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TMI Blog2001 (12) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... n the appeals concerning this issue came up before the Bombay Benches of the Tribunal, the Tribunal, purporting to follow the above decision of the Supreme Court held that no wealth-tax was payable on the stock exchange card. Further, by Notification dated 24-7-2001 issued by the Dy. Registrar, ITAT, it was informed that in view of the judgment of the Supreme Court the appeal in the case of Shirish Dave pending before the Special Bench for hearing has been delisted by the order of Hon'ble President, ITAT. 3. Thereafter, when the matter came up for consideration in some of the appeals before the Tribunal, a prayer was made on behalf of the Department to the effect that it should be given an opportunity to contest the applicability of the judgment to the Wealth-tax Act and that it should be permitted to argue the matter afresh and distinguish the judgment of the Supreme Court. Even though in the meantime some orders had been passed by the Tribunal following the judgment of the Supreme Court cited supra, to the effect that the stock exchange card was not an asset under the Wealth-tax Act and in the normal course such orders would have had to be followed in the interests of judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any rights or privileges attached thereto and no such attempted assignment, mortgage, pledge, hypothecation or charge shall be effective as against the Exchange for any purpose nor shall any right or interest in any membership other than the personal right or interest of the member therein be recognised by the Exchange. The Governing Board shall expel any member of the Exchange who acts or attempts to act in violation of the provisions of this Rule. Right of Nomination 7. Subject to the provisions of these Rules a member shall have the right of nomination which shall be personal and non transferable. Right of Nomination not to be Exercised By Former Member 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. Right of Nomination of Deceased or Defaulter Member 9. On the death of a member his right of nomination shall cease and vest in the Exchange. Forfeited or Lapsed Right of Membership 10. When a right of membership is forfeited to or vest in the Exchange under any Rule, Bye-law or Regulation of the Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p of a defaulter shall be restored to him if he be re-admitted as a member within six months from the date of default but if an application by a defaulter for re-admission be rejected by the Governing Body or if no such application be made within six months of the declaration of default the Governing Board may at any time exercise the right of nomination in respect of such membership. Fresh Nomination 12. If a nominee be not eligible under these Rules or if a nominee be rejected by the Governing Board a fresh nomination may be submitted to the Exchange. Form of Nomination 13. The nomination shall be in the Form prescribed in Appendix B to these Rules or in such other Form as the Governing Board may from time to time prescribe and the Form shall only be issued on receipt of a written application signed by the nominator and containing the full name of and signed by the nominee. Notice of Nomination 14. A notice of the proposed nomination shall be posted on the notice board of the Exchange for not less than fifteen days. Within fourteen days of the posting of such notice members shall file their claims against the member by or in respect of whom the nomination has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Stock Exchange (ASE) are the same as those of the Bombay Stock Exchange (BSE) and the arguments as well as our decision are also based on this premise. (B) Ratio of the judgment of the Supreme Court in Stock Exchange Ahmedabad's case. 7. We may briefly notice the facts in this case. One Rajesh Shah, who became a member of the ASE on 19-2-1988 died on 7-2-1994. On 12-2-1994, his heirs and legal representatives wrote to the Stock Exchange that they were unable to meet the liabilities of Rajesh Shah. The Governing Body of the ASE declared 'R' to be a deemed defaulter and that the membership rights which vested in the Stock Exchange under rule 9 may be disposed of for a price of Rs.25 lakhs. On 15-2-1994, a provisional order of attachment was issued by the Income-tax authorities under section 281B of the Income-tax Act in respect of the stock exchange card in the name of Rajesh Shah and also the margin money and security deposit kept by him with the ASE. The Stock Exchange took the stand that on the death or default of a member, his right of nomination vested in the Stock Exchange free of all rights, claims, etc. of the member or persons claiming through him. On 5-12-1994, dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts own earlier judgment in the case of Vinay Bubna v. Stock Exchange, Mumbai [1999] 97 Comp. Cas. 874. This decision may be briefly noticed. Section 281B of the Income-tax Act confers power on the Income-tax authorities to effect provisional attachment of "any property belonging to the assessee" in the manner provided in the Second Schedule if they are of the opinion that it is necessary to do so for the purpose of protecting the interests of the revenue. It may be noted that this section uses the expression "any property belonging to the assessee". The definition contained in section 2(e) of the Wealth-tax Act is that "assets" includes "property of every description, movable or immovable". Substantially, both the expressions signify the same concept. A careful reading of the judgment of the Supreme Court in the case of Vinay Bubna shows that in that case the Supreme Court was dealing with a case arising under the BSE rules. The constitutional validity of rule 16 of the BSE rules was under challenge. One Yogesh Mehta, was a member of the BSE. He was declared a defaulter by the Exchange. A huge sum was due and payable by him to Vinay Bubna. The amount was not paid. Vinay Bubna there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the Exchange to exercise the rights and privileges attached thereto subject to the rules, bye-laws and regulations of the Exchange. In paragraph 8 of the judgment it has been observed as under: "The membership card of a sharebroker is not his personal property, which on default being committed by him and his ceasing to be a member, can be sold and the proceeds distributed amongst his creditors. Rules 53 and 54 leave no manner of doubt that the member's right of membership vests in the Exchange after he is declared defaulter." After noticing the above judgment in the case of Vinay Bubna, the Supreme Court in Stock Exchange, Ahmedabad's case observed as follows: "In Vinay Bubna v. Stock Exchange [1999] 97 Comp. Cas. 874 (SC), on consideration of similar rules in respect of the Bombay Stock Exchange this court held that the membership of the Stock Exchange is a personal permission from the Exchange to exercise the rights and privileges attached thereto. It is not a private asset. That was a case of a defaulter, but in principle, it would make no difference as under the rules both in the case of the death or default of a member, his right of nomination ceases and vests in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case where it had been held that the right of nomination which a member had during his continuance had economic value and any right having value would amount to "property". Not only this, it is also to be noticed that the Supreme Court in terms held, on a perusal of the rules of the ASE, which are similar to those of BSE, that: "On a plain and combined reading of the rules it is clear that the right of membership is merely a personal privilege granted to a member, it is non-transferable and incapable of alienation by the member or his legal representatives and heirs except to the limited extent as provided in the rules on fulfilment of conditions provided therein. The nomination wherever provided for is also not automatic. It is hedged by rules. On the right of nomination vesting in the stock exchange under the rules, that right belongs to the stock exchange absolutely". 15. It is again to be remembered that the Supreme Court in Vinay Bubna's case was affirming the judgment of the Hon'ble Bombay High Court in Writ Petition No. 1177 of 1997 (dated 23-12-1997) (copy filed) wherein it was held at para 15 as follows: "According to us, the petitioner's challenge to the impugned Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn. He may in turn nominate a member as set out in Rule 11. In the case of a deceased member, under Rule 9, on his death, his right of nomination ceases and vests in the Exchange. There is, therefore, no property in membership." 17. If as held in all the above judgments the right of membership is merely a personal privilege granted to a member by the stock exchange, it cannot amount to "property" within the meaning of section 2(e) of the Wealth-tax Act. It would be anomalous to hold, in the face of the two judgments of the Supreme Court, to the contrary. (C) Applicability of the judgments to cases under the Wealth-tax Act 18. One of the principal contentions of Mr. Dave, the learned CIT(DR), is that all the above cases have been decided under the Constitution of India (different text) and in a different context (civil litigation) and are therefore not applicable to the interpretation of section 2(e) of the Wealth-tax Act. Here again we are not able to agree. The concept of the word "property" is the same whether it is for the purpose of the Constitution of India or for the purpose of the Wealth-tax Act. There is no special definition of the word for purposes of the Wealth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in all the judgments is based on the rules of the ASE/BSE and that is what is important and should not be lost sight of amidst the enthusiasm to evolve original ideas. A binding judgment on the point, in our humble view, cannot be circumvented on the mere ground that the context is different if the issue decided is the same. The text also may have been different Constitution of India and not the Wealth-tax Act -- but the concept propounded and explained is that of stock exchange membership card, its nature, the characteristics etc. in the light of the rules of the stock exchange. A lower court or tribunal cannot attempt to reach a conclusion diametrically opposed to that of a superior court after conducting the very same enquiry into the rules of the very same stock exchange (BSE) merely on the ground that the higher or superior court had conducted the enquiry in the context of the Constitution of India and not under the Wealth-tax Act. Judicial adventurism or originality has its limits and cannot be taken to such absurd lengths where each and every judgment of a higher judicial forum is sought to be circumvented on some slender or tenuous ground. Every discovery of argumentative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not concerned with the case of a non-defaulting, continuing member and therefore those decisions should not be followed in the cases before us. (E) "Obiter dicta" of the Supreme Court -- are they binding? 21. Mr. Dave strenuously contended before us that the observations made by the Supreme Court in the two judgments cited supra suggesting that stock exchange membership card is not property and is only a personal privilege or permission are "obiter dicta" and do not constitute the ratio of the decisions. Several authorities were cited by him in this behalf. On behalf of the assessees, Mr. Shivram and Mr. Hiro Rai also drew our attention to several authorities to contend that even the obiter of the Supreme Court are binding on us. In fact Mr. Shivram would say that the Tribunal has no choice but to follow the law laid down by the Supreme Court in view of Article 141 of the Constitution. On a perusal of the authorities cited by Mr. Dave, we find that they deal with the manner in which a judgment of a court should be understood. It has been held that it is necessary to have in view the context in which the observations were made and that it is not proper to pick out a single o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s who are members of the company. It would thus appear that one has to be a shareholder of DSE Ltd. in order to become a member eligible to do business. There is no rule similar to Rule 5 of BSE which in terms declares that membership of the BSE is a personal privilege. Thus the order of the Special Bench cannot be considered applicable to membership of all stock exchanges. It can be applied only where the rules of the particular stock exchange are similar to those of DSE Ltd. Certainly, the rules being different, it cannot be applied to the membership of the BSE. 23. Further, as pointed out by Mr. Patil, learned counsel who led the arguments, the Special Bench would appear to have relied heavily on the judgment of the Gujarat High Court in Stock Exchange Ahmedabad case and the text of "economic value" for the stock exchange card. Since this judgment has now been reversed by the Supreme Court on appeal Stock Exchange Ahmedabad's case the order of the Special Bench will have to be read and understood in the light of the Supreme Court judgment. 24. Our view is that the order of the Special Bench would apply wherever the rules of the concerned stock exchange are similar to those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore 31-12-1998. A third view is based upon the principle that the beliefs and assumptions of those making the law cannot be considered to be the law (adverted to by the Supreme Court in ITO v. Mani Ram [1969] 72 ITR 203). The question whether stock exchange card could be considered to be property and consequently a capital asset is highly arguable one (as the debate before us has shown) and such a contentious issue cannot be decided on the basis of the assumption of the Legislature. An appropriate example would be the provisions of section 10 which exempts various categories of income. From the fact that exemption is provided it is impermissible to infer that a particular receipt is taxable as income in the first place because the particular receipt may defy legal or common or practical notions of income and may not be taxable at all. The question of exemption comes in only when a receipt is first proved to be taxable as income on general principles relating to the concept of "income" and the taxability cannot be left to assumptions and beliefs. The charge to tax must be clear, unambiguous and permitted by the relevant provisions of the Act. A converse instance which immediately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y its very nature does not amount to "property" or interest in property. (I) Opinion of the Bombay Chartered Accountants' Society: 30. In their booklet titled "Intangibles -- A compendium" published by the Bombay Chartered Accountants Society, it has been opined that the membership card of the BSE is a commercial right and is therefore an intangible asset eligible for depreciation. It has been noticed that the card holder is entitled to transfer his card to any person subject to guidelines or rules framed by the Exchange and that the card of a defaulting member can be auctioned for a substantial consideration. It has also been stated that the concept of corporatisation of the card also indicates that it is an asset. This compendium was relied upon by Mr. Dave. 31. The compendium reflects the view of a section of the accountancy profession. They are entitled to their view, but it is significant to note that there is no reference to the judgment of the Supreme Court in the case of Stock Exchange, Ahmedabad case. Strangely, the Compendium says that in Vinay Bubna's case, the Supreme Court has held that the Stock Exchange card is an asset. This appears to be erroneous si ..... X X X X Extracts X X X X X X X X Extracts X X X X
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