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Income Tax Appellate Tribunal - Ahmedabad

V.G. Gajjar And Ors. vs Deputy Commissioner Of Wealth Tax And ... on 30 September, 2004

Equivalent citations: [2005]93ITD624(AHD), (2005)93TTJ(AHD)70

ORDER

R.P. Garg, Vice President

1. The prime controversy in this bunch of 39 appeals revolves around the taxability of value of stock exchange membership card of Ahmedabad Stock Exchange under the WT Act, 1957. Consequent peripheral issues have also been raised simultaneously and we will deal with them individually in respective appeals in the later part of this order. But, first we take up the issue whether the stock exchange membership card held by the assessees in Ahmedabad Stock Exchange is an asset within the meaning of Section 2(e) of the WT Act 1957 and liable to tax.

2. The facts leading to controversy are not in dispute. The adjudication of the controversy depends upon the interpretation of Rules and bye-laws of stock exchange vis-a-vis WT Act, 1957. Therefore, before taking note of arguments advanced by the learned counsel, it is salutary to take note of Rules, bye-laws of stock exchange in enrolling a person as a member (and) what rights and duties devolve upon such member by membership.

3. The assessees, in these appeals, are members of Ahmedabad Stock Exchange. The object of the stock exchange, inter alia, is to support and protect the character and status of the brokers and dealers, and to further the interests of both the brokers and dealers, and of the public interested in securities. Under the Rules of the stock exchange, the member has got, by virtue of membership, the privilege of going to exchange and dealing in the exchange.

4. Rule 2 provides that the stock exchange shall be constituted of those persons who are and shall hereafter be duly admitted as a member of the exchange according to the rules for the time being in force. Rule 18 provides the eligibility to become a member and states that no person shall be admitted unless he worked for not less than two years as partner with or as an authorised clerk or remisier or apprentice to a member; or he agrees to work for a minimum period of two years as a partner or to work for such period as a representative member with another member and enter into bargains on the floor of the exchange, not in his own name, but in the name of such other member; or he succeeds to the established business of a deceased or retiring member who is his father, uncle, brother or any other person who is in the opinion of the Governing Board, a close relative; he has, in the opinion of the Governing Board, not less than two years experience in connection with various activities relating to the securities market; he has a minimum net worth; possesses a minimum working capital of cash and/or marketable securities, and possesses assets belonging to himself and/or spouses or children; of such nature and value as the Governing Board may from time to time in its opinion determine and consider acceptable; and he qualifies in a written test conducted by the exchange and in case of a corporate member, the directors referred to in Sub-clause (v) of Rule 19A(b) qualify in a written test conducted by the exchange, and in the case of a financial corporation, the chief executive officer and another director/officer both possessing experience as provided in Sub-clause (v) of Rule 19A(b) qualify in a written test conducted by the exchange. Non-eligibility is enumerated in Rule 17 which provides that no person shall be elected as a member if he is less than twenty-one years of age, he is not a citizen of India provided that the Governing Board may in suitable cases relax this condition with the prior approval of the Central Government, he has an educational qualification of less than either matriculation or the 10 plus 2 years' qualification of the 10 plus 2 plus 3 years' educational system or such other educational qualification as may be prescribed by the Governing Board from time to time : provided that the Governing Board may in exceptional cases, with the previous approval of the Central Government relax this condition; he has been adjudged bankrupt or a receiving order in bankruptcy has been made against him or he has been proved to be insolvent even though he has obtained his final discharge; he has compounded with his creditors unless he has paid sixteen annas in the rupee; he has been convicted of an offence involving fraud or dishonesty; he is engaged as principal or employee in any business other than that of securities except as a broker or agent not involving any personal financial liability unless he undertakes on admission to severe his connection with such business; he is associated with or is a member of or a subscriber to or a shareholder or debenture holder in or is connected through a partner or employee of a member of or is a member or director of or debenture holder in a company which is a member of or debenture holder in any other organisation, institution, association, company or corporation where forward business of any kind whether in goods or commodities or otherwise is carried on unless he undertakes on admission to severe such association or connection; he has been at any time expelled or declared a defaulter by any other stock exchange; he has been previously refused admission to membership unless a period of one year has elapsed since the date of such rejection. Upon intimation of election, newly elected member is to pay entrance fee as per Rule 32, admission fee as per Rule 33 and fees and annual subscription fee as per Rule 34 and upon payment of admission fee, entrance fee and annual subscription fee, certificate of admission is issued to the member together with an intimation of date from which he shall enjoy the rights and privileges and be subject to all the duties, liabilities and obligations of a member of the exchange. As per Rule 36, a new member on admission is to provide security for the sum of Rs. 75,000 and shall maintain such security with the exchange at all times he is carrying on business on the exchange except when working as a representative member. Whereas, the entrance fee, admission fee and annual subscription fees become the property of the exchange, the security is subject to a first and paramount lien for any sum due to the exchange or the clearing house by him or by the partnership of which he may be a member and for the due fulfilment of his engagements, obligations and liabilities or the partnership of which he may be a member arising out of or incidental to any bargains, dealings, transactions and contracts made subject to the rules, bye-laws and regulations of the exchange or anything done in pursuance thereof. This security is to be returned to the member on termination of his membership or on his ceasing to carry on business on the exchange or on his working as a representative member or on his death all security not applied under the Rules, bye-laws and regulations of the exchange shall, at the cost of the member, be repaid and transferred either to him or as he shall direct or in the absence of such direction to his legal representatives. Termination of membership is provided under Rule 47 which states that if the member ceases to be a citizen of India; he is adjudged bankrupt; he is convicted of an offence or he engages either as principal or employee in any business other than that of securities except as a broker or agent not involving any personal financial liability and he is to be treated as expelled by the Governing Board and the provisions of Rules relating to expulsion shall apply to such member. Rule 48 provides for registration* of a member which may be accepted by the Governing Board either unconditionally or on such conditions as it may think fit or may refuse to accept such resignation and in particular may refuse to accept such resignation until it is satisfied that all outstanding transactions with such member have been settled. Rule 50 provides that when a member dies, all subscriptions, debts, fines, fees, charges and other monies as shall have been determined by the Governing Board to be due by him to the exchange or to the clearing house and all debts, liabilities, obligations and claims arising out of any contracts made by him subject to the rules, bye-laws and regulations of the exchange as shall have been admitted by the Governing Board, shall be paid and satisfied in full before his legal representatives or heirs or the persons mentioned in Appendix C to these rules are allowed to exercise the right of nomination. Rule 51 provides the payment of deceased member's obligations which states that if the legal representatives of a deceased member or his heirs or the persons mentioned in Appendix-C to these rules or any other person on his behalf do not or are unable to pay and satisfy his dues, debts, liabilities, obligations and claims as provided in the rules, bye-laws and regulations, the Governing Board shall exercise the right of nomination in respect of such membership and the consideration received therefor shall be applied in the manner provided in these rules. Rule 52 provides continuance of deceased member's business which states that if legal representatives or heirs or the persons mentioned in Appendix C to these rules desire that his business should be continued for sometime for the benefit of the deceased's family by any specified person who is eligible for membership and intimate their' desire by a letter to the exchange, the Governing Board or the President may in its or his discretion, permit such business to be carried on by such person on behalf of the legal representative or the persons mentioned in Appendix C for such period not exceeding six months as may be deemed proper. Rule 53 provides for cessation of the member, if the member is declared to be a defaulter and thereupon he ceased to enjoy any of the rights and privileges of membership but the rights of his creditor members against him shall remain unimpaired. Rule 54 stipulates the membership right of a member and that right shall lapse to and vest in the exchange immediately he is declared as a defaulter.

4.1 The rule Nos. 5 to 16 deal with membership and nomination. They are reproduced hereunder for the sake of brevity.

"3. Subject to the provisions of the Securities Contracts (Regulation) Act, 1956, the membership of the exchange shall consist of such number of members as the exchange in general meeting may from time to time determine.

5. The membership shall constitute a personal permission from the exchange to exercise the rights and privileges attached thereto subject to the rules, bye-laws and regulations of the exchange.

6. A member shall not assign, mortgage, pledge, hypothecate or charge his right of membership or any rights or privileges attached thereto and n(r) 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.

7. Subject to the provisions of these rules a member shall have the right of nomination which shall be personal and non-transferable.

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.

9. On the death or default of a member his right of nomination shall cease and vest in the exchange.

10. When a right of membership is forfeited to or vests in the exchange under any rule, bye-law or regulation of the exchange for the time being in force it shall belong absolutely to the exchange free of all rights, claims or interest of such member or any person claiming through such member and the Governing Board shall be entitled to deal with or dispose of such right of membership as it may think fit.

11(a) A member of not less than seven years' standing who desires to resign may nominate a person eligible under these rules for admission in his place :

Provided that a member of less than seven years' standing who desires to resign may with the sanction of the Governing Board nominate his own son eligible under these rules for admission to membership of the exchange a candidate for admission in his place.

(b) The legal representatives of a deceased member or his heirs or the persons mentioned in Appendix C to these rules may with the sanction of the Governing Board nominate any person eligible under these rules for admission to membership of the exchange as a candidate for admission in the place of the deceased member. In considering such nomination the Governing Board shall be guided so far as practicable by the instructions set out in Appendix C to these rules.

(c) The forfeited right of membership of a defaulter shall be restored to him if he be readmitted as a member within six months from the date of default but if an application by a defaulter for readmission be rejected by the Governing Board 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.

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.

13. xxxxxx

14. xxxxxxx

15. The Governing Board shall not approve a nomination unless the nominating member or in the case of a deceased member his legal representatives or heirs or the persons mentioned in Appendix C to these rules or any other person on his behalf shall have paid and satisfied in full.

(i) Such subscriptions, debts, fines, fees, charges and other monies as shall have been determined by the Governing Board to be due to the exchange or the clearing house by the nominating or deceased member; and

(ii) Such debts, liabilities, obligations and claims arising out of any contracts made by such member subject to the rules, bye-laws and regulations of the exchange as shall have been admitted by the Governing Board.

16. When as provided in these rules the Governing Board has exercised the right of nomination in respect of a membership vesting in the exchange the consideration received therefor shall be applied to the following purposes and in the following order of priority, namely :

(i) first-the payment of such subscriptions, debts, fines, fees, charges and other monies as shall have been determined by the Governing Board to be due to the exchange or to the clearing house by the former member whose right of membership vests in the exchange:

(ii) second-the payment of such debts, liabilities, obligations an claims arising out of any contracts made by such former member subject to the rules, bye-laws and regulations of the exchange as shall have been admitted by the Governing Board : provided that if the amount available be insufficient to pay and satisfy all such debts, liabilities, obligations and claims in full they, shall be paid and satisfied pro rata, and

(iii) third-the payment of the surplus if any to the funds of the exchange : provided that the exchange in general meeting may at its absolute discretion direct that such surplus be disposed of or applied in such other manner as it may deem fit."

4.2 Rules 20 and 21 deal with nomination and recommendation, which read as under :

"20. A candidate for admission except a candidate applying for a membership vesting in the exchange must obtain a nomination in the manner provided in these rules.

21. A candidate for admission must be recommended by two members none of whom should be a member of the Governing Board. The recommenders must have such personal knowledge of the candidate and of his past and present circumstances as shall satisfy the Governing Board".

4.3 The form of application is provided in Rule 22 and then procedure for admitting of a member is prescribed in subsequent rule.

5. The assessee was admitted to membership of the Ahmedabad Stock Exchange and claimed that the membership card was nothing but a personal right amounting to assets within the meaning wealth-tax, and therefore, no value thereof can be added in his wealth. The AO referred to the decision of Gujarat High Court, Stock Exchange of Ahmedabad v. CIT (1998) 231 ITR 906 (Guj) and following further reasons, added the value of stock exchange card to the wealth of the assessee by observing as under :

"The distinction between property and personal rights would be that the property rights are susceptible to valuation while the personal rights are not. The right would be proprietary if it has economic value. The right to nomination even if hedged and limited has, for whatever it is as per the rules of exchange, an economic value. The nomination in favour of an eligible person is made for consideration and the nominee acquires 'nomination' from the retiring member for a price. In other words, the right is in respect of an economic thing. Economic advantage to the person entitled to this 'thing', i.e., the right to nominate a successor to membership for a price is the object of the right. This would be a 'thing' in economic conception just as there are physical things. This is because there is an element of wealth in the right. The economic view has prevailed in the legal science for recognising intangible rights as proprietary rights. The test would be, is there a legally guaranteeable value ? The right to nomination to whatever extent granted under the rules of the petitioner stock exchange, clearly answers this test and would in our view be a property right since it has economic value.

It may be noted that in membership right auction notice which was issued by the petitioner stock exchange in the Economic Times on 17th Feb., 2004, the opening words clearly refer to 'disposable membership right'. In that notice, bids were invited from the interested bidders of Rs. 25 lakhs and above for the membership right of the deceased, which was available by auction. This would also show that there was a property element in the rights of membership of the petitioner stock exchange."

5.1 Apart from this legal position, details were gathered about auction value of card and it was noted that no stock exchange card was sold in vicinity of valuation date, i.e., 31st March, 1990. As per the information available from the stock exchange, cards were auctioned during financial year 1988-89 wherein value of card ranged between Rs. 1,31,000 to Rs. 1,35,000. There was no sale of card during financial years 1989-90 to 1990-91. Next auction took place during financial year 1991-92 and value of card sold ranged between Rs. 11,11,111 to Rs. 11,75,000. Therefore, estimate of fair market value of card was to be made for the value as on 31st March, 1990. In case of one member of Ahmedabad Stock Exchange, CWT(A) vide his order Nos. CIT(A)-II/AC-2(5)/10 and 11/97-98, dt. 10th June, 1999, has held fair market value of Ahmedabad Stock Exchange card as on 31st March, 1991, at Rs. 10,00,000 as reasonable. Therefore, in view of clear decision of jurisdictional High Court and the fair market value of stock exchange card as on 31st March, 1991, which was estimated earlier in case of member of Ahmedabad Stock Exchange (ASE), assessee was asked to show-cause vide notice served on 4th Jan., 2000, that why the fair market value of ASE, be not taken at Rs. 10,00,000 and may not be taken as asset for computing net wealth of the assessee. The assessee was also informed about the decision of Gujarat High Court and the fact that CWT(A) had held the fair market value of card at Rs. 6,00,000 as on 31st March, 1990.

6. When the appeal came before the CIT(A), the judgment of the Supreme Court was announced in the appeal against the decision of the Gujarat High Court, which is Stock Exchange, Ahmedabad v. Asstt. CIT (2001) 248 ITR 209 (SC). Quoting the headnotes of the judgment of Supreme Court, the CIT(A) observed that the question for consideration before the Hon'ble apex Court was what would be position of the card held by the member in the special circumstances of his death or default. The question has been answered only with reference to the circumstances whether recovery of outstanding tax liabilities against the deceased member can be made from the value of membership card which stood vested with the stock exchange in view of certain rules of the exchange since the deceased member had committed defaults in settling the dues of the stock exchange and its other members. He then referred another decision of the Supreme Court in the case of Vinay Bubna v. Stock Exchange, Mumbai (1999) 97 Comp Cas 874 (SC), wherein it is held that membership of the stock exchange is a personal permission from the exchange to exercise the rights and privileges attached thereto and observed that this case was also a case of a defaulter. He observed that the High Court held in principle that it would not make any difference under the rules, both in the case of the death or default of a member, his right of nomination ceased and vested in the stock exchange. He then referred to the decision of Bombay Bench of Tribunal in the case of V.N. Cantol v. ITO and Anr. (1994) 50 ITD 386 (Bom), wherein after referring the decision of the Supreme Court in the case of Purshottam N. Amarsay v. CWT (1973) 88 ITR 417 (SC), the Tribunal held that the word 'property' has been widened so as to include even non-transferable assets and so far as the membership right of the stock exchange is concerned, it can be sold and the consideration received can be utilised in the manner prescribed in rules, bye-laws and regulations. The Tribunal, therefore, held that claim of the assessee that the membership card cannot be treated as a property under Section 2(e) cannot be accepted. He also referred to Special Bench decision in the case of Jagan Nath Sayal v. Asstt. CGT (2000) 67 TTJ (Del)(SB) 1 : (2000) 72 ITD 1 (Del)(SB), wherein the Tribunal held that a share in the Delhi Stock Exchange (DSE) and also membership of DSE are capital assets within the meaning of Section 2(e) of the WT Act, wherein, according to him, the Tribunal held by fortifying their finding by observing that there are ample indications that the Parliament itself intended to treat them as capital assets though in order to know such intention one has to take into consideration the provisions of the Finance Act, 1997, which came into effect from 1st April, 1998. He referred to Section 47 of the IT Act stating that "nothing contained in Section 45 shall apply to the following transfers..... (ix) any transfer made on or before 31st day of December, 1997, by a person (not being a company) of a capital asset being membership of a recognised stock exchange to a company in exchange of shares allotted by that company to the transferee". Following Explanation was then quoted "for the purpose of this clause, the expression 'membership of a recognised stock, exchange' means the membership of a stock exchange in India which is recognised under the provisions of Securities Contracts (Regulation) Act, 1956". He then referred to Section 47A of the IT Act withdrawing the exemption by reproducing Sub-section (2) thereto stating that where at any time, before the expiry of a period of three years from the date of the transfer of a capital asset referred to in Clause (xi) of Section 47, any of the shares allotted to the transferor in exchange of a membership in a recognised stock exchange are transferred, the amount of profits and gain not charged under Section 45 by virtue of the provisions contained in Clause (xi) of Section 47 shall, notwithstanding anything contained in the said clause be deemed to be the income chargeable under the head "Capital gains" of the previous year in which such shares are transferred.

6.1 He then referred to Board Circular No. 763, dt. 18th Feb., 1998, which reads as under :

"Encouraging corporatisation of stock brokers' card-28.1 Under the existing provision of Section 45 of the IT Act, 1961, corporatisation of membership of recognised stock exchange involves transfer of a capital asset and is, therefore, subject to capital gains tax.

28.2 In order to encourage more brokers to corporatise, increase their liquidity and consequently their volume of trading resulting eventually in giving a boost to the capital markets, the Finance Act, 1997, exempts from tax, capital gains arising on corporatisation of membership of a recognised stock exchange by inserting Clause (xi) in Section 47 of the IT Act. A new Sub-section 47A(2) has been inserted providing for withdrawal of such exemption if the transferor retains shares allotted on transfer of membership for less than three years. This exemption will be allowed only in respect of corporatisation effect on or before 31st Dec, 1997".

6.2 He further observed that if it was to beheld that the membership of a person in stock exchange was not a 'property' of such person as contended, then the provisions of Section 47(xi) and 47A(2) of IT Act would become superfluous and redundant and that a construction that addresses one of the provisions to a 'dead letter' is not a harmonious construction. Referring the definition of the assets in Clause 2(e) he observed that it is inclusive one and has got a very wide connotation and the purpose was not to limit the meaning but to widen its net. Property of every description is included in the definition and only exclusion being as specified in Clauses (1) and (2) of Section 2(e). He, therefore, upheld the action of the AO in holding the fair market value of stock exchange card as includible in the net wealth of the assessee.

6.3 The value of the stock exchange card at Rs. 10 lakhs taken by the AO is also upheld by the CIT(A) by observing that for the two years prior to that, in the immediately succeeding year, the value of stock exchange card ranged between Rs. 11,11,111 to Rs. 11,75,000 on the basis of sale taken place, and therefore, the value adopted by the AO at Rs. 10 lakhs was held to be reasonable.

7. Shri Sanjay R. Shah, learned counsel for the assessee, appearing in WTA No. 107/Ahd/2001, while impugning the order of Revenue authorities took us through the above rules and bye-laws of Ahmedabad Stock Exchange and contended that membership right of a member of a stock exchange is not "property", but a mere personal permission to carry on business as a share broker with other members for and on behalf of his constituents, subject to rules and regulations of stock exchange. It was contended that such personal rights or permission neither be equated with expression "assets" available in Section 2(e) of WT Act, 1957, nor it fell within the extended definition of the WT Act. He further contended that in case of death and default of a member his right of nomination ceases and vests in the stock exchange. According to him, this is not only a right which has any value, but this right is not an absolute right. In this connection, he referred to Rule 9 of Stock Exchange Rules and contended that this right of nomination is subject to Rules 5 and 6. These Rules prohibit a member from assigning his rights of membership or any right or privilege attached to such membership. Thus, it is only a personal permission from the exchange to exercise the right and privilege attached thereto. He, further contended that even if a member is not in default or expired or had an eligible number of years as a member for exercising right to nomination under the Rules, such right would also not be exercised absolutely. It can be exercised after fulfilling the three interdictions available in Rule 11 (a) of the Rules, namely, (i) approval of such person, i.e., the nominee by the Governing Board for admission to stock exchange, (ii) qualification and eligibility of the nominee, and (iii) clearance of the dues of the outgoing member under Rules 15 and 50 of the said Rules. It was submitted that until all this was done, such inchoate right of nomination could not be exercised. He, therefore, submitted that in the case of deceased member, his representative's right to nominate given by the Rule 11(b) r/w section of Appendix C was restricted by similar conditions. Hence, he emphasised that membership card cannot be construed as an "asset" within the meaning of this expression employed in Section 2(e) of WT Act, 1957. Relying upon the Supreme Court judgment in the case of Stock Exchange of Ahmedabad v. Asstt. CIT (supra), the decisions of Tribunal in the case of Upendra M. Dalal v. Dy. CIT (2004) 83 TTJ (Mumbai) 828 : (2004) 89 ITD 629 (Mumbai) and in the case of Dy. CIT v. Ashwin C. Shah (2002) 82 ITD 573 (Mumbai) Mr. Sanjeev Shah contended that the Supreme Court has examined all the Rules and Regulations of Stock Exchange of Ahmedabad in the aforesaid case and ultimately concluded that stock exchange membership card is a personal right and cannot be equated with "property". Further, he took us through the judgment of Tribunal, Bombay, in the case of Ashwin C. Shah (supra), wherein the Tribunal after putting reliance on the judgment of the Supreme Court has held that membership card of Bombay Stock Exchange whose Rules and Regulations are analogous to Rules and Regulations of Ahmedabad Stock Exchange cannot be termed as an asset according to WT Act and not liable to levy of tax under the WT Act, 1957.

8. Mr. Saurabh Soparkar, appearing in WTA No. 95/Ahd/1999, submitted that membership card is a personal privilege. He also submitted that it does not make any difference whether the assessee is a continuing member or a defaulter or he be a legal heir of the member on death. The property in card is inalienable and vests in the stock exchange, Mr. Manish Shah, appearing in WTA No. 27/Ahd/2000, adopted the earlier arguments of Mr. Sanjiv Shah and Mr. Soparkar and also submitted that in his case the reopening was made after four years and reliance on Gujarat High Court decision in the case of Stock Exchange, Ahmedabad v. Asstt. CIT (supra) would not be of any help for justifying reopening in view of later decision of the Supreme Court reversing the decision in the above case of Gujarat High Court as reported in (2001) 248 TTR 209 (SC) (supra). According to him, reopening was also invalid. Mr. Divetia, appearing in WTA Nos. 17, 18, 81, 96 and 101/2001, adopting the earlier arguments further submitted that the matter was decided ex parte and there was no basis for the valuation of the card as on 31st March, 1991, at Rs. 7 lakhs. He also referred to provisions of Section 16A of WT Act. Mr. M.K. Patel in WTA No. 44/2003 adopting the earlier arguments, also submitted that the valuation was not in accordance with the law. Mr. Chirag Shah, appearing in WTA Nos. 86 and 88/2001, submitted that the card held by the assessee was less than seven years and, therefore, the assessee in his case has no right even for nomination. The valuation of the card was also disputed by him. Mr. Suresh Shah, appearing in WTA No. 5/2001, submitted that it is the first year of the case and the assessee had purchased the card in the year under consideration. Mr. N.P. Parikh, appearing in WTA Nos. 82, 102, 103, 104, 106 and 111/2001, submitted that the membership card held by the assessee is more than seven years and he adopted the arguments of Mr. Shah and Mr. Soparkar and also challenged the valuation of stock card as well. Mr. K.P. Shah, appearing in WTA No. 65/2001, also adopted the arguments and also challenged the valuation and referred to some stock exchange letter for valuation. Mr. J.T. Shah appearing in WTA No. 7/2001, besides challenging the assessment on merits, also submitted that valuation of the card was very high. Mr. Jayesh Parikh in WTA No. 29/2001 submitted that card held by the assessee is for less than 7 years and, therefore, the assessee had no right, even for nomination. Mr. Shreyan Shah, appearing WTA Nos. 8, 83 and 100/2001, adopted the arguments of the earlier counsel. The learned counsel emphasised that income-tax matters are governed by all India statutes. When there is a decision of another co-ordinate Bench of Tribunal on the interpretation of a statutory provision, it would be a wise judicial policy and practice not to take a different view, more particularly, the judicial discipline demands consistency in the judgments or if the Tribunal is going to take a different view, then the matter be referred to for constitution by a Special Bench.

9. On the other hand, the learned Departmental Representative submitted that the right to membership of stock exchange was not a mere status, but it had value in terms of money and the membership card could be sold. It was contended that the fact that even if the nomination made by a member is rejected, the member had a right to make a fresh nomination under Rule 12 which clearly indicates that the right to nominate granted by Rule 11 is a property right. For supporting his contention, he relied upon the decision of Tribunal Bombay, in the case of Upendra M. Dalai (supra), wherein it has been held that the sale proceeds of a stock exchange card were considered to be liable for capital tax under the IT Act, 1961. While distinguishing the judgment of the Supreme Court in Ahmedabad Stock Exchange (supra), the learned Departmental Representative submitted that the Supreme Court has considered the right devolves upon a member from the membership card of stock exchange in altogether different context. Therefore, the judgment of the Supreme Court cannot give any help to the assessee to say that a membership card has no element of property. He submitted that the Bombay High Court in a recent decision in the case of Stock Exchange, Bombay v. V.S. Kandalgaonkar, Asstt. CIT and Ors. (2003) 261 ITR 577 (Bom), has again considered the controversy elaborately which is analogous to the dispute raised before the Supreme Court in Ahmedabad Stock Exchange (supra). The Bombay High Court has upheld the attachment of the balance surplus attributable to such member who has been relinquishing his right of membership either by way of default or death or any other form. The Stock Exchange Rules provide how the sale proceeds of a stock exchange card or right of nomination are to be appropriated. Such appropriation is to be according to Rules and the surplus would be given to the member whose membership card has been put to sale or who has given up his right of nomination. The Bombay High Court has upheld the attachment of such surplus. In this way, the learned Departmental Representative submitted that the Department has rightly considered the value of stock exchange card as an "asset" and levied wealth-tax. Mr. Patwari, referring to the decision of Rajasthan High Court in the case of Ravindra Kumar Jain v. CIT (2003) 132 Taxman 882 (Raj), submitted that in case of transfer of membership card at a lower than the market value, the gift-tax levy was upheld upon considering even the decision of Supreme Court in the case of Ahmedabad Stock Exchange (supra). He further submitted that in view of the decision of the Supreme Court in the later case, CWT v. Prince Muffakham Jah Bahadur Chamlijan (2001) 247 ITR 351 (SC), the right to live in a house during life time without paying rent, though personal and inalienable, was held to be property chargeable to tax and the value is to be determined on what it would fetch if it were sold in an assumed market, a willing purchaser would pay for it. In the present case, Ahmedabad Stock Exchange rule Nos. 5 and 6 do call the membership of stock exchange as personal and inalienable and the same can be very well assumed to be saleable in the case of live member of stock exchange and above rule can be applied. He also referred in this case the decision of Special Bench of the Tribunal in the case of Jagan Nath Sayal (supra). The decision of Bombay High Court in the case of Stock Exchange v. V.S. Kandalgaonkar and Ors. (supra) wherein defaulter's card was sold for Rs. 37 lakhs and almost 34 lakhs of such recovery was allowed by the High Court to be attached by TRO of income-tax after considering the judgment of the Supreme Court in the case of Ahmedabad Stock Exchange (supra), according to him, definitely goes on to show the tremendous economic value of the sale proceed of nomination rights of stock exchange as well. Whatever may be the hedging of such right to nomination by various rules, it does have a tremendous economic value. He also referred the decision of the Supreme Court in the case of CWT v. U.C Mehtab (1998) 231 ITR 501 (SC), wherein the right to receive compensation constitutes an asset. He then referred the decision of the Tribunal in the case of Upendra M. Dalai v. Dy. CIT (supra), wherein the membership of stock exchange put to sale through nomination was held to be subject to capital gains tax by the Tribunal by holding that it was a transfer of capital assets. He then concluded that :

(i) The value of stock exchange card in the case of non-defaulting, surviving member has economic value and, therefore, constitutes property within the meaning of Section 2(e) of the WT Act.

(ii) The decisions of apex Court in the case of Stock Exchange, Ahmedabad v. Asstt. CIT (supra) and Vinay Bubna v. Stock Exchange, Mumbai (supra) are specific to the defaulting members who cease to be members of stock exchange and therefore, does not have any interest in their card and accordingly, the same could not be regarded as their assets. In view of this, the decision of the apex Court has limited applicability to the specific facts of those cases and cannot be applied to all members having interest in membership cards.

(iii) The right to assign membership, subject to certain rules, can be quantified in monetary terms and can constitute property.

(iv) The decision of Bombay High Court (2003) 261 ITR 577 (Bom) (supra) and Rajasthan High Court decision's reported in (2003) 132 Taxman 882 (Raj) (supra) are subject to the decisions of apex Court and in both the decisions, transfer of membership rights has been considered as valuable assets in the hands of members. In view of the above, the decision of the Supreme Court on the issue of membership right of stock exchange nowhere concludes that value of cards in the hands of surviving member will not be an asset.

9.1 Learned Departmental Representative also submitted the written submissions which read as under :

"1. In the case of Stock Exchange of Ahmedabad v. CIT (supra), the Gujarat High Court had held that the Ahmedabad Stock Exchange has rules which allow the nomination in favour of some other person by the member of stock exchange. Such possibility of nomination with certain restriction has an economic value which certainly makes the card under the rules of Ahmedabad Stock Exchange a valuable property.

2. This issue has not been adjudicated upon by the Supreme Court in the above-mentioned case reported in (2001) 248 ITR 209 (SC) (supra), when this case travelled upto Supreme Court. Therefore, as on date the above decision of the Gujarat High Court is a law in the territory of Gujarat.

3. The Gujarat High Court had relied on the Rule 11(b) of the stock exchange which allows the right of nomination, subject to certain restrictions, to legal heirs of deceased member of stock exchange within a period of six months. In the above case the member died in February, 1995, and the card of the dead member was attached under Section 281B by IT Departmental in the month of June, 1995. At the time of attachment, six months had not elapsed from the date of death of the member and hence the right to nominate by the legal heirs of the deceased had not expired. However, the Supreme Court found that the legal heirs communicated their inability to clear the dues in the month of February, 1995, itself and hence had lost the right to nominate. The Supreme Court, therefore, held that the deceased member had died and defaulted, and, therefore, his legal heirs had no right of nomination in the membership of the stock exchange. The membership card had ceased to exist after the death of the member and the right to nominate had ceased to exist for the legal heirs due to non-clearance of dues within six months of death of the member in this case.

4. The question of property in the stock exchange card would arise when the card exists. The decision of the Supreme Court is based on only this fact that the member even though dead, was a defaulter too and had, therefore, ceased to hold the card and the right to nominate. The Supreme had, therefore, no occasion to go further into the issue and give a finding in such cases where the member is not a defaulter. Therefore, the ratio of the decision of Gujarat High Court is still applicable that the right to nominate as per Ahmedabad Stock Exchange has an economic value and, therefore, wherever such right exists and the member is not a defaulter, the corresponding membership card will be a property.

5. The Bench of Tribunal, Mumbai, has based its decision in the case of Dy. CWT v. Ashwin C. Shah (2002) 76 TTJ (Mumbai) 823 : (2002) 254 ITR 90 (Mumbai)(AT) on the incorrectly understood ratio of the abovementioned judgment of Supreme Court. The ratio incorrectly understood by the above Bench is :

'Membership of stock exchange is a mere personal privilege and that the right of nomination is not automatic but is hedged in by several conditions. On the right of nomination vesting in the stock exchange under the rules, the right belongs to stock exchange absolutely ' The Supreme Court has made the above observation but the issue whether such hedged right of nomination would not be a property has not been decided by the Supreme Court. The correct ratio of the above judgment is 'both in case of default and death, the right of nomination vests in stock exchange as per Rule 9 of Ahmedabad Stock Exchange. Moreover, the legal heir did not pay or satisfy the dues and claim as required under Rule 15 of Ahmedabad Stock Exchange. Hence, the membership right was not available, therefore, the question of its being a property does not arise. Hence, the membership card of a live member who is not a defaulter should be valued on the basis of the ratio of the judgment of Gujarat High Court in the case of Stock Exchange of Ahmedabad v. CIT (supra).'"

10. In rebuttal to the aforesaid written submissions, the learned counsel of the assessee submitted, in his rejoinder, as under :

"1. The learned Departmental Representative has tried to raise the contention that Supreme Court in the decision of Ahmedabad Stock Exchange (supra) has only dealt with the proposition 'whether the card of a member under the rules of Ahmedabad Stock Exchange can be treated as a valuable property after the death of such member and they have not dealt with the issue of 'stock exchange card with possibility of nomination with certain restriction, has an economic value which certainly makes the card under the rules of Ahmedabad Stock Exchange a valuable property'. This contention is not correct. This can be seen from the issue which was for determination before the Supreme Court at p. 212 of the Supreme Court decision in 248 ITR (supra). The same is reproduced here :

'The question for determination is as to the nature of the rights of the deceased or his legal representatives in the stock exchange card. On the facts of the case, whether the said card was the property belonging to the assessee and after his demise devolved upon his legal representatives and heirs or it was a personal permission in favour of the deceased and right of nomination of the legal representatives and heirs after his death has ceased and the said right has vested in the exchange is the point in issue. A careful reading of the above issue, with the highlighted portion shows that the Supreme Court was dealing with following issues while deciding on the appeal of Stock Exchange, Ahmedabad :

(a) Nature of the right of deceased member of the stock exchange.

(b) Whether the said card was the property belonging to the assessee and after his demise devolved upon his legal representatives and heirs or it was a personal permission in favour of the deceased ?

(c) Whether right of nomination of legal representatives and heirs after his death has ceased and said right has vested in the exchange ?

Thus, the Supreme Court has considered the issue 'whether the said card was the property belonging to the assessee as could be seen in point (b) above, besides considering whether after his demise it devolved upon legal heirs. Therefore, it is not correct to say, as contended by learned Departmental Representative, that the Supreme Court was considering a proposition about stock exchange card to be considered as a property after the death of the member. This would get further corroborated by the ultimate conclusion drawn by the Supreme Court which is mentioned in second para on p. 214 as under :

The question whether right of a membership confers upon the member any right of property, is, therefore, to be examined within the framework of the rules, bye-laws and relations of the exchange. 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'. Further, the contention that the Supreme Court has not adjudicated upon the issue of 'possibility of nomination with certain restriction has an 'economic value' which certainly makes the card under the rules of Ahmedabad Stock Exchange a valuable property is also not correct as could be seen from further conclusion reached by Supreme Court in para 2 of p. 214 which reads as under:

'The nomination wherever provided for is also not automatic. It is hedged as per rules. On the right of nomination vesting in the stock exchange under the rules that right belongs to the stock exchange absolutely. The consideration received by the stock exchange on exercise of the right of nomination vesting in it, is to be applied in the manner provided in Rule 16. Therefore, the Supreme Court has dealt with both the proposition in its judgment (supra), i.e., whether stock exchange card is a property belonging to the assessee or it was a personal permission granted by the exchange in favour of the member whether dead or alive and whether right of nomination of the legal heirs of a deceased member after his death has ceased and whether the said right has vested in the exchange. Since the conclusion of the Supreme Court regarding the first issue is that it is personal permission granted by the stock exchange to the members whether dead, defaulting or functioning, it has to reject the stand of the Department of having 'economic value' to the right of nomination which is attached with such card and which Gujarat High Court had upheld in its decision. This is further strengthened by the observation of the Supreme Court in the last para on p. 215 where it concludes that 'the membership right in question was not the property of the assessee and, therefore, it could not be attached under Section 281B of the IT Act'. The Supreme Court thus in terms states about the membership right and nomination right both and not only about the right of nomination alone which is attached to the membership right'. In short, the Supreme Court was evaluating status of both the right of membership as well as right of nomination vis-a-vis the assessee and hence it is incorrect to read into the judgment that the Supreme Court was only dealing with the case of dead member or that it has not considered the possibility of nomination as a relevant factor which can term the stock exchange card as valuable property. Considering the above, entire ratio of Gujarat High Court decision is reversed by the Supreme Court and no part thereof remains a valid proposition of law after the decision of the Supreme Court. The learned Authorised Representative further submitted that the contention of the learned Departmental Representative in para 7 of his note that Tribunal, Mumbai, in the case of Ashwin C. Shah (supra) has incorrectly understood the ratio of the Supreme Court decision is also, therefore, to be rejected in view of the analysis of the Supreme Court judgment made out in earlier paras. In fact, the Bombay Tribunal in that case has dealt with every possible and conceivable. argument from the Department in point at issue and has then come to the conclusion that stock exchange card whether in respect of a dead, defaulting or living member, is a personal permission and hence not asset under Section 2(e) of the WT Act liable to wealth-tax. He further submitted that recently also another Bench of Bombay Tribunal in the case of Upendra M. Dalai (supra) had occasion to deal with a part of the above controversy in relation to chargeability to capital gain on nomination of another member in place of the existing member. The Tribunal therein decided the issue against the assessee holding that as and when an existing member nominates another person in his place and thus exercise his right of nomination, he converts his personal permission into a personal property and hence the consideration received thereof can be said to be for the transfer of such capital asset liable to tax as capital gain. This decision however, therefore, supports the view that so long as nomination is not done even in the case of existing share broker, stock exchange card is a personal permission. This decision is also further states on p. 640 supporting the view taken by Bombay Bench of Tribunal in the case of wealth-tax matter of Ashwin C. Shah (supra) that it is also correct to say, as has been held by the wealth-tax Bench of Tribunal, Bombay, that even in the hands of the non-defaulting continuing member, mere possession of a stock exchange card does not amount to possession of an asset, as the card merely grants a personal privilege and further on the same page in the last lines it states as under :

'The members of the Bombay Stock Exchange are known to advertise their intention to sell the card and they call for the bids for which the parties can be nominated. No doubt, such transfer is subject to the conditions laid down in Rules 9 and 43 of the Bombay Stock Exchange Rules. However, these conditions do not take away completely, though they may restrict, the value of the important right which has been passed through nomination. Thus, rights and interest in the stock exchange card are not attachable in garnishee proceedings. They are not liable to wealth-tax by way of an annual levy as held by the wealth-tax Bench of the Tribunal, Mumbai. Similarly, the card is not attachable in the case of defaulting or deceased member, because the rights in the cards vest in the stock exchange in case of default or death. And, therefore, the view taken in Ashwin C. Shah's decision (supra), Bombay Tribunal atleast as far as wealth-tax is concerned, has been further fortified by the subsequent Bench of Bombay Tribunal in the case of Upendra Dalai referred supra. Department's reliance on the Special Bench decision of Jagan Nath Sayal (supra) is misplaced for deciding the applicability of the wealth-tax to the stock exchange card in respect of at least Ahmedabad and Mumbai share brokers because in the case of Jagan Nath Sayal (supra) the point at issue was applicability of the rules of Delhi Stock Exchange which are materially different from the rules of Ahmedabad and Bombay Stock Exchanges. This controversy is also adequately dealt with by the Mumbai Tribunal in the case of Ashwin C. Shah (supra) at paras 22 to 24 on p. 589. Therefore, the Special Bench decision of Jagan Nath Sayal (supra) may be a good law for Delhi Stock Exchange, but not with respect to the members of Ahmedabad and Bombay Stock Exchanges, where the rules are different from Delhi Stock Exchange. Lastly, the issue regarding the applicability of Mumbai Bench decision in Ashwin C. Shah's (supra) case was recently examined in one of the cases by Ahmedabad C. Bench in the matter of appeal Nos. 3347/Ahd/1996 and 3429/Ahd/1996 in the case of Vasudev G. Gajjar v. Asstt. CIT, decided on 28th Nov., 2003, and the ratio whereof is as under :

'We have considered the rival submissions and perused the record, and also have gone through the decisions cited. After considering the totality of the case and on perusal of the decisions, of the Tribunal, Mumbai Bench (supra), we find that on identical set of facts it has been held that the stock exchange card of the Bombay Stock Exchange is not an asset under Section 2(e) of the WT Act. On perusal of the said decision of the Tribunal, we find that the observation about the decision of the Special Bench of Tribunal, Delhi, cited by learned Departmental Representative that order of the Special Bench of the Tribunal would apply wherever the rules of the concerned stock exchange are similar to those of Delhi Stock Exchange. Since all the relevant facts particularly, the rules of stock exchange of which the card has been sold by the assessee, have not been examined by the lower authorities and the same cannot be examined at this stage on account of non-availability of relevant record at this stage, under the circumstances, we think it proper to send back this issue to the file of AO with the direction to decide the same after considering the relevant rules of the stock exchange in accordance with the decisions of the Special Bench of the Tribunal and the decision of the Tribunal, Mumbai Bench, after affording reasonable opportunity of hearing to the assessee.' On reading the ratio of this decision, it would be found that the Ahmedabad Bench had accepted the ratio of Mumbai Tribunal in the case of Ashwin C. Shah (supra) and since a coordinate Bench of Tribunal, Ahmedabad, has accepted the ratio of Bombay Tribunal in Ashwin C. Shah's case (supra) in the above case of Vasudev G. Gajjar (supra), the Bench should also follow the same following the ratio of Gujarat High Court in the matter of Sayaji Iron & Engg. Co. v. CIT (2002) 253 ITR 749 (Guj). It is further submitted that all along, the stress by the Department is to consider the stock exchange card as an asset or the property on the ground that it carries with it the right of nomination which can be transferred. In this regard, it is submitted that under rule No. 7 of the Ahmedabad Stock Exchange Rules such right of nomination is also a personal and non-transferable right. Further, even such personal right of nomination is also available to a member only after he has 7 years standing as per Rule 11(a) of the said Rules. It means, therefore, that in case of a member having less than 7 years standing such right of nomination at all is not available to him. In such a situation the membership of stock exchange even if considered to be a property would be a property without value since there would not be any nomination by such a member except to his son as per the proviso to Rule 11 (a). In such cases of the members of Ahmedabad Stock Exchange, therefore, where members have less than 7 years standing such right of nomination has as such no value and, therefore, on that ground also the membership card cannot be said to be having any value liable to wealth-tax."

11. We have heard the parties and considered the rival contentions. Much emphasis has been put on the ratio laid down by the Supreme Court in Ahmedabad Stock Exchange (supra) by both the sides. Let us see the applicability of the above decision of the Supreme Court in 'exclusion' or 'inclusion' of value of stock exchange membership card for the purpose of WT Act, 1957. In this case, one Rajesh Shah was a member since 19th Feb., 1988, and he died on 7th Feb., 1994. His legal representatives declined and did not opt to exercise the right of nomination and wrote to the exchange that they were unable to meet the liabilities of the stock exchange. The stock exchange, therefore, passed a resolution declaring Rajesh Shah to be a deemed defaulter and assumed the membership rights which were resolved on 12th Feb., 1994, to be disposed of for a sum of Rs. 25 lakhs as minimum floor price, but actually sold later for Rs. 27 lakhs to UTI on 5th Dec, 1994. The AO issued 281B order of provisional attachment in respect of (i) stock card, (ii) margin money, and (iii) security deposit. The AO issued a notice under Section 226(3) on 14th June, 1995. The claim of the stock exchange has been that membership rights were vested in stock exchange because Rajesh was defaulter and ceased to have right of nomination and after that they did not have any money for and on behalf of Rajesh or his legal representatives. The question for determination before the Supreme Court was "as to the nature of rights of the deceased or his legal representatives in the stock exchange card; whether the card was the property of the assessee and after his death devolved upon his legal representatives or it was a personal permission in favour of the deceased and right of nomination of the legal representatives and heirs after his death has ceased and the said right thereupon has vested in the stock exchange." The Supreme Court narrated various clauses of rules and held :

"The stock exchange rules, bye-laws and regulations have been approved by the Government of India under the Securities Contracts (Regulation) Act, 1956. There is no challenge to these rules. The question whether right of membership confers upon the member any right of property is, therefore, to be examined within the framework of the rules, bye-laws and regulations of the exchange. 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."

11.1 The Court however added thereafter to the effect that :

"On the right of nomination vesting in the stock exchange under the rules, that right belongs to the stock exchange absolutely. The consideration received by the stock exchange on exercise of the right of nomination vesting in it, is to be applied in the manner provided in Rule 16."

11.2 These observations clearly point out that the Supreme Court was dealing with a case where right of nomination ceased and vested in stock exchange and not of a continuing member who is not a defaulter but of a member who had died and also declared as a defaulter. The Court itself said that :

"It is personal privilege though non-transferable and incapable of alienation is a right to the limited extent provided in the rules and subject to fulfilment of certain conditions."

11.3 The right of nomination is thus there but hedged by rules. This is further evident by saying it to be a case similar to K.R.P. Shroff (1933) 3 Comp Cas (PC), wherein the member lost his membership for being declared as a defaulter. Vinay Bubna's case (supra) also recognises it as personal permission from exchange to exercise right and privileges and not a private asset. This was a case of defaulter and the Supreme Court in Stock Exchange, Ahmedabad case (supra) observed no different in the case of defaulter or death as in both case they loose their right of nomination. That this was a case of death is evident from the following paragraph :

"The heirs and legal representatives of Rajesh Shah, as already noticed, had informed the stock exchange that they were unable to meet the liabilities of the deceased and the appropriate decision in that behalf may be taken by the stock exchange. It is evident that they did not exercise the right of nomination under Rule 11 r/w Appendix C. They did not pay or satisfy the dues and claims as required under Rule 15. Under these circumstances the Governing Board exercised the right of nomination in respect of membership of Rajesh Shah which had vested in the stock exchange."

11.4 It is, therefore, abundantly clear that it was not a case of continuing non-defaulter member where right of nomination vests in him by virtue of Rule 11. The decision of the Supreme Court, no doubt, states that it is a mere personal privilege granted to the member, it is non-transferable and incapable of alienation of the member or legal heirs but simultaneously stating, "except to the limited extent provided in the rules and subject to fulfilment of certain conditions and the right of nomination is not automatic but hedged by rules". The card was sold by the stock exchange itself in this case for a sum of Rs. 27 lakhs. Therefore, to say that there was no property at all in stock exchange card is not the decision of Supreme Court.

12. Similarly, in the case of Mrs. Sejal Rikeen Dalai v. Stock Exchange, Bombay 69 CC 709, the nomination of Sejal, the daughter-in-law of the member of stock exchange, Sh. Pardeep, by the legal heirs on his death was right of stock exchange which was claimed to be violating Art. 31(1) of the Constitution, being right to property. The Court held that on death, right of nomination ceases and vests in stock exchange by Rule 9. There is, therefore, no property in membership. This also is a case dealing with right of legal heirs on death of the card holder.

13. In Stock Exchange v. Custodian, the Special Court vacated the attachment against membership card of a continuing member by following Supreme Court decisions in Stock Exchange, Ahmedabad (supra) and Vinay Bubna (supra) by holding that "membership is a personal privilege and it is not alienation as a property." This, according to assessee, removes the doubt that the Supreme Court's decision also applies to a continuing member. It should be however seen in context of later decision of Bombay High Court in Stock Exchange, Mumbai v. V.S. Kandalgaonkar and Ors. (supra). In this case, one Suresh, a broker of the Bombay Stock Exchange, was member up to 29th June, 1994, when he was declared a "defaulter" under the rules. The broker failed to pay arrears of income-tax due from him under a certificate dt. 29th March, 1996, amounting to Rs. 37,48,651. By letter dt. 5th Oct., 1995, the AO informed the stock exchange that since the broker was declared a defaulter by the stock exchange in June, 1994, his membership card may be auctioned. By the said letter, the stock exchange was informed that the said broker was in arrears of income-tax to the tune of Rs. 25,43,551 and, therefore, it was necessary to apportion a part of the amount realised from the auction for the purposes of meeting outstanding income-tax dues. Accordingly, the stock exchange was called upon by the AO to issue a cheque in favour of the RBI in respect of outstanding demands. By the said letter, the AO further stated that he would be issuing notice under Section 226(3) of the IT Act on receiving intimation from the stock exchange regarding auctioning of the membership card. The stock exchange refused to pay and the TRO issued a prohibitory order attaching the membership card and the credit balances in the account of the broker in the books of the stock exchange. The said card and the nomination rights were sold by the BSE and a surplus of Rs. 37,85,199.93 lying with the exchange out of the sales proceeds thereof which had came in the hands of BSE for and on behalf of the defaulter member in the course of administration of assets and allocation under Rule 16(1)(iii).

13.1 In the aforesaid case, the Bombay High Court after analysing the Bombay Stock Exchange Rules, Regulations and Bye-laws observed that the Bombay Stock Exchange has been recognised by the Central Government under the Securities Contracts (Regulation) Act, 1956, and constituted with the main object of protecting, in public interest, the status of brokers, dealers and investors and in order to assist, regulate and control in public interest, dealings in securities in order to ensure fair dealing, integrity and to protect equitable principles of trade and business. A card membership of Bombay Stock Exchange cannot be sold for the benefit of the creditors of a member on his becoming bankrupt or pursuant to a member being declared defaulter, his membership rights vests in the stock exchange and also membership, the membership security deposits, office deposit, etc. vest in the stock exchange. The balance surplus would be held by the stock exchange for and on behalf of the members and that is attachable under IT Act. Therefore, the Bombay High Court propounded that the stock exchange membership card has monetary value in economic parlance, though on the death or default of the members, the said value would vest in the Bombay Stock Exchange but it is for meeting the liability of such deceased or defaulted members according to the bye-laws, and the surplus retained on behalf of such member shall be given to him or to his legal heirs, obviously, such surplus can be attached. The Court discussed the rules along with the regulations with regard to disposal of sales proceeds of the cards and surplus after meeting the liabilities of the defaulter as under:

"The main object of establishing the BSE is to support and protect in public interests the character and status of brokers and dealers and to further the interests both of brokers and dealers and of public interested in securities and to assist, regulate and control, in public interest, dealings in securities in order to maintain high standards of commercial honour and integrity and to inculcate just and equitable principles of trade and business, to discourage and suppress malpractices, to settle disputes and decide all questions of usage, custom and courtesy in the conduct of trade and business [Rule 4(i)]. Under Rule 4(xi), the BSE is required to establish and maintain a clearing house for the object and purpose of the BSE. Under Rule 5, it is declared that the membership shall constitute a personal permission from the BSE to exercise rights and privileges attached thereto subject to rules, bye-laws and regulations of the exchange. Under Rule 6, the right of membership is inalienable. Under Rule 7, a member has a right of nomination which is personal and non-transferable. Under Rule 8, the right of nomination is not exercisable by a former member who has been expelled or who has ceased to be a member under any rule, bye-law or regulation. Under Rule 9, on death or default of a member, his right of nomination shall cease and vest in the exchange. Under Rule 10, when a right of membership is forfeited or vested in the BSE, such right shall belong absolutely to the exchange free of all rights, claims or interests of such member or any person claiming through such member and the governing board shall be entitled to deal with or dispose of such right of membership as it may think fit. Rule 16 deals with allocation in order of priority. It lays down that in cases where the governing board has exercised the right of nomination in respect of a membership vesting in the exchange, the consideration received therefor shall be applied in the following order of priority, namely, (a) dues of exchange and clearing house, (b) liabilities relating to contracts, and (c) surplus. In the matter of payment of the surplus, if any, accruing to the funds of the exchange, absolute discretion is given to the BSE for disposal of such surplus. The BSE is free to apply such surplus in any manner as it may deem fit. However, under Rule 16(2), it is laid down that Rule 16(1) which refers to allocation in order of priority shall not apply in cases where the governing board has exercised the right of nomination in respect of a membership which has vested in the exchange upon a member having been declared a defaulter on or subsequent to such date as the governing board may specify in this behalf. In the present case, we are furnished with extracts of the minutes of the AGM held on 13th Oct., 1999, which dealt with appropriation of surplus amount of consideration of the membership right vested in the exchange. In the said AGM, the general body of the BSE has accepted the recommendation of the governing board of the BSE that such surplus amount, after paying the dues and liabilities under Rule 16, shall be appropriated in the manner mentioned in the minutes of the AGM. As per the said resolution, after deducting 5 per cent of the surplus for the customers' protection fund and 5 per cent of the surplus for the brokers' contingency fund, the residual 90 per cent of the surplus was to be paid as ex gratia amount to the defaulter.

Under Rule 16A, when the governing board has exercised the right of nomination in respect of the membership which has vested in the BSE on the member being declared a defaulter then the consideration received shall be paid by the governing board to the defaulters' committee to be applied for the purposes and in the order of priority specified in the bye-laws of the exchange. Rule 16 is required to be read with bye-law Nos. 338, 342, 342A and 400. Bye-law No. 338 lays down that the defaulter's committee shall keep a separate account in respect of monies, securities and other assets payable to a defaulter which are received by the defaulters' committee. Under bye-law No. 342, application of assets of the defaulter remaining in the hands of the defaulters' committee is provided for. It lays down that the defaulters' committee shall apply the net assets in satisfying, firstly, the claim of the exchange and the clearing house and then rateably such admitted claims of members against the defaulters arising out of contracts entered into in the market. Bye-law No. 400 deals with application of defaulters' assets and other amounts. It lays down that the defaulters' committee shall realise and apply all the money, rights and assets of the defaulter which have vested in the defaulters' committee for the following purposes and in the order of priority mentioned therein. Sub-clause (ix) of bye-law No. 400 states that surplus, if any, shall be paid to the defaulter. It is clarified that bye-law No. 400 does not apply to the amount paid by the governing board to the defaulter's committee under Rule 16A in respect of consideration received by the governing board for exercising the right of nomination in respect of the defaulter's erstwhile right of membership as the same does not belong to the defaulter and as the defaulter has no claim right, title or interest therein. Under bye-law No. 401, it is laid down that in the event of the defaulter's assets and other amounts mentioned in bye-law No. 400 being insufficient to pay the amounts mentioned in bye-law No. 400 then the amount paid to the defaulters' committee under Rule 16A in respect of the defaulter's erstwhile right of membership shall be applied by the defaulters' committee for the purposes and in the order of priority mentioned in Clauses (i) to (vii) of bye-law No. 400, and the surplus, if any, shall be paid to the exchange provided that the exchange in the general body may at its absolute discretion direct that such surplus be disposed of or applied in such other manner as it may deem fit. Under Rule 36, a new member, on admission, is required to provide security on admission. The amount is to be decided by the governing board. The security to be furnished by such a member shall be either in cash or in the form of a deposit receipt of a bank or in the form of securities approved by the governing board (Rule 37). Therefore, every incoming member has to furnish a security either in the form of cash or in the form of deposit receipt of a bank or in the form of securities approved by the governing board and every such member has to maintain the value of such securities at not less than Rs. 2 lakhs by providing further security to the satisfaction of the governing board. Rule 43 provides for a lien. Rule 43 lays down that the security provided by the member under Rule 37 shall be subject to a paramount lien for any sum due to the exchange or to the clearing house and for due fulfilment of his engagements, obligations and liabilities which may accrue to a member out of bargains, dealings, transactions and contracts made as per the rules and bye-laws. Under Rule 44, on termination of membership, the security shall be returned. Rule 53 falls under the chapter 'default and readmission to membership'. It lays down that a member who is declared a defaulter shall cease to be a member of the exchange and he shall cease to enjoy rights and privileges of membership but the rights of his creditor-members against him shall remain unimpaired. Under Rule 170(a)(ii), the governing board shall every year appoint a defaulters' committee.

Under bye-law No. 91 of the BSE, the exchange is required to maintain a clearing house. This clearing house is not a part of the BSE. In the present case, as stated above, the clearing house is handled by the Bank of India Shareholding Ltd. in which the BSE holds 49 per cent and the BOI holds 51 per cent. The clearing house acts as a common agent of the members for clearing contracts between members and for delivering securities and for receiving securities from and for receiving or paying any amount payable to or payable by such members in connection with any of the contracts entered into by the members on the stock exchange. Under bye-law No. 316, grounds are given for declaring a member a defaulter. Under bye-law No. 326, the defaulters' committee is empowered to call for and realise the security and margin money and securities deposited by the defaulter. The defaulters' committee is also empowered to recover all monies, securities and other assets due, payable or deliverable to the defaulter by any other member of the stock exchange in respect of the transactions or dealings carried out on the floor of the stock exchange. Under bye-law No. 326, it is further provided that all such assets of the broker shall vest in the defaulters' committee for the benefit of creditor-members. We have already discussed the remaining bye-law Nos. 338, 342, 342A, 400 and 401.

The important thing which is required to be noted is Rule 16 on the one hand and Rule 43 and Rule 44 on the other hand. According to the petitioners, Rule 16 deals with sale and distribution of the defaulter's membership card and proceeds therefrom whereas, Rule 43 and Rule 44 deal with other securities given by the member at the time of admission. According to the petitioners, in cases falling under Rule 16, the surplus belongs to the exchange and the exchange is vested with the absolute discretion to dispose of such surplus in the manner as it may deem fit. However, when it comes to the application of defaulter's assets (other securities) under bye-law No. 400, the surplus, if any, has to be paid to the defaulter. In fact, there is a clarification to bye-law No. 400. It states that bye-law No. 400 does not apply to the amounts paid to the defaulters' committee under Rule 16A in respect of the consideration received by the governing board for exercising the right of nomination in respect of the defaulters' erstwhile right of membership as the same does not belong to the defaulter and the defaulter has no right, title or interest therein. Therefore, when it comes to distribution of the consideration received by the governing board for exercising the right of nominating the surplus, if any, belongs to the BSE and, therefore, the exchange has a right to dispose of the surplus in the manner it deems fit. However, the exchange has no such right when it comes to distribution of surplus arising on the sale of the defaulter's other assets. This is the basic contention advanced on behalf of the BSE on the above rules".

13.2 The Court upon consideration of these rule regulations and submissions of the parties held :

"(i) That there existed a contractual relationship between the broker and the BSE. However, on 29th June, 1994, the broker was declared a defaulter under the rules of the BSE and his right of membership stood vested in the exchange on his being declared a defaulter. Even if the broker-member had no right, title and interest in the membership card, still in view of Rule 16(1)(iii) of the Stock Exchange Rules, the balance surplus would become payable to the TRO as the said amount came to the hands of the BSE for and on behalf of the assessee-broker in the course of administration of assets and allocation under Rule 16(1)(iii) read with the general body resolution dt. 13th Oct., 1999. This balance had to paid over by the BSE to the TRO in accordance with the show-cause notice under Section 226(3)(i).

(ii) That there is a clear dichotomy under the rules and bye-laws between the sale of membership card and recovery of the defaulter's other assets and application thereof. Even on the vesting of such other assets in the defaulter's committee, such other assets continue to belong to the member-broker for the purposes of distribution, which is for the benefit of the BSE, the clearing house and other creditor-members so that these other creditor-members' dues could be recovered expeditiously. The other assets were attachable and recoverable under the provisions of Section 226(3)(i) and (x) r/w Rule 26(1)(a) and (c) of Sch. II to the IT Act, 1961.

(iii) That the Government and other creditors such as the BSE, the clearing house and other creditor-members under the rules and bye-laws of the stock exchange were creditors of equal degree and under Section 73(3) of the Code of Civil Procedure, 1908, the Government dues had priority over other such creditors.

13.3 This makes abundantly clear that when the sale proceeds of the membership card are utilised for repayment of his or her debt though according to rules, regulations and bye-laws of the stock exchange, the surplus, if any, handed over to him or her legal heirs, there cannot be any doubt about the proposition that the membership card is the valuable assets of the assessee to be included in his wealth by virtue of enlarged definition contained in Section 2(e) which includes the property of every description, whatsoever.

14. In the case of Purshottam N. Amarsay v. CWT (1973) 88 ITR 417 (SC), the Supreme Court dealt with the case of settler under the trust deed wherein the trustees were to apply the net income of the trust funds for the support, maintenance and advancement in life and otherwise for the benefit of the settler and his wife in such manner as to enable the settler to live as far as possible with the same comforts and to enjoy life in the same manner as he is accustomed to it. The Tribunal held that the settler's interest under the trust deed had no value for the purpose of wealth-tax, it being personal estate, which was not possible to sell in the market. The High Court on reference held that even though the estate conferred is a personal estate and it is not possible to sell in the open market, yet under the law, the same has to be valued on the basis of the principles of WT Act. On appeal to the Supreme Court confirming the decision of the High Court, it was held that even it being personal estate was incapable of being sold in the market in the interest of settler, has to be valued by the WTO.

14.1 In that context, the earlier decision of the Supreme in the case of Ahmed. G.H. Ariffs v. CWT (1970) 76 ITR 471 (SC), was referred to wherein the following extracts of the decision of the Bombay High Court in the case Purshottam N. Amarsay (supra), were noted with the approval:

"The only direct case on the point under consideration is a decision of the Bombay High Court in CWT v. Purshottam N. Amarsay (the decision under appeal). There is deed of settlement providing that the trustees shall apply the net income from the fund for the support, maintenance and advancement of life and otherwise for the benefit of the settler and his wife, etc. It was held that the definitions of 'assets' in Section 2(e) and that of 'net wealth' in Section 2(m) were comprehensive provisions and all assets were included in the net wealth by the very definition. Therefore, when Section 3 imposed the charge of wealth-tax on the net wealth, it necessarily included in it every description of property of the assessee, movable and immovable, barring the exceptions stated in Section 2(3) and other provisions of the Act. We are in entire concurrence with that view. There is no reason or justification to give any restricted meaning to the word 'asset' as defined by Section 2(e) of the Act when the language employed shows that it was intended to include property of every description. On a proper construction of the relevant clauses in the wakf deed, we are not satisfied that the aliquot share income provided for the beneficiaries was meant merely for their maintenance and support...Mr. Sen has laid emphasis on the language of Section 7(1) of the Act and has contended that the right to a share in the income is not capable of any valuation and the price which it would fetch, if sold in the open market, could not possibly be ascertained. Such an argument was fully examined in the Bombay case (supra) in which the High Court referred to the provisions of the English statutes, which were in pari materia, as also decisions given by the English Courts including the one by the House of Lords in IRC v. Crossman. It has been rightly observed by the High Court that when the statute uses the words 'if sold in the open market', it does not contemplate actual sale or the actual state of the market but only enjoins that it should be assumed that here is an open market and the property can be sold in such a market and, on that basis, the value has to be found out. It is a hypothetical case which is contemplated and the Tax Officer must assume that there is an open market in which the asset can be sold.

Mr. Chagla, learned counsel for the assessee, contended that in that case this Court did not consider the possibility of an asset not having any value whatsoever. We are unable to accede to that contention. What this Court ruled in Ahmed G.H. Aim's case (supra), was that even if the property in question is incapable of being sold in the open market, being a personal estate, in that event also the interest of the assessee has to be valued by the WTO. In our opinion, the decision of this Court in Ahmed G.H. Ariff's case (supra) completely covers the issue under discussion."

14.2 On reading these two decisions, in our opinion, it is amply clear that the definitions of "asset" under Section 2(e) and that of 'net wealth' under Section 2(m) are comprehensive provisions and all assets were included in the net wealth. It is observed by the Bombay High Court in the case of Purshottam N. Amarsay (supra) which was later upheld by the Supreme Court, was also upheld in the case of Ahmed G.H. Ariff's (supra) by observing that "we are entire concurrence with that view. There is no reason or justification to give any restricted meaning to the word 'asset' as defined by Section 2(e) of the Act when the language employed shows that it was intended to include property of every description." A similar, matter again came up before the Supreme Court in the case of CWT v. Prince Muffakham Jah Bahadu Chamlijan (supra). In this case a life interest to live in the house was given to the beneficiaries and the question was as to whether it was assets includible in the wealth of the assessee. Referring to the aforesaid two decisions, the Supreme Court in the cases of Purshottam N. Amarsay (supra) which later uphold by the Supreme Court, and Ahmed G.H. Ariff's (supra), reiterated that the assessee has right to reside in the house for the duration of his life though it was personal and inalienable, was property which would have a market in an assumed market place. In other words, and assuming somebody would acquire this personal right in the property during the lifetime of the assessee and pay a price for it, the right of the assessee had to be included in the wealth of the assessee for the purpose of wealth-tax. In the present case, it is not a mere right to live in house but a right as a member to conduct business on the floor of stock exchange, which would not have been possible to carry out unless he holds the membership card. It may be a personal right or a personal permission and also inalienable but in light of the aforesaid three decisions of the Supreme Court, it is a property so long as the member continues to be a member and has right to nomination thereof to transfer the card of the stock exchange. It would, of course, be a different situation, if the member is declared to be a defaulter or he dies, because in that situation, rules of stock exchange provide that the property in the card and right of membership card vested in stock exchange and right of nomination ceases on his death and/or his being declared as defaulter.

15. In the case of Upendra M. Dalai (supra) of the Bombay Bench, after discussing its earlier decision in the case of Ashwin C. Shah (supra) held that when a member of a stock exchange commits a default or he dies, his right of nomination lapses and there remains no property or the assets which could be said to be held by the defaulting member. It is also correct to say that even in the hands of the non-defaulting continuing member, as held by the wealth-tax Bench of the Tribunal, mere possession of a stock exchange card does not amount to possession of an asset, as the card merely grants a personal privilege. However, the personal privilege enjoyed by the members of the stock exchange is not identical to the privilege enjoyed by members of professional bodies, such as lawyers and advocates who are members of the Bar Council of India. The membership of the Bar is not transferable by nomination and at all stages and at all times, it remains a personal privilege, unlike the membership of Bombay Stock Exchange which is transferable through nomination subject to certain conditions and approval of the Governing Body. The Tribunal held that the moment the holder of the membership card of stock exchange decides to nominate another person as member and submits an application for nomination to the stock exchange authority, the personal privilege gets converted into a valuable asset. That was also clear from the language of the Rules of the Bombay Stock Exchange which provide transfer of card through nomination. This is also clear from the language of agreement entered into by the assessee on 1st Nov., 1994, wherein the assessee has been described as "seller" and Saurashtra Capital Services (P) Ltd. described as buyer. What the seller sells and buyer buys is an asset; a valuable property and the rights embodied in such a card ceased to be a mere personal privilege on transfer. To place any other interpretation would amount to ignoring the realities on the grounds. The members of the Bombay Stock Exchange are known to advertise their intention to sell the card and they call for the bids for which the parties can be nominated. No doubt, such transfer is subject to the conditions laid down in Rules 9 and 43 of the Bombay Stock Exchange Rules. However, these conditions do not take away completely, though they may restrict, the value of the important right, which has been passed through nomination. Thus, rights and interests in the stock exchange card are not attachable in garnishee proceedings because in the case of defaulting or deceased member, the rights in the cards vest in the stock exchange. However, when such a holder of stock exchange card makes an application for nomination with the consent of the person to be nominated, the privilege enjoyed under the said card does not remain a personal privilege. When the membership of Bombay Stock Exchange is put to sale through nomination, a personal privilege is concerted into an asset and the consequential gain is exigible to tax. This would be in line with the legislative intent as apparent from the provisions of Section 47(xi) and the CBDT circular, and would also be in conformity with the ground realities which show that membership cards are being sold for substantial consideration.

16. In the case of Ravindra Kumar Jain (supra), before the Rajasthan High Court, a deemed gift under Section 4(1)(a) was upheld by observing that there was a transfer of membership by the assessee and his membership has been transferred at the consideration of Rs. 50,000. When a valuable right or any interest in the property, which has some value in terms of money, has been transferred for the consideration less than its market value, that attracts the provision of Clause (a) of Sub-section (1) of Section 4 of the GT Act. In this case, the assessee was admitted as a member of Jaipur Stock Exchange on 11th March, 1986, on payment of admission fee of Rs. 2,500. On 21st Aug., 1989, assessee entered into an agreement with Pawan Kumar that he will transfer the membership to him when it is transferable, as minimum 5 years are required, within which he cannot transfer the membership. The membership was transferred on 24th Dec, 1991, at Rs. 50,000. The GTO noticed that one of the memberships of the stock exchange was auctioned in 1991 at Rs. 8,71,000, therefore, he held that the transfer of membership card was for inadequate consideration. The learned counsel for the assessee submitted that the membership is not a property, therefore, there is no question of charging any gift-tax on transfer of the membership of the stock exchange by the assessee, by placing reliance on the decision of the Supreme Court in the case of Stock Exchange, Ahmedabad (supra). The Rajasthan High Court, after referring the definition of property given in Clause (xxii) of Section 2(e) of the GT Act, which includes any interest in the property, movable or immovable, observed that it is true that their Lordships have considered whether membership of the stock exchange can be attached as in case of other properties and whether it is a property. Their Lordships have taken the view that right of nomination finally vests in the stock exchange and without nomination by the stock exchange, membership cannot be transferred, therefore, that membership cannot be attached like any other property and in the case in hand, there is no dispute that there was a transfer of membership. There is a transfer of membership by the assessee for consideration of Rs. 50,000."

17. In the case of Jagan Nath Sayal (supra), Delhi Special Bench discussed the issue under the WT Act as well as under GT Act and held that a share in the Delhi Stock Exchange (DSE) and also membership card are capital assets within the meaning of Section 2(e) of the Act. There are ample indications that the Parliament itself intended to treat them as capital assets and in order to know such intention, the provisions of the Finance Act, 1997, have taken into consideration which came into effect from 1st April, 1988. Sec. 47 of the IT Act deals with the exempt assets whose transfer does not yield any capital assets and while listing out such assets in Clause (xi), the membership of a recognised stock exchange is specifically recognised as a capital asset. The Delhi Stock Exchange is a limited company and it issued shares. By virtue of holding shares, as such, Special Bench held that a shareholder is not entitled to transact the business in the stock exchange. He should also become a member by following the prescribed formalities. It is also observed that the shareholder is different from a member of DSE according to the bye-laws of DSE. A member can co-opt several others and he can form a partnership with others and, therefore, the contention that membership does not confer any proprietary right but it represents only a personal permission, is to be repelled. It is further observed that a person purchases the shares with a view to become the member of the stock exchange. It is a condition precedent for becoming the member of the DSE and, therefore, holding of shares gives rise to a dormant right. Holding of the shares is not enough. One must satisfy the other conditions also as laid down in the rules to become the member of the stock exchange. Therefore, the value of the shares is to be determined with reference to the purpose which it serves. It does not confer any other benefit to the holder. It is an essential requirement to attain the status of member of the DSE and because of its peculiar nature its value cannot be determined in isolation. Referring to the decision of the Supreme Court in the cases of Ahmed G.H. Ariffs (supra) and Purshottam N. Amarsay (supra), it was held that even if an asset is non-transferable and not saleable in the open market, still it can be valued for the purposes of the levy of wealth-tax and word "property" signifies every possible interest which a person can clearly hold and enjoy.

17.1 Thereafter, the Special Bench discussed the decision of the membership of the stock exchange and held that:

"In the instant case, DSE Rules provide a vested right to its members to carry on business as stock broker. This is a very important right. In a way, it is a ticket to explore the EL DORADO. This right cannot be disturbed. Only by becoming a defaulter or in the event of death, membership comes to an end. However, if a member becomes a defaulter, stock exchange auctions the card and utilises the proceeds to pay his debts. Similarly, on his demise, his successors may step into his shoes subject to the fulfilment of conditions contained in the memorandum. The distinction between proprietary and personal rights would be that proprietary rights are susceptible to valuation while personal rights are not. The right would be propriety if it has economic value. It is absolutely clear from, the aforesaid discussion that the DSE card has got economic value."

17.2 The Special Bench, after taking into consideration the entire conspectus of the case, observed that the membership right held by the assessee in DSE constitutes an asset and is exigible to tax. The composite value of shares and ticket (card) is to be adopted for making the correct valuation. In the DSE Rules also, Rule 45 states that a member's right of membership shall lapse and vest in the stock exchange immediately he is declared as a defaulter. On the declaration of default, he shall at once cease to be a member of the exchange and as such cease to enjoy any of the rights and privileges of membership, but the rights of his creditor-members against him shall remain unimpaired. There also, the share can be transferred only to a member of stock exchange or a candidate for membership of stock exchange who has been duly elected as eligible for membership by board of directors of the stock exchange and under article 24, the share broker is given wide field to choose his associate as also his heir. A shareholder in the articles of association has been defined to mean any person, individual or firm registered in the books of the company as owner of any share in the capital of the company and the members of stock exchange is defined to mean a member authorised to operate on the stock exchange. Thus, the definition of shareholder and definition of member indicate different categories of the persons.

18. A card holder member of the stock exchange is given a right of nomination by Rule 11 of the stock exchange. That is nothing but nominating or selecting the purchaser or the transferee of the card. 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 card holder 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 WT Act.

19. There is yet another angle which requires attention and that is that the sale proceeds of the card are utilised by the stock exchange under Rule 16 for discharge of the liabilities of the card holders. It is an indirect way of receiving the consideration which is received either in cash or in kind and later kw6uld include the discharge of the liability of the member card.

20. All the three situations are, in our opinion, pointers of a fact that the stock exchange card is a property; it can be sold/transferred by nomination by the card holder, though with permission of the stock exchange and on being declared as defaulter or his death by the stock exchange, which again gives to legal heirs a right to be substituted on repayment of dues of cardholders. The sales proceeds are utilised for discharge of his liability. It is this right in property, as held by the Supreme Court in the case of Prince Muffakham Jah Bahadur Chamlijan (supra), though it is an inalienable or of a character of personal right/permission, which is to be treated as a property within the wider meaning of Section 2(e) of the WT Act and consequently liable to be taxed.

21. We are conscious of the principles of law that a co-ordinating Bench should not reach a conclusion directly opposite to the conclusion reached by another Bench of the Tribunal on earlier occasion and if the Division Bench differs from the views of other Division Bench, the matter should be posted before the larger Bench for considering the question. But that principle is subject to certain limitation, as observed by the Tribunal in the case of Dy. CIT v. Mira Industries (2003) 87 ITD 475 (Ahd), viz., (i) the facts are the same, (ii) no new facts are brought on record, (iii) no change in the circumstances under which the decision was reached is there, (iv) there is no decision of a higher Court, or (iv) there is no change in the statutory provision of law. A decision reached on particular facts and on consideration of the law prevailing at that time can be deviated from if some new facts are brought on record or some more cases of higher Courts on the subject have come to its notice. It would be justified and indeed under a duty to take a view commensurate to the new development and also because each year and each assessee is a separate year and a separate assessee and the principles of res judicata and estoppels did not apply to income-tax proceedings even though the Department is one and also because in the earlier order some of the decisions of the Supreme Court and the High Court were not considered.

21.1 Here in the present case, Bombay Tribunal while deciding the case in the matter of Ashwin C. Shah (supra), did not have the benefit of later decision of the Bombay High Court in the case of Stock Exchange, Mumbai v. V.S. Kandalgaonkar (supra), wherein after considering in details not only the rules and regulations, but also bye-laws of the stock exchange, held that even if the broker member has no right, title and interest in the membership card, still in view of Rule 16(1)(iii) of the Stock Exchange Rules, the balance surplus amount would come into the hands of the stock exchange for and on behalf of the assessee-broker in the course of administration of assets and allocation under Rule 16(1)(iii) read with the general body resolution dt. 13th Oct., 1999, and that they vested in the committee only to enable the committee administration and distribution and apply the same in order of priority given in the rules and bye-laws. The decision of the Rajasthan High Court in the case of Ravindra Kumar Jain (supra), upheld the levy of gift-tax for inadequate consideration for transfer of membership card. In both these cases the decisions of the Supreme Court in the case of Ahmedabad Stock Exchange (supra) was considered. The later decision of the Tribunal in the case of Upendra M. Dalai (supra) was also not there before the Division Bench in the case of Ashwin C. Shah (supra), wherein it was held that capital gains tax is chargeable on the transfer of membership card by the member of stock exchange.

22. A membership card which can be sold for a price without or with the permission and subject to rules and regulations of stock exchange, would undoubtedly be a property, and, therefore, the member's right thereon would be an interest in property and consequently, the Supreme Court decisions in the case of Prince Muffakham Jah Bahadur Chamlijan (supra) and other two decision in the case of Ahmed G.H. Ariffs (supra) and Purshottam N. Amarsay (supra), would be clearly applicable wherein it has been held that the right though inalienable and personal privilege would be an asset within the meaning of Section 2(e) of the WT Act. The case in Prince Muffakham Jah Bahadur Chamlijan (supra) was case of a life interest to reside in a property. In the case of Ahmed G.H. Ariffs (supra), there was a right of beneficiary to receive an adequate share of net income of the properties comprised in a wakf created by a Muslim, governed by the Mohammedan Law which extends the meaning of property even to a Mahantship or Shebaitship and in the case of Purshottam N. Amarsay (supra), the right of the settler to live as far as possible with the same comforts and to enjoy the life in the same manner as he was accustomed to. In all these three cases, the rights and privileges were personal and inalienable and the Supreme Court uniformly held that such interest was an asset within the meaning of Section 2(e) of the Act because the language employed shall that it was intended to include the property of every description.

23. To summarise, the stock exchange card is a property and consequently an asset under Section 2(e) of the WT Act, because;

(i) It can be sold by nomination for a price :

-by the member himself on resignation from his membership under Rule 11(a);

-by the stock exchange, or by member himself on restoration of his membership by governing body on his being declared as a defaulter under Rule 11(c);

-by stock exchange, or legal heirs of the deceased if the governing body so approves on his death under Rule 11(b),

(ii) Rule 12 also provides for fresh nomination, if the first nominee is not found to be eligible to become a member as per the rules of the stock exchange

(iii) The right of nomination to a continuing member is granted by the Rule 7, but it is stated to be a personal and non-transferable one. In other words, this is not the right as such, which is not transferable, but exercise of the right of nomination cannot be delegated to any person other than the member himself. He has to exercise his right himself.

(iv) By Rule 14, notice of proposed membership is to be placed on the notice board of the stock exchange for atleast 15 days and within 14 days thereafter, members have to file their respective claims against the transferee members. By Rule 15, the nomination is not be approved unless nominating member or in case of his death his legal heirs satisfy his dues in full.

(v) The right of nomination on death of a member of defaulter ceases and vested in the stock exchange by virtue of Rule 9 but that is also not absolute and is subject to Rule 11(b) and11(c) and it is only when that fails that right of nomination is forfeited and lapsed and Governing Body becomes eligible to deal with and dispose of such rights as it may think fit. If the Governing Body decides to exercise its right, consideration received on the sale/disposal of those rights are to be applied in order of priority as prescribed under Rule 16/16A.

24. Crux of these rules is that the card is valuable property which enables the member to deal in transactions on the floor of the stock exchange and without which he cannot transact in such business. It can be disposed of by him by nomination, though subject to rules and regulations of stock exchange and settlement of debts and liabilities of the members of the stock exchange. One such instance is found in the decision of Rajasthan High Court in case of Ravinder Kumar Jain (supra), in the case of transfer/sale for inadequate consideration under the GT Act. Another example is also found in the case of Special Bench, before Delhi Tribunal in the case of Jagan Nath Sayal (supra), again a case under the GT Act. The third example is found in the case before the Bombay Tribunal in case of Upendra M. Dalai (supra), wherein in connection with capital gain tax liability in transfer of card was upheld.

25. It is only the right of nomination on default or death vested in the stock exchange but that again subject to a right to the members of readmission or his legal heirs for admission in his place on their satisfaction of the liabilities of the stock exchange under Rule 16(a) and 16(b). It is only thereafter that the stock exchange governing body becomes entitled to and deal with and dispose of such right, as it thinks fit, under Rule 10, but are also subject to utilisation of proceeds in order of priority under Rules 19(a) and 16(b) of the Rules. The aim and objects are to take care of settling the debts and liabilities of the members to the stock exchange on penalties, etc. that may be levied upon him for the default. If still there is a surplus, the instances are that money has to go back to defaulting member or his legal heirs and one such instance is the later decision of the Bombay High Court in the case of V.S. Kandalgaonkar (supra), wherein a substantial sum of Rs. 37 lakhs and odds was decided to be given back to the defaulter member on realisation of his card after satisfaction of his liabilities and was held by for and on behalf of the defaulter member. These are the indications that the member of a stock exchange has a right in property and an antecedent right of the member in the card.

26. The contention of the learned counsel for the assessee that indent of a member of DSE is not pari materia to the member of the Ahmedabad Stock Exchange on the ground that there the member has to be necessarily share holder, has no impact insofar as to determine the question whether the stock exchange card is an asset or not. The Special Bench itself has noted the difference between share holding by a member of the stock exchange and membership card held by such person. Both species, viz., share as well as membership card of the stock exchange are to be assessed independently. The ratio of the aforesaid Special Bench, in our opinion, would apply with full force to the present case as well.

27. The reopening was also challenged by the assessee in WTA No. 27/A/2000 on the ground that it was reopened on the basis of Gujarat High Court decision which has been reversed by the Supreme Court, also has no force in view of the discussion aforesaid and our finding that card held by the assessee in Ahmedabad Stock Exchange is an asset chargeable to wealth-tax and the decision of the Supreme Court in the case of Stock Exchange, Ahmedabad (supra), has no application, as it deals with only the situation of a member who has been declared as defaulter and not a continuing member.

28. The contention of the assessees in some of the cases that the membership was for less than a period of five years and therefore the right of nomination was itself not there and consequently in such cases atleast there would be no property of the member unless he retains the membership for a period of five years. This contention, in our opinion, has no force, because, the proviso to Rule 11 itself provides that a member having a less than five years' standing can resign and nominate a person as candidate in his place subject to such terms and conditions as the governing body may in its absolute discretion think fit to impose. The second proviso further provides that he may resign in favour of the company with the sanctioning of the governing body on fulfilment of certain conditions mentioned therein. In any case, this may be a factor relevant for determination for value of the card. But, so far as the property in the card is concerned, this fact would not have any impact.

29. Before parting with the matter, we may deal with valuation aspect of the card, which is in dispute in almost every appeal by alleging that the valuation made by the AO in every case was excessive. The Special Bench in the case of Jagan Nath Sayal (supra), as regards valuation held that:

"The AO is duty-bound to determine the market value of the card. Market value may be said to be the price that a willing purchaser would pay to a willing seller for a property having due regard to its existing conditions, with all its existing advantages and its potential possibilities when laid out on its most ¦ advantageous manner. In view of this, the composite value of the ticket cannot be determined with reference to the BSE sensex. Nor, the auction value of BSE is relevant.

The argument that the value of ticket depends on the business acumen of a broker is not tenable. A novice shooter may not yield result, while with the same weapon an experienced shooter may hit the target. The gun is the same. Result depends on the expertise. The gun will fetch the price according to its quality. The experience or inexperience of its own in its operation is not relevant for determining its value.

The provisions of Section 16A(1) r/w Rule 3(b) of the WT Rules, 1957, mandatorily require the WTO to make a reference to the DVO, if the difference in the value of the assets returned by the assessee and the fair market value of the assets as estimated by the WTO is more than the limits prescribed under Rule 3(b). However, if as required under these provisions, reference to DVO is not made, it amounts to a procedural irregularity.

In a case where the flaw in the order appealed against consists of in the non-. observance of certain procedure, it is open to the AO to start the procedure once again with the view to follow the rules of procedure and the principles of natural justice."

29.1 In conformity with the Special Bench decision of the Tribunal, in the case of Jagan Nath Sayal (supra) we set aside the matter of valuation and remit back to file of AO to value the property in lines of direction given by the Special Bench and after giving opportunity of hearing to the assessee.

30. In the result, all the appeals and CO. s are partly allowed.