2016 (12) TMI 1134 - HC - Wealth-tax

Stock Exchange Card of Ahmedabad Stock Exchange liability to Wealth Tax Act - Held that - So long as assessee holds Membership Card and is non defaulting Member such a Membership Card can be said to be an assets within the definition of Section 2(e) of the Act, 1957 and on the same the assessee is liable to pay Wealth Tax. The question answered in favour of Revenue and against the assessee.

Summary

Issues Involved:
1. Whether the Stock Exchange Card of Ahmedabad Stock Exchange is liable to Wealth Tax under the Wealth Tax Act, 1957.
2. Interpretation of Supreme Court decisions in Stock Exchange, Ahmedabad vs. ACIT (2001) 248 ITR 209 and Vinaj Bubna vs. Stock Exchange, Mumbai (1999) 6 SCC 215.
3. Applicability of the decision in MS Techno Shares & Stocks Limited vs. Commissioner of Income Tax IV (327 ITR 323) to the present case.

Detailed Analysis:

Issue 1: Liability of Stock Exchange Card to Wealth Tax

The core issue was whether the Stock Exchange Card held by the assessee, a member of the Ahmedabad Stock Exchange, could be considered an "asset" under Section 2(e) of the Wealth Tax Act, 1957, and thus liable to Wealth Tax. The Assessing Officer, CIT(A), and ITAT had all ruled that the Stock Exchange Card was liable to Wealth Tax. The High Court upheld this view, stating that as long as the assessee holds the Membership Card and is a non-defaulting member, the card can be considered an "asset" within the definition of Section 2(e) of the Wealth Tax Act, 1957.

Issue 2: Interpretation of Supreme Court Decisions

The assessee relied heavily on Supreme Court decisions in Stock Exchange, Ahmedabad vs. ACIT (2001) 248 ITR 209 and Vinaj Bubna vs. Stock Exchange, Mumbai (1999) 6 SCC 215 to argue that the Stock Exchange Card should not be considered an asset. The Supreme Court had previously held that membership rights were personal privileges and not property that could be attached or sold upon default. However, the High Court distinguished these cases by noting that they involved defaulting members, whereas the present case involved a non-defaulting member. Therefore, the earlier Supreme Court decisions were not directly applicable to the facts of this case.

Issue 3: Applicability of MS Techno Shares & Stocks Limited Decision

The Revenue relied on the Supreme Court decision in MS Techno Shares & Stocks Limited vs. Commissioner of Income Tax IV (327 ITR 323), which held that the membership right could be considered an "asset" for the purposes of Section 32(1)(ii) of the Income Tax Act. The High Court found this decision applicable, as it involved a non-defaulting member and concluded that the membership card has economic and money value, thus qualifying as an "asset." The court noted that the right of membership, including the right of nomination, continues to hold value as long as the member is not in default.

Conclusion:

The High Court concluded that the Stock Exchange Card held by a non-defaulting member of the Ahmedabad Stock Exchange is an "asset" under Section 2(e) of the Wealth Tax Act, 1957, and is therefore liable to Wealth Tax. The court distinguished the present case from earlier Supreme Court decisions involving defaulting members and relied on the MS Techno Shares & Stocks Limited decision to support its ruling. Consequently, the appeal was dismissed, and the question was answered in favor of the Revenue and against the assessee.