TaxTMI 
TaxTMI 
2006 (9) TMI 237
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....1,00,00,000 for which shares were allotted. The Assessing Officer was of the view that the membership card of MSE constituted a capital asset and hence the gains arising on the transfer of such card constituted capital gains. However, the assessee was of the view that it was not an asset but merely a personal right, a personal permission, which was not capable of being transferred. The contention of the assessee did not convince the Assessing Officer who held it to be a capital asset and accordingly added the entire sale proceeds as capital gain to the total income of the assessee since the cost of acquisition was nil. 3. Before the Commissioner (Appeals) also elaborate arguments were advanced, mainly to the effect that the cost of acquisition was nil and no transfer was involved in the resignation from the stock exchange and nominating a person in place of resigning member. However, the Commissioner (Appeals) was also not convinced with the arguments of the assessee and held that the transfer of card gave rise to capital gains and accordingly confirmed the order of the Assessing Officer. 4. The learned counsel for the assessee commenced the arguments by referring to the foll....
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....erred to the decision of the Mumbai Bench of the Tribunal in the case of Dy. CWT v. Ashwin C. Shah [2002] 82 ITD 573 wherein the judgment of the Supreme Court had been duly considered. Having shown us the conclusion of the Supreme Court to the effect that membership right in question was not the property of the assessee, the learned counsel then referred to two provisions of the Act viz., sections 2(14) and 281B and also to the definition of the term 'assets' given in section 2(e) of the Wealth-tax Act, 1957. It was pointed out that as per section 2(14) of the Act, 'capital asset' means "property of any kind...". As per section 281B of the Act "...attach provisionally any property belonging to the assessee in the manner provided in Second Schedule." As per section 2(e) of the Wealth-tax Act, 'assets' includes "property of every description, movable or immovable, but does not include...". 8. It was the argument of the learned counsel that by virtue of the above three provisions given in the two enactments, the Legislature had defined the term 'assets' or 'capital assets' to be property of any kind. The same expression, that is, 'any pro....
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....unsel as to how the privilege got converted into an asset was not known to any process of law and it was not known as to what was the alchemi by which such a conversion lock place. Thus, finally concluding his argument, the learned counsel strongly placed reliance on the judgment of the Supreme Court in the case of ASE. 10. The learned D.R. opined his augment by stating that the main plank on which the assessee has placed his arguments is the judgment of the Supreme Court in the case of ASE. However, it was contended that the context in which the said judgment was rendered cannot be lost sight of. As per section 281B of the Act, only property belonging to the assessee could be attached. As per the rules of ASE, a person ceases to be a member thereof on his death or on his being declared a defaulter. Under these circumstances, the member has ceased to be owning any property and all the rights in the card vested with Exchange authorities. Therefore, when the member did not have any property in the card, such card could not be attached under section 281B of the Act. Similar were the rules so far as MSE was concerned. He referred to clause 38 of the Articles of Association of MSE an....
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...., loses all interest both in the property of the association and in his card. The Court also took note of its earlier decision in the case of Vinay Bubna v. Stock Exchange, Mumbai [1999] 97 Comp. Cas. 874 (SC) wherein it was held that the membership of the Stock Exchange is a personal permission from the exchange to exercise the right and privilege attached thereto. It was not a private asset. However, the Supreme Court observed in the case of ASE that in principle, it would make no difference as under the rules both in the case of death or default of a member, his right of nomination ceases and vested in the Stock Exchange. Thus all the above three judgments rendered by the Supreme Court and the Privy Council clearly bring out the particular aspect of the entire issue. It is this. When a member loses his membership by virtue of his death or on being declared defaulter, he loses all his rights and privileges enjoyed by a member as also he loses the right to nominate a person in his place. In the case of death or default, the entire property in the card vests with Stock Exchange authorities and it is the Stock Exchange who will then exercise the right of nomination. 12. Under the....
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....rd. He enjoins and has that right until he is declared defaulter or he dies. Till then it vests only in him, though, subject to and hedged by rule of Stock Exchange. Nobody can impair that right he alone can exercise that right of transacting the business and of nomination. His nominee cannot be denied the membership of the card unless he is disqualified or not eligible to be member of the Stock Exchange, which are the requirements even for becoming an original member. The right of nomination is invariably for consideration and is equivalent to right to sell which itself has characteristics of property as held by Bombay Bench Tribunal while dealing with the liability to the capital gain on transfer of the membership right. It is only when the member is declared as a defaulter or he dies, his right of nomination vests in Stock Exchange. In all the cases cited at the Bar, the Stock Exchange has sold/auctioned card and that also is another pointer that the cardholder 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. 19. There is yet another angle which requires attention and t....