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TMI Blog2017 (1) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... artment. - D.B. Income Tax Appeal No. 17/2006 - - - Dated:- 30-11-2016 - K. S. Jhaveri And Dinesh Mehta, JJ. For the Appellant : S. L. Jain For the Respondent : K. D. Mathur, R. B. Mathur ORDER 1. By way of this appeal, the assessee has challenged the judgment and order passed by the Tribunal whereby the Tribunal has reversed the order of the CIT(A) which allowed the appeal of the assessee. 2. While admitting the appeal, this Court vide order dated 28.2.2006 framed the following substantial questions of law for consideration:- 1. Whether on the facts and in the circumstances of the case the membership seat of a Stock Exchange is a property or merely a personal privilege granted to a member by the stock exchan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re quite different. 10. On the other hand, the ITAT Mumbai Bench in the case of Upendra M. Dalal Vs. DCIT, 89 ITD 629 has discussed that when membership of Stock Exchange is put on sale through nomination, a personal privilege is converted into an asset and consequential gain is exigible to tax. The ITAT Mumbai Bench has already discussed the ratio laid down by the Hon'ble Supreme Court in the case of Stock Exchange, Ahmedabad, supra. The Tribunal held that:- When the member puts his membership for sale and realizes a substantial value, it is difficult to deny that a valuable asset has been transferred. When membership of the Bombay Stock Exchange is put on sale through the nomination, a personal privilege is converted into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember, and on his death his legal representatives, had a right of nomination, under rule 15, if the member was a defaulter or the legal representatives had not paid the dues in full, any nomination would not be approved by the governing body. Under Rule 16 when the governing body exercised the right of nomination vesting in the stock exchange, the consideration had to be applied first towards dues of the member to the stock exchange and clearing house, then towards dues to other members and the disposal of the balance, if any, was at the absolute discretion of the stock exchange in general meeting. R, who became a member of the appellant stock exchange on February 19, 1988, died on February 7, 1994. On February 12, 1994, his heirs and leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was merely a personal privilege granted to a member. It was non-transferable and incapable of alienation by the member or his legal representatives except to the limited extent provided in the rules and subject to fulfillment of conditions. The nomination wherever provided was not automatic; it was hedged by rules. On the right of nomination vesting in the stock exchange under the rules, that right belonged to the stock exchange absolutely. In the case of the death or default of a member, his right of nomination ceased and vested in the stock exchange. The membership right or membership card or R was not the property of R and, therefore, it could not be attached under section 281B; and, since no amount on account of R was due from or held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a licence which was one of the items which fell in section 32(1)(ii). The right to participate in the market had an economic and money value. It was an expense incurred by the assessee which satisfied the test of being a licence or any other business or commercial right of similar nature in terms of section 32(1)(ii). 7. Respondent was not in a position to dispute the same. 8. In this view of the matter, we are of the opinion that the membership of Stock Exchange is a personal privilege or a license and not a Capital Asset within the meaning of sec.2(14) of the Income Tax Act. As such admission fee paid by the assessee cannot be treated to be cost of acquisition. The questions are therefore answered in favour of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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