2006 (5) TMI 307 - AT - Income Tax

Summary

Issues Involved:
1. Whether the Membership of Stock Exchange is a personal right or an asset for the purpose of Wealth Tax?
2. If it is an asset, what would be its value?

Detailed Analysis:

Issue 1: Whether the Membership of Stock Exchange is a personal right or an asset for the purpose of Wealth Tax?

The primary issue revolves around whether the Membership of a Stock Exchange constitutes a personal right or an asset under section 2(e) of the Wealth Tax Act. The Tribunal analyzed various judgments and rules of the Stock Exchange to determine this.

The assessee argued that the Membership right is a personal privilege and cannot be valued in terms of money, citing several judgments such as Vinay Bubna v. Stock Exchange, Bombay, and Mrs. Sejal Rikeen Dalal v. Stock Exchange, Bombay. These cases established that Membership rights ceased upon the member's death or default, and the right to nominate vested with the Stock Exchange.

Contrarily, the Department argued that unless a member is declared insolvent, defaulter, or dies, they retain the right to nominate another person, which amounts to a transfer of right. This right to nominate is considered a property as it can be sold for a price, hence qualifying as an asset under section 2(e) of the Wealth Tax Act.

The Tribunal referenced the case of V.G. Gajjar v. Dy. CWT, where it was held that the Stock Exchange card is a property and consequently an asset under section 2(e) as it can be sold by nomination for a price. The Tribunal also noted that the Membership card enables the member to conduct business on the floor of the Stock Exchange, which is a valuable property right.

The Tribunal concluded that the Membership of the Stock Exchange is indeed a property and consequently an asset under section 2(e) of the Wealth Tax Act. It can be sold by nomination, thus having a market value.

Issue 2: If it is an asset, what would be its value?

The valuation of the Membership card was another significant issue. The Assessing Officer had valued the Membership card at varying amounts for different assessment years, which the assessee contested.

The Tribunal referred to the Special Bench decision in the case of Jagan Nath Sayal, which provided guidelines for valuing such assets. The Special Bench had emphasized that the market value should be the price a willing purchaser would pay to a willing seller, considering the card's existing conditions and potential possibilities.

The Tribunal directed the Assessing Officer to compute the value of the Stock Exchange card as per the guidelines laid down in the case of Jagan Nath Sayal, ensuring a proper opportunity of being heard to the assessee.

Conclusion:

The Tribunal held that the Stock Exchange Membership card is a property and an asset under section 2(e) of the Wealth Tax Act. It directed the Assessing Officer to value the card following the guidelines from the Jagan Nath Sayal case. The appeals were partly allowed for statistical purposes.