Stock exchange membership rights can be attachable property, and garnishee liability needs a proper quasi-judicial enquiry.

A stock exchange membership right, including the associated nomination right after a member's death, was treated as a valuable proprietary interest because it arose from contract and exchange rules and had economic value, so it could be attached as property for provisional tax recovery; the attachment of security deposit and margin money was also upheld. Where a garnishee under notice denied liability by statement on oath, the tax authority had to conduct a proper quasi-judicial enquiry before treating it as an assessee-in-default and proceeding coercively. The challenge to the provisional attachment and garnishee action accordingly failed.

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Issues: (i) Whether the stock exchange membership card and the associated right of nomination of a deceased member constituted attachable property under section 281B of the Income-tax Act, 1961. (ii) Whether the garnishee notice issued under section 226(3) of the Income-tax Act, 1961 was without jurisdiction or was premature.

Issue (i): Whether the stock exchange membership card and the associated right of nomination of a deceased member constituted attachable property under section 281B of the Income-tax Act, 1961.

Analysis: The right flowing from membership of the stock exchange was held to arise from contract and the exchange rules. Though the rules prohibited assignment and described the right of nomination as personal and non-transferable, the Court found that the right still had economic value and was capable of valuation. The limited right of a member with the required standing, and after death the limited right of the heirs with the sanction of the board, was treated as a valuable proprietary interest. The Court further held that attachment under section 281B could extend to such property, even though the right was subject to the rules of the exchange and could not be expanded in the hands of the Revenue. The provisional attachment of the security deposit and margin money was also held to be within jurisdiction as those amounts were property.

Conclusion: The membership-related right was attachable property, and the provisional attachment was valid and not without jurisdiction.

Issue (ii): Whether the garnishee notice issued under section 226(3) of the Income-tax Act, 1961 was without jurisdiction or was premature.

Analysis: The notice required the stock exchange to pay amounts said to be due or held on account of the assessee or her legal heir. The Court held that, once the garnishee filed a statement on oath denying liability, the authority had to undertake a proper quasi-judicial enquiry before treating the garnishee as an assessee-in-default. The subsequent show-cause communication was not treated as a final adverse order. The Court therefore held that the notice itself was not without jurisdiction, but any coercive recovery could follow only after lawful enquiry and decision in accordance with natural justice.

Conclusion: The garnishee notice was valid, though recovery action could proceed only after due enquiry.

Final Conclusion: The challenge to both the provisional attachment and the garnishee proceedings failed, and the petition was rejected.

Ratio Decidendi: A limited but economically valuable right arising from stock exchange membership, including the right of nomination under the exchange rules, can constitute property for purposes of provisional attachment under the Income-tax Act, and a garnishee denying liability by statement on oath is entitled to a quasi-judicial enquiry before being treated as an assessee-in-default.

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