2009 (10) TMI 387

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.... the Income-tax Act, 1961 (hereinafter referred for short. "the I. T. Act".) 2. We have heard Sri K. B. Mohamedkutty, senior counsel appearing for the appellant and the standing counsel appearing for the respondent. 3. The appellant-assessee was a member of the Cochin Stock Exchange.  However, on account of chronic default, the Cochin Stock Exchange declared him a defaulter and terminated his membership and sold his stock exchange membership card in auction which fetched sale consideration of Rs. 12,75,000. Since the membership card was sold in the previous year relevant to the assessment year 1994-95, the Assessing Officer brought to tax long-term capital gain arising to the appellant on the sale of the stock exchange card. Even....

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....sation which is approved by the Securities and Exchange Board of India. A membership card which confers right on the member to trade in stock and shares in the exchange, is certainly a property. So much so, it falls within the definition of "capital asset" under section 2(14) of the Income-tax Act. Further, section 47 (xiiia) makes itself very clear that membership right in stock exchange is a "capital asset" and so much so, the transfer of it except in cases covered by the said clause, would attract liability for tax. However, there is a distinction in this case inasmuch as the appellant has not sold the membership card, but the same is sold by the stock exchange after declaring the appellant a defaulter and after taking over the membershi....

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....yable to him. Since the stock exchange membership card which is sold in auction is property covered by the description "capital asset" under section 2(14) of the Income-tax Act, its sale by stock exchange amounts to "transfer" within the meaning of section 2(47) of the Income-tax Act. Therefore, in our view, the Tribunal is right in upholding the assessment for capital gains. Even though the senior counsel referred to a judgment of the Supreme Court in Vinay Bubna v. Stock Exchange, Mumbai [1999] 97 Comp Cas 874 ; [1999] 155 CTR 519, and contended that stock exchange member card is not personal property of the member, we are unable to accept the argument because the case decided is not as to whether the membership card is a capital asset....