2001 (12) TMI 195 - AT - Wealth-tax

Stock exchange card not an asset under Wealth-tax Act; Department appeals dismissed, assessees' allowed.

The Tribunal held that the stock exchange card of the Bombay Stock Exchange is not considered an asset under section 2(e) of the Wealth-tax Act. The ... Assets, Appellate Tribunal Issues Involved:1. Whether the stock exchange card held by the assessees in the Bombay Stock Exchange is an asset within the meaning of section 2(e) of the Wealth-tax Act, 1957, and consequently wealth-tax is payable thereon.Summary:Issue 1: Applicability of Supreme Court JudgmentThe primary issue was whether the stock exchange card is an asset u/s 2(e) of the Wealth-tax Act, 1957. The Tribunal referred to the Supreme Court's decision in Stock Exchange, Ahmedabad v. Asstt. CIT [2001] 248 ITR 209, where it was held that the stock exchange card is not property and hence cannot be attached u/s 281B of the Income-tax Act. Consequently, the Tribunal had previously followed this decision, holding that no wealth-tax was payable on the stock exchange card.Issue 2: Department's Request for ReconsiderationThe Department requested an opportunity to contest the applicability of the Supreme Court judgment to the Wealth-tax Act and distinguish it. Despite previous Tribunal orders following the Supreme Court judgment, the Tribunal decided to hear arguments from both sides to ensure all viewpoints were considered.Issue 3: Rules of the Bombay Stock ExchangeThe Tribunal examined the relevant provisions of the Bombay Stock Exchange Rules, which indicated that membership is a personal privilege, non-transferable, and inalienable. The right of nomination is also personal and non-transferable, ceasing upon the member's death or default, at which point it vests in the Exchange.Issue 4: Supreme Court's Ratio in Stock Exchange, Ahmedabad's CaseThe Supreme Court had held that the membership right is a personal privilege and not property, relying on its earlier judgment in Vinay Bubna v. Stock Exchange, Mumbai [1999] 97 Comp. Cas. 874. The Tribunal noted that the rules of the Bombay Stock Exchange (BSE) and Ahmedabad Stock Exchange (ASE) are similar, and thus the Supreme Court's decision applies.Issue 5: Applicability to Wealth-tax ActThe Tribunal rejected the Department's contention that the Supreme Court's decisions were inapplicable to the Wealth-tax Act. It held that the concept of 'property' is consistent across different contexts, including the Constitution of India and the Wealth-tax Act. The Supreme Court's judgments, based on the rules of the stock exchanges, concluded that membership is a personal privilege and not property.Issue 6: Other Relevant JudgmentsThe Tribunal referenced several judgments, including Sejal Rikeen Dalal v. Stock Exchange, Bombay AIR 1991 Bom. 30 and the Special Court's decision in Stock Exchange v. Custodian, which supported the view that stock exchange membership is not property.Issue 7: Obiter Dicta of the Supreme CourtThe Tribunal addressed the argument that the Supreme Court's observations were obiter dicta, asserting that even obiter dicta from the Supreme Court are binding on the Tribunal.Issue 8: Special Bench Order in Jagan Nath Sayal v. Asstt. CGTThe Tribunal distinguished the Special Bench decision in Jagan Nath Sayal v. Asstt. CGT [2000] 72 ITD 1 (Delhi), which dealt with the Delhi Stock Exchange, noting that the rules of the Delhi Stock Exchange differ significantly from those of the BSE.Issue 9: Section 47(xi) of the Income-tax ActThe Tribunal discussed the relevance of section 47(xi) of the Income-tax Act, which exempts certain transfers of stock exchange membership from capital gains tax. It concluded that this provision does not imply that the membership card is property.Issue 10: Supreme Court Judgment in CWT v. Prince Muffakham Jah Bahadur ChamlijanThe Tribunal considered the Supreme Court's judgment in CWT v. Prince Muffakham Jah Bahadur Chamlijan [2001] 247 ITR 351, distinguishing it on the basis that the nature of the right to reside in a property is different from stock exchange membership.Conclusion:The Tribunal held that the stock exchange card of the Bombay Stock Exchange is not an asset u/s 2(e) of the Wealth-tax Act. The appeals filed by the department were dismissed, and those filed by the assessees were allowed.