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TMI Blog2004 (9) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... In all the cases cited at the Bar, the Stock Exchange has sold/auctioned card and that also is another pointer that the card holder has right in property or so to say the card is property in itself and consequently, an asset within the meaning of section 2(e) of the Wealth-tax Act. A membership card which can be sold for a price without with the permission and subject to rules and regulations of stock exchange would undoubtedly be a property and, therefore the members right thereon would be an interest in property and consequently the Supreme Court in the case of Prince Muffakham Jah Bahadur Chamlijan [ 2000 (12) TMI 100 - SUPREME COURT] and other-two decisions in the case of Ahmed G.H. Ariffs [ 1969 (8) TMI 4 - SUPREME COURT] and Purshottam N. Amarsay would be clearly applicable wherein it has been held that the right though inalienable and personal privilege would be an asset within the meaning of section 2(e) of the Wealth-tax Act. The case in Prince Muffakham Jah Bahadur Charnlijan was case of a life interest to reside in a property. In the case of Ahmed G.H. A riff there was a right of beneficiary to receive an adequate share of net income of the properties comprised in a Wak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in respective appeals in the later part of this order. But, first we take up the issue whether the Stock Exchange Membership Card held by the assessees in Ahmedabad Stock Exchange is an asset within the meaning of section 2(e) of the WT Act, 1957 and liable to tax. 2. The facts leading to controversy are not in dispute. The adjudication of the controversy depends upon the interpretation of Rules and bye-laws of Stock Exchange vis-a-vis WT Act, 1957. Therefore, before taking note of arguments advanced by the learned counsel, it is salutary to take note of Rules, Bye-laws of Stock Exchange in enrolling a person as a Member, what rights and duties devolve upon such member by Membership. 3. The assessees, in these appeals, are members of Ahmedabad Stock Exchange. The object of the Stock Exchange, inter alia, is to support and protect the character and status of the brokers and dealers and to further the interests both the brokers and dealers and of the public interested in securities. Under the rules of the Stock Exchange the member has got, by virtue of membership, the privilege of going to exchange and dealing in the exchange. 4. Rule 2, provides that the Stock Exchange shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has been adjudged bankrupt or a receiving order in bankruptcy has been made against him or he has been proved to be insolvent even though he has obtained his final discharge; he has compounded with his creditors unless he has paid sixteen annas in the Rupee; he has been convicted of an offence involving fraud or dishonesty; he is engaged as principal or employee in any business other than that of securities except as a broker or agent not involving any personal financial liability unless he undertakes on admission to sever his connection with such business; he is associated with or is a member of or a subscriber to or a shareholder or debenture holder in or is connected through a partner or employee of a member of or is a member or director of or debenture holder in a company which is a member of or debenture holder in any other organisation, institution, association, company or corporation where forward business of any kind whether in goods or commodities or otherwise is carried on unless he undertakes on admission to sever such association or connection; he has been at any time expelled or declared a defaulter by any other stock exchange; he has been previously refused admissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er unconditionally or on such conditions as it may think fit or may refuse to accept such resignation and in particular may refuse to accept such resignation until it is satisfied that all outstanding transactions with such member have been settled. Rule 50 provides that when a member dies all subscriptions, debts, fines, fees, charges and other monies as shall have been determined by the Governing Board to be due by him to the Exchange or to the Clearing House and all debts, liabilities, obligations and claims arising out of any contracts made by him subject to the Rules, Bye-laws and Regulations of the Exchange as shall have been admitted by the Governing Board shall be paid and satisfied in full before his legal representatives or heirs or the persons mentioned in Appendix-C to these rules are allowed to exercise the right of nomination. Rule 51, provides the payment of deceased Member's obligations which states that if the legal representatives of a deceased member or his heirs or the persons mentioned in Appendix-C to these Rules or any other person on his behalf do not or are unable to pay and satisfy his dues, debts, liabilities, obligations and claims as provided in the Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the right of nomination which shall be personal and non-transferable. 8. The right of nomination shall not be exercised by a former member who has been expelled or who has ceased to be a member under any Rule, Bye-law or Regulation of the Exchange for the time being in force. 9. On the death or default of a member his right of nomination shall cease and vest in the Exchange. 10. When a right of membership is forfeited to or vests in the Exchange under any Rule, Bye-law or Regulation of the Exchange for the time being in force it shall belong absolutely to the Exchange free of all rights, claims or interest of such member or any person claiming through such member and the Governing Board shall be entitled to deal with or dispose of such right of membership as it may think fit. 11(a) A member of not less than seven years' standing who desires to resign may nominate a person eligible under these Rules, for admission in his place: Provided that a member of less than seven years' standing who desires to resign may with the sanction of the Governing Board, nominate his own son eligible under these Rules for admission to membership of the Exchange a candidate for admission in his pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ims arising out of any contracts made by such former member subject to the Rules, Bye-laws and Regulations of the Exchange as shall have been admitted by the Governing Board: provided that if the amount available be insufficient to pay and satisfy all such debts, liabilities, obligations and claims in full they shall be paid and satisfied pro rata, and (iii) third - the payment of the surplus, if any, to the funds of the Exchange: provided that the exchange in general meeting may at its absolute discretion direct that such surplus be disposed of or applied in such other manner as it may deem fit." 4.2 Rules 20 and 21 deal with nomination and recommendation, which read as under: "20. A candidate for admission except a candidate applying for a membership vesting in the Exchange must obtain a nomination in the manner provided in these Rules. 21. A candidate for admission must be recommended by two members none of whom should be a member of the Governing Board. The recommenders must have such personal knowledge of the candidate and of his past and present circumstances as shall satisfy the Governing Board." 4.3 The form of application is provided in Rule 22 and then procedure for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld in vicinity of valuation date i.e., 31-3-1990. As per the information available from the Stock Exchange, cards were auctioned during financial year 1988-89 wherein value of card range between Rs. 1,31,000 to Rs. 1,35,000. There-was no sale of card during financial years 1989-90 & 1990-91. Next auction took place during financial year 1991-92 and value of card sold ranged between Rs. 11,11,111 to Rs. 11,75,000. Therefore, estimate of fair market value of card was to be made for the value as on 31-3-1990. In case of one member of Ahmedabad Stock Exchange, CWT(A) vide his order No. CIT(A)-II/AC-2(5)/10 & 11/97-98 dated 10-6-1999 has held fair market value of Ahmedabad Stock Exchange card as on 31-3-1991 at Rs. 10,00,000 as reasonable. Therefore, in view of clear decision of jurisdictional High Court and the fair market value of Stock Exchange card as on 31-3-1991 which was estimated earlier in case of Member of ASE, assessee was asked to show cause vide notice served on 4-1-2000 that why the fair market value of ASE, be not taken at Rs. 10,00,000 and may not be taken as asset for computing net wealth of the assessee. The assessee was also informed about the decision of Gujarat High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DSE and also membership of DSE are capital assets within the meaning of section 2(e) of the Wealth-tax Act, wherein, according to him, the Tribunal held by fortifying their finding by observing that there are ample indications that the Parliament itself intended to treat them as capital assets though in order to know such intention one has to take into consideration the provisions of the Finance Act, 1997 which came into effect from 1-4-1998. He referred to section 47 of the IT Act stating that "Nothing contained in section 45 shall apply to the following transfers ... (ix) any transfer made on or before 31st day of December, 1997 by a person (not being a company) of a capital asset being membership of a recognized stock exchange to a company in exchange of shares allotted by that company to the transferee". Following explanation was then quoted "For the purpose of this clause, the expression 'membership of a recognized stock exchange' means the membership of a stock exchange in India which is recognized under the provisions of Securities Contracts (Regulation) Act, 1956. He then referred to Section 47A of the IT Act withdrawing the exemption by reproducing sub-section (2) theret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market value of stock exchange card as includible in the net wealth of the assessee. 6.3 The value of the stock exchange card at Rs. 10 lakhs taken by the Assessing Officer is also upheld by the CIT(A) by observing that for the two years prior to that on the immediately succeeding year, the value of stock exchange card ranged between Rs. 11,11,111 to Rs. 11,75,000 on the basis of sale taken place and, therefore, the value adopted by the Assessing Officer at Rs. 10 lakhs was held to be reasonable. 7. Shri Sanjay R. Shah, ld. counsel for the assessee appearing in WTA No. 107/Ahd./2001 while impugning the order of the Revenue Authorities took us through the above Rules and Bye-laws of Ahmedabad Stock Exchange and contended that membership right of a Member of a Stock Exchange is not 'properly', but a mere personal permission to carry on business as a share broker with other members for and on behalf of his constituents, subject to Rules & Regulations of Stock Exchange. It was contended that such personal rights or permission neither be equated with expression "assets" available in section 2(e) of the Wealth-tax Act, 1957 nor it fell within the extended definition of the Wealth-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay Stock Exchange whose Rules & Regulations are analogous to Rules & Regulations of Ahmedabad Stock Exchange cannot be termed as an 'asset' according to Wealth-tax Act and not liable to levy of tax under the Wealth-tax Act, 1957. 8. Mr. Saurabh Soparkar appearing in WTA No. 95/Ahd./1999 submitted that membership card is a personal privilege. He also submitted that it does not make any difference whether the assessee is a continuing member or a defaulter or he be a legal heir of the member on death. The property in card is inalienable and vests in the Stock Exchange. Mr. Manish Shah appearing in WTA No. 27/Ahd./2000 adopted the earlier arguments of Mr. Sanjiv Shah and Mr. Soparkar and also submitted that in his case the reopening was made after four years and reliance on Gujarat High Court decision in the case of Stock Exchange, Ahmedabad v. Asstt. CIT [1998] 231 ITR 906 would not be any help for justifying re-opening in view of later decision of the Supreme Court reversing the decision in the above case of Gujarat High Court in Stock Exchange, Ahmedabad v. Asstt. CIT [2001] 248 ITR 209. According to him, re-opening was also invalid. Mr. Divetia appearing in WTA Nos. 17, 18, 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber is rejected, the Member had a right to make a fresh nomination under Rule 12 clearly indicates that the right to nominate granted by Rule 11 as a property right. For supporting his contention, he relied upon the decision of IT AT Bombay reported in 89 ITD 629 in the case of Upendra M. Dalai wherein it has been held that the sale proceeds of a Stock Exchange card were considered to be liable for capital tax under the Income-tax Act, 1961. While distinguishing the judgment of the Supreme Court in Stock Exchange, Ahmedabad's case, the ld. DR submitted that the Supreme Court has considered the right devolves upon a Member from the membership card of Stock Exchange in altogether different context. Therefore, the judgment of the Supreme Court cannot give any help to the assessee to say that a membership card has no element of property. He submitted that the Bombay High Court in a recent decision in the case of Stock Exchange, Bombay v. V.S. Kandalgaonkar [2003] 261 ITR 577 has again considered the controversy elaborately which is analogous to the dispute raised before the Supreme Court in Stock Exchange, Ahmedabad's case. The Bombay High Court has upheld the attachment of the balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mic value. He also referred the decision of Supreme Court in the case of CWT v. U.C. Mehatab [1998] 231 ITR 501 wherein the right to receive compensation constitutes an asset. He then referred the decision of the Tribunal in the case of Upendra M. Dalal v. Dy. CIT [2004] 89 ITD 629 (Mum.) wherein the membership of stock exchange is put to sale through nomination was held to be subject to capital gain tax by the Tribunal by holding that it was a transfer of capital assets. He then concluded that- (i) The value of stock exchange card in the case of non-defaulting, surviving member has economic value and, therefore, constitute property within the meaning of section 2(e) of the W.T. Act. (ii) The decision of Apex Court in the cases of Stock Exchange, Ahmedabad and Vinay Bubna are specific to the defaulting member who ceases to be a Member of Stock Exchange and therefore, do not have any interest in their card and accordingly, the same could not be regarded as their assets. In view of this, the decision of the Apex Court has limited applicability to the specific facts of these cases and cannot be applied to all members having interest in membership cards. (iii) The right to assign me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the death of the member and the right to nominate had ceased to exist for the legal heir due to non-clearance of dues within six months of death of the member in this case. 4. The question of property in the stock exchange card would arise when the card exist. The decision of Supreme Court is based on only this fact that the member even though dead, was a default too and had, therefore, ceased to hold the card and the right to nominate. The Supreme Court had, therefore, no occasion to go further into the issue and give a finding in such cases where the member is not a defaulter. Therefore, the ratio of the decision of Gujarat High Court is still applicable that the right to nominate as per Ahmedabad Stock Exchange has an economic value and, therefore, wherever such right exists and the member is not a defaulter, the corresponding membership card will be a property. 7. The Bench of ITAT, Mumbai has based its decision in the case of Ashwin Shah, 254 ITR 90 on the incorrectly understood ratio of the above-mentioned judgment of Supreme Court. The ratio incorrectly understood by the above Bench is: 'Membership of Stock Exchange is a mere personal privilege and that the right of nomi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court was dealing with following issues while deciding on the appeal of Stock Exchange, Ahmedabad: (a) Nature of the rights of deceased member of the Stock Exchange. (b) Whether the said card was the property belonging to the assessee and after his demise devolved upon his legal representatives and heirs or it was a personal permission in favour of the deceased? (c) Whether right of nomination of legal representative and heirs after his death has ceased and said right has vested in the Exchange? Thus, the Supreme Court has considered the issue 'whether the said card was the property belonging to the assessee' as could be seen in point (b) above besides considering whether after his demise it devolved upon legal heirs. Therefore, it is not correct to say, as contended by learned DR, that Supreme Court was considering a proposition about Stock Exchange card to be considered as a property after the death of the member. This would get further corroborated by the ultimate conclusion drawn by the Supreme Court which is mentioned in second para on page 214 as under: 'The question whether right of a membership confers upon the member any right of property is, therefore, to be ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the membership right. In short the Supreme Court was evaluating status of both the right of membership as well as right of nomination vis-a-vis the assessee and hence it is incorrect to read into the judgment that Supreme Court was only dealing with the case of dead member or that it has not considered the possibility of nomination as a relevant factor which can term the Stock Exchange card as valuable property. Considering the above, entire ratio of Gujarat High Court decision is reversed by the Supreme Court and no part thereof remains a valid proposition of law after the decision of Supreme Court. The learned AR further submitted that the contention of learned DR in para 7 of his note that ITAT, Mumbai in the case of Ashwin Shah 82 ITD 579 has incorrectly understood the ratio of Supreme Court decision is also, therefore, to be rejected in view of the analysis of the Supreme Court judgment made out in earlier paras. In fact the Bombay Tribunal in that case has dealt with every possible and conceivable argument from the department in point at issue and has then come to the conclusion that stock exchange card whether in respect of a dead, defaulting or living member is a perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fortified by the subsequent Bench of Bombay ITAT in the case of Upendra Dalai referred. Department's reliance on the Sspecial Bench decision of Jagannath Sayal 72 ITD 1 is misplaced for deciding the applicability of the wealth-tax to the stock exchange card in respect of at least Ahmedabad and Mumbai Share brokers because in the case of Jagannath Sayal the point at issue was applicability of the rules of Delhi Stock Exchange which are materially different from the rules of Ahmedabad and Bombay Stock Exchanges. This controversy is also adequately dealt with by the Mumbai Tribunal in the case of Ashwin C. Shah at paras 22 to 24 on page 589. Therefore, the Special Bench decision of Jagannath Sayal may be a good law for Delhi Stock Exchange but not with respect to the members of Ahmedabad and Bombay Stock Exchanges, where the rules are different from Delhi Stock Exchange. Lastly, the issue regarding the applicability of Mumbai Bench decisions in Ashwin C. Shah's case was recently examined in one of the cases by Ahmedabad C Bench in the matter of appeal Nos. 3347/Ahd./96 and 3429/Ahd./96 in the case of Vasudev G. Gajjar v. Asstt. CIT decided on 28-11-2003 and the ratio whereof is as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g less than 7 years' standing such right of nomination at all is not available to him. In such a situation the membership of stock exchange even if considered to be a property it would be a property without value since there would not be any nomination by such a member except to his son as per the proviso to rule 11(a). In such cases of the members of Ahmedabad Stock Exchange, therefore, where members have less than 7 years' standing such right of nomination has as such not value and, therefore, on that ground also the membership card cannot be said to be having any value liable to wealth-tax." 11. We have heard the parties and considered the rival contentions. Much emphasis has been put on the ratio laid down by the Supreme Court in Stock Exchange, Ahmedabad's case by both the sides. Let us see the applicability of the above decision of the Supreme Court in 'exclusion' or 'inclusion' of value of Stock Exchange membership card for the purpose of Wealth-tax Act, 1957. In this case one Rajesh Shah was a member since 19-2-1988 and he died on 7-2-1994. His legal representatives declined and did not opt to exercise the rights of nomination and wrote to the Exchange that they were unabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock exchange on exercise of the right of nomination vesting in it, is to be applied in the manner provided in rule 16." 11.2 These observations clearly pointed out that the Supreme Court was dealing with a case where right of nomination ceased and vested in Stock Exchange and not of a continuing member who is not a defaulter but of a member who had died and also declared as a defaulter. The Court itself said that- "It is a personal privilege though non-transferable and incapable of alienation is a right to the limited extent provided in the rules and subject to fulfilment of certain conditions." 11.3 The right of nomination is thus there but hedged by rules. This is further evident by saying it to be a case similar to Official Assignee of Bombay v. K.R.P. Shroff [1933] 3 Comp. Cas. 12 (PC) wherein the member lost his membership for being declared as a defaulter. Vinay Bubna v. Stock Exchange [1999] 97 Comp. Cas. 874 (SC) also recognize it as personal permission from Exchange to exercise right and privileges and not a private asset. This was a case of defaulter and the Supreme Court in Stock Exchange, Ahmedabad's case observed no difference in the case of defaulter or death as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt decision also applies to a continuing member, it should be however seen in context of later decision of Bombay High Court in V.S. Kandalgaonkar's case. In this case one Suresh, a broker of the Bombay Stock Exchange was member up to June 29, 1994 when he was declared a 'defaulter' under the rules. The broker failed to pay arrears of income-tax due from him under a certificate dated March 29, 1996 amounting to Rs. 37,48,651. By letter dated October 5, 1995, the Assessing Officer informed the Stock Exchange that since the broker was declared a defaulter by the stock exchange on June, 1994, his membership card may be auctioned. By the said letter, the stock exchange was informed that the said broker was in arrears of income-tax to the tune of Rs. 25,43,551 and, therefore, it was necessary to apportion a part of the amount realised from the auction for the purposes of meeting outstanding income-tax dues. Accordingly, the stock exchange was called upon by the Assessing Officer to issue a cheque in favour of the RBI in respect of outstanding demands. By the said letter, the Assessing Officer further stated that he would be issuing notice under section 226(3) of the Income-tax Act on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support and protect in public interest the character and status of brokers and dealers and to further the interest both of brokers and dealers and of public interested in securities and to assist, regulate and control, in public interest, dealings in securities in order to maintain high standards of commercial honour and integrity and to inculcate just and equitable principles of trade and business, to discourage and suppress malpractices, to settle disputes and decide all questions of usage, custom and courtesy in the conduct of trade and business [rule 4(i)]. Under rule 4(xi), the BSE is required to establish and maintain a clearing house for the object and purpose of the BSE. Under rule 5 it is declared that the membership shall constitute a personal permission from the BSE to exercise rights and privileges attached thereto subject to rules, bye-laws and regulations of the exchange. Under rule 6, the right of membership is inalienable. Under rule 7, a member has a right of nomination which is personal and non-transferable. Under rule 8, the right of nomination is not exercisable by a former member who has been expelled or who has ceased to be a member under any rule, bye-law or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration received shall be paid by the governing board to the defaulters' committee to be applied for the purposes and in the order of priority specified in the bye-laws of the exchange. Rule 16 is required to be read with bye-law Nos. 338, 342, 342A and 400. Bye law No. 338 lays down that the defaulters' committee shall keep a separate account in respect of monies, securities and other assets payable to a defaulter which are received by the defaulters' committee. Under bye-law No. 342, application of assets of the defaulter remaining in the hands of the defaulters' committee is provided for. It lays down that the defaulters' committee shall apply the net assets in satisfying firstly the claim of the exchange and the clearing house and then rateably such admitted claims of members against the defaulters arising out of contracts entered into in the market. Bye-law No. 400 deals with application of defaulters' assets and other amounts. It lays down that the defaulters' committee shall realise and apply all the money, rights and assets of the defaulter which have vested in the defaulters' committee for the following purposes and in the order of priority mentioned therein. Sub-claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Membership". It lays down that a member who is declared a defaulter shall cease to be a member of the exchange and he shall cease to enjoy rights and privileges of membership but the rights of his creditor-members against him shall remain unimpaired. Under rule 170(a)(ii). the governing board shall every year appoint a defaulters' committee. Under bye-law No. 91 of the BSE, the exchange is required to maintain a clearing house. This clearing house is not a part of the BSE. In the present case, as stated above, the clearing house is handled by the Bank of India Shareholding Ltd. in which the BSE holds 49 per cent and the BOI holds 51 per cent. The clearing house acts as a common agent of the members for clearing contracts between members and for delivering securities and for receiving securities from and for receiving or paying any amount payable to or payable by such members in connection with any of the contracts entered into by the members on the stock exchange. Under bye-law No. 316, grounds are given for declaring a member a defaulter. Under bye-law No. 326, the defaulters' committee is empowered to call for and realise the security and margin money and securities deposite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eclared a defaulter under the rules of the BSE and his right of membership stood vested in the exchange of his being declared a defaulter Even if the broker-member had no right, title and interest in the membership card, still in view of rule 16(1)(iii) of the Stock Exchange Rules, the balance surplus would become payable to the Tax Recovery Officer as the said amount came to the hands of the BSE for and on behalf of the assessee-broker in the course of administration of assets and allocation under rule 16(1)(iii) read with the general body resolution dated October 13, 1999. This balance had to be paid over by the BSE to the Tax Recovery Officer in accordance with the show-cause notice under section 226(3)(i). (ii) That there is a clear dichotomy under the rules and bye-laws between the sale of membership card and recovery of the defaulter's other assets and application thereof. Even on the vesting of such other assets in the defaulter's committee, such other assets continue to belong to the member-broker for the purposes of distribution, which is for the benefit of the BSE, the clearing house and other creditor-members so that these other creditor-members dues could be recovered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... say were noted with the approval: "The only direct case on the point under consideration is a decision of the Bombay High Court in CWT v. Purshottam N. Amarsay (the decision under appeal). There are deed of settlement provided that the trustees shall apply the net income from the fund for the support, maintenance and advancement of life and otherwise for the benefit of the settler and his wife etc. It was held that the definition of 'assets' in section 2(e) and that of 'net wealth' in section 2(m) were comprehensive provisions and all assets were included in the net wealth by the very definition. Therefore, when section 3 imposed the charge of wealth-tax on the net wealth it necessarily included in it every description of property of the assessee, movable and immovable, barring the exceptions stated in section 2(3) and other provisions of the Act. We are entire concurrence with that view. There is no reason or justification to give any restricted meaning to the word 'asset' as defined by section 2(e) of the Act when the language employed shows that it was intended to include property of every description. On a proper construction of the relevant clauses in the wakf deed we are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o include property of every description". A similar matter again came up before the Supreme Court in the case of Prince Muffakham Jah Bahadur Chamlijan. In this case a life interest to live in the house was given to the beneficiaries and the question was as to whether it was assets includible in the wealth of the assessee. Referring to the aforesaid two decisions, the Supreme Court in the cases of Purshottam N. Amarsay which was later upheld by the Supreme Court, and Ahmed G.H. Ariff's case reiterated that the assessee has right to reside in the house for the duration of his life though it was personal and inalienable, was property which would have a market in an assumed market place. In other words, and assuming somebody would acquire this personal right in the property during the life-time of the assessee and pay a price for it. The right of the assessee had to be included in the wealth of the assessee for the purpose of wealth-tax. In the present case, it is not a mere right to live in house but a right as a member to conduct business on the floor of Stock Exchange, which would have not been possible to carry out unless he holds the membership card. It may be a personal right or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an asset, a valuable property and the rights embodied in such a card ceased to be a mere personal privilege on transfer. To place any other interpretation would amount to ignoring the realities on the grounds. The Members of the Bombay Stock Exchange are known to advertise their intention to sell the card and they call for the bids for which the parties can be nominated. No doubt such transfer is subject to the conditions laid down in Rules 9 and 43 of the Bombay Stock Exchange Rules. However, these conditions do not take away completely, though they may restrict the value of the important right, which has been passed through nomination. Thus, rights and interests in the Stock Exchange card are not attachable in garnishee proceedings because, in the case of defaulting or deceased Member, the rights in the cards vest in the Stock Exchange. However, when such a holder of Stock Exchange card makes an application for nomination with the consent of the person to be nominated, the privilege enjoyed under the said Card does not remain a personal privilege. When the membership of Bombay Stock Exchange is put to sale through nomination, a personal privilege is concerted into an asset and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there is no dispute that there was a transfer of membership. There is a transfer of membership by the assessee for consideration of Rs. 50,000. 17. In the case of lagan Nath Sayal Delhi Special Bench discussed the issue under the Wealth-tax Act as well as under Gift-tax Act, and held that a share in the Delhi Stock Exchange (DSE) and also membership card are capital assets within the meaning of section 2(e) of the Act. There are ample indications that the Parliament itself intended to treat them as capital assets, and in order to know such intention the provisions of the Finance Act, 1997 has taken into consideration which came into effect from 1-4-1988. Section 47 of the Income-tax Act deals with the exempt assets whose transfer does not yield any capital assets and while listing out such assets in clause (xi), the membership of a recognized stock exchange is specifically recognized as a capital asset. The Delhi Stock Exchange is limited company and it issued shares. By virtue of holding shares, as such, Special Bench held a shareholder is not entitled to transact the business in the Stock Exchange. He should also become a member by following the prescribed formalities. It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration the entire conspectus of the case, observed that the membership right held by the assessee in DSE constitutes an asset and is exigible to tax. The composite value of shares and ticket (card) is to be adopted for making the correct valuation. In the DSE Rules also Rule 45 states that a member's right of membership shall lapse and vest in the stock exchange immediately he is declared as a defaulter. On the declaration of default, he shall at once cease to be a member of the exchange and as such cease to enjoy any of the rights and privileges of membership, but the rights of his creditor members against him shall remain unimpaired. There also the share can be transferred only to a member of stock exchange or a candidate for membership of stock exchange who has been duly elected as eligible for membership by Board of Directors of the Stock Exchange and under Article 24, the share broker is given wide field to choose his associate as also his heir. A shareholder in the Articles of Association has been defined to mean any persons, individuals or firm registered in the books of the company as owner of any share in the capital of the company and the members of the stock exchang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 21. We are conscious of the principles of law that a coordinating bench should not reach a conclusion directly opposite to the conclusion reached by another bench of the Tribunal on earlier occasion and if the Division Bench differs from the views of other Division Bench, the matter should be posted before the larger Bench for considering the question. But that principle is subject to certain limitations, as observed by the Tribunal in the case of Dy. CIT v. Mira Industries [2003] 87 ITD 475 (Ahd.) viz., (i) the facts are the same, (ii) no new facts are brought on record, (iii) no change in the circumstances under which the decision was reached is there, (iv) there is no decision of a higher court, or (v) there is no change in the statutory provision of law. A decision reached on particular facts and on consideration of the law prevailing at that time can be deviated from it some new facts are brought on record or some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he right though inalienable and personal privilege would be an asset within the meaning of section 2(e) of the Wealth-tax Act. The case in Prince Muffakham Jah Bahadur Charnlijan was case of a life interest to reside in a property. In the case of Ahmed G.H. A riff there was a right of beneficiary to receive an adequate share of net income of the properties comprised in a Wakf created by a Muslim governed by the Mohammedan law which extends the meaning of property even to a Mahantship or Shebaitship and in the case of Purshottam N. Amarsay, the right of the settler to live as far as possible with the same comforts and to enjoy the life in the same manner as he was accustomed to. In all these three cases, the rights and privileges were personal and inalienable and the Supreme Court uniformly held that such interest was an asset within the meaning of section 2(e) of the Act because the language employed shall that it was intended to include the property of every description. 23. To summarise, the stock exchange card is a property and consequently an asset under section 2(e) of the Wealth-tax Act, because: (i) it can be sold by nomination for a price- - by the member himself on resi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Bench, before Delhi Tribunal in the case of Jagan Nath Sayal v. Asstt. CGT [2000] 72 ITD 1, again a case under the Gift-tax Act. The third example is found in the case before the Bombay Tribunal in the case of Upendra M. Dalal, in connection with capital gain tax liability in transfer of card was upheld. 25. It is only the right of nomination on default or death vested in t he Stock Exchange but that again subject to a right to the members of readmission or his legal heirs for admission in his place on their satisfaction of the liabilities of the stock exchange under rule 16(a) and 16(b). It is only thereafter that the stock exchange governing body becomes entitled to and deal with and dispose of such right, as it thinks fit, under Rule 10, but are also subject to utilisation of proceeds in order of priority under rules 19(a) and 16(b) of the Rules. The aim and objects are to take care of settling the debts and liabilities of the members to the stock exchange on penalties etc. that may be levied upon him for the default. If still there is a surplus, the instances are that money has to go back to defaulting members or his legal heirs and one such instance in the later decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the company with the sanctioning of the Governing Board on fulfilment of certain conditions mentioned therein. In any case, this may be a factor relevant for determination for value of the card. But so far as the property in the card is concerned, this fact would not have any impact. 29. Before parting with the matter, we may deal with valuation aspects of the card, which is dispute in almost every appeal by alleging that the valuation made by the Assessing Officer in every case was excessive. The Special Bench in the case of Jagan Nath Sayal as regards valuation held that- "The Assessing Officer is duty bound to determine the market value of the card. Market value may be said to be the price that a willing purchaser would pay to a willing seller for a property having due regard to its existing conditions, with all its existing advantages and its potential possibilities when laid out on its most advantageous manner. In view of this, the composite value of the ticket cannot be determined with reference to the BSE sensex. Nor the auction value of BSE is relevant. The argument that the value of ticket depends on the business acumen of a broker is not tenable. A notice sho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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