealth-tax Act, because: (i) it can be sold by nomination for a price- - by the member himself on resignation from his membership under Rule 11(a); - by the Stock Exchange, or by member himself on restoration of his membership by governing body on his being declared as a defaulter under Rule 11(c); - by the Stock Exchange or legal heirs of the deceased if the governing body so approves on his death under Rule 11(b). (ii) Rule 12 also provides for fresh nomination, if the first nominee is not found to be eligible to become a member as per the rules of the Stock Exchange. (iii) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or admission in his place on their satisfaction of the liabilities of the stock exchange under rule 16(a) and 16(b). It is only thereafter that the stock exchange governing body becomes entitled to and deal with and dispose of such right, as it thinks fit, under Rule 10, but are also subject to utilisation of proceeds in order of priority under rules 19(a) and 16(b) of the Rules. The aim and objects are to take care of settling the debts and liabilities of the members to the stock exchange on penalties etc. that may be levied upon him for the default. If still there is a surplus, the instances are that money has to go back to defaulting members or his legal heirs and one such instance in the later decision of the Bombay High Court in the case of V.S. Kandalgaonkar, wherein a substantial sum of Rs. 37 lakhs and odds was decided to be given back to the defaulter member on realization of his card after satisfaction of his liabilities and was held by for and on behalf of the defaulter member. These are the indications that the member of a Stock Exchange has a right in property and an antecedent right of the member in the card. 26. The contention of the learned counsel for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in every case was excessive. The Special Bench in the case of Jagan Nath Sayal as regards valuation held that- "The Assessing Officer is duty bound to determine the market value of the card. Market value may be said to be the price that a willing purchaser would pay to a willing seller for a property having due regard to its existing conditions, with all its existing advantages and its potential possibilities when laid out on its most advantageous manner. In view of this, the composite value of the ticket cannot be determined with reference to the BSE sensex. Nor the auction value of BSE is relevant. The argument that the value of ticket depends on the business acumen of a broker is not tenable. A notice shooter may not yield result, while with the same weapon an experienced shooter may hit the target. The gun is the same. Result depends on the expertise. The gun will fetch the price according to its quality. The experience or inexperience of its own in its operation is not relevant for determining its value. The provisions of section 16A(1) read with rule 3(b) of the Wealth-tax Rules, 1957 mandatorily require the WTO to make a reference to the DVO, if the difference in the v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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