1996 (1) TMI 19 - HC - Income Tax

Summary

Issues Involved:
1. Provisional attachment of deceased member's card, security deposit, and margin money u/s 281B of the IT Act, 1961.
2. Garnishee notice issued u/s 226(3) of the IT Act, 1961.
3. Nature of membership rights and their attachability.
4. Jurisdiction and validity of the provisional attachment and garnishee notice.

Summary:

1. Provisional Attachment u/s 281B:
The petitioner stock exchange challenged the provisional attachment order dated 15th Feb., 1994, issued u/s 281B of the IT Act, 1961, against Smt. Dipti R. Shah, as a legal heir of Rajesh Anubhai Shah. The attachment included the Ahmedabad stock exchange card, margin money, and security deposits. The attachment was justified on the grounds that substantial tax demand was anticipated, and the assessee had not made provisions for payment.

2. Garnishee Notice u/s 226(3):
The garnishee notice dated 14th June, 1995, required the stock exchange to pay any amount due to the deceased Rajesh A. Shah or his legal heir, amounting to Rs. 12,24,887. The stock exchange did not comply, leading to further correspondence from the Asstt. CIT, questioning why the stock exchange should not be treated as an assessee-in-default.

3. Nature of Membership Rights:
The court examined whether the membership right of a stock exchange is "property" and thus attachable. It was argued that the membership right is a personal privilege and not property. However, the court found that the right to nominate a successor has economic value and is, therefore, a property right. The membership card's attachment was, in substance, an attachment of this property right.

4. Jurisdiction and Validity:
The court held that the provisional attachment order and the garnishee notice were issued within the jurisdiction and lawful exercise of the powers of the concerned authority. The petitioner's objections to the garnishee notice would need to be adjudicated in a quasi-judicial enquiry by the tax authorities. The court rejected the petition, stating that the challenge to the validity of the orders on the ground of lack of jurisdiction or authority fails.

Conclusion:
The petition challenging the provisional attachment and garnishee notice was rejected, and the rule was discharged with no order as to costs. The court affirmed that the membership rights, having economic value, could be attached under the IT Act, and the tax authorities acted within their jurisdiction.