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TMI Blog2006 (9) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... gh which he can exercise the privileges of a cardholder, i.e., mainly trading on the floor of the Stock Exchange. The use of a card by a member is q nothing but an exploitation of this valuable right for the purpose of earning income on regular basis. Therefore, when a continuing member nominates another person in his place, it is nothing but the transfer of this right from one to the other. Accordingly, the card is a valuable property which entitles the members to deal in transactions on the floor of the Stock Exchange and without which one cannot transact such business. This right can be disposed of by a member by nomination, though subject to rules and regulations of Stock Exchange and settlement of debts and liabilities of the members of the Stock Exchange. The argument of the learned counsel was that exercising the right of nomination is not equivalent to transferring an asset. This argument has been met with by the Ahmedabad Bench of the Tribunal in the case of V.G. Gajjar [ 2004 (9) TMI 290 - ITAT AHMEDABAD-A] . We are in full agreement with the view expressed therein. Accordingly, in the present case, we hold that the transfer of membership card by the assessee to ASE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. CIT [1998] 231 ITR 906 (Guj.); (ii) Stock Exchange, Ahmedabad (ASE) v. Asstt. CIT [2001] 248 ITR 209 (SC); (iii) Dy. CWT v. Ashwin C. Shah [2002] 82 ITD 573 (Mum.). 5. Referring firstly to the judgment of the Gujarat High Court, it was pointed out by the learned counsel that the crucial question which fell for determination of the Hon'ble High Court was whether the right to nominate a member was a right to property and if so, whether it could be attached for the purpose of recovery of income-tax payable by the assessee. The Hon'ble High Court considered the issue at length and also considered the relevant rules and regulations of stock exchange. Finally, it came to the conclusion that the membership of a stock exchange has not only personal attributes but it carries a valuable property right to nominate which 'nomination' can be sold for a price to the nominee by the member having requisite standing, or, on his death by his heirs of course, with the sanction of the Board. Referring to the provisions of section 281B of the Income-tax Act, 1961 (for short 'the Act'). The High Court held that the words 'any property' under section 281B of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the membership right was held to be not a property by the Supreme Court, the membership right could not be considered to be a capital asset and hence no capital gains could arise on the transfer of the same. It was contended that the expression explained in a particular enactment should be given the same meaning, unless contrary was provided by the statute. Referring to the decision of the Tribunal in the case of Ashwin C. Shah, it was pointed out that the Tribunal there had duly taken note of the judgment of the Supreme Court and according to the said judgment, the membership card was a personal privilege and not a private asset. The learned counsel then referred to the provisions of section 47(xi). By relying on this provision, the argument of the department was that since this provision was incorporated in the statute treating the membership of a stock exchange to be a capital asset, it virtually means that the membership was in fact, a capital asset since beginning. This argument of the department was countered by the learned counsel by stating that if Heydon's Rule of Mischief is taken into consideration, then the mischief sought to be remedied, has to be viewed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nomination held by a member who had been declared defaulter vested with the Exchange and only the Exchange could exercise such right. Referring to other relevant clauses of the Articles of Association, it was pointed out that even corporate membership was recognized by the MSE and, therefore, the membership right could not be considered to be a personal privilege. The learned D.R. referred to the decision of the Delhi Special Bench in the case of Jagan Nath Sayal v. Asstt. CGT [2000] 72 ITD 1 and heavily relied on it. Reliance was also placed on the decision of the Ahmedabad Bench of the Tribunal in the case of V.G. Gajjar v. Dy. CIT [2005] 93 ITD 624 and of the Rajasthan High Court in the case of Ravindra Kumar Jain v. CIT [2003] 263 ITR 368. 11. We have duly considered the rival contentions and the material on record. It is true that the learned counsel for the assessee has placed heavy reliance on the judgment of the Supreme Court in the case of ASE. The facts and circumstances under which the said judgment was rendered needs to be taken note of. In this case, one of its members Rajesh Shah died on 7-2-1994. The heirs and legal representatives of Rajesh Shah wrote to the Stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right of nomination vests with the Stock Exchange authorities and such right can be exercised only by the Exchange. So far as death of a member is concerned, there is a slight variation in the MSE rules to the effect that legal representatives of a deceased member or his heirs may nominate any person eligible under the rules for admission to the membership of the Exchange. But this slight deviation also does not make any difference. During the subsistence of membership, what a person is holding is a valuable right through which he can exercise the privileges of a cardholder, i.e., mainly trading on the floor of the Stock Exchange. The use of a card by a member is q nothing but an exploitation of this valuable right for the purpose of earning income on regular basis. Therefore, when a continuing member nominates another person in his place, it is nothing but the transfer of this right from one to the other. In the case of ASE, the Supreme Court was dealing with a case of member whose right of nomination had ceased and had vested with Stock Exchange and not of a continuing member who is not a defaulter nor is he deceased. In the case of V.G. Gajjar, the Ahmedabad Bench of the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of the liabilities of the cardholders. It is an indirect way of receiving the consideration which is received either in cash or in kind and later would include the discharge of the liability of the member card. 20. All the three situations, in our opinion, are pointers of a fact that the Stock Exchange card is a property, it can be sold/transferred by nomination by the cardholder, though with permission of the Stock Exchange and on being declared as defaulter or his death by the Stock Exchange, which again gives to legal heirs a right to be substituted on repayment of dues of cardholders. The sale proceeds are utilized for discharge of his liability. It is this right in property, as held by the Supreme Court in the case of Prince Muffakham Jah Bahadur Chamlijan though it is an inalienable or of a character of personal right/permission, which is to be treated as a property within the wider meaning of section 2(e) of the Wealth-tax Act and consequently liable to be taxed. 13. Thus, all these decisions and judgments referred to above converge to the conclusion that the card is a valuable property which entitles the members to deal in transactions on the floor of the Stock ..... X X X X Extracts X X X X X X X X Extracts X X X X
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