Upon the death of its member, Rajesh Shah on 07.02.1994, the appellant resolved\u00a0 to dispose of his membership rights in the stockexchange by inviting offers\u00a0 with a minimum floor price of Rs. Twenty Five Lakhs. A provisional attachment order, dated 15.02.1994, under Section 281B of the Income-tax Act, 1961 (IT Act, 1961) was issued by the ACIT\u00a0 in\u00a0 respect of\u00a0 Stock Exchange Card in\u00a0 the\u00a0 name\u00a0 of Rajesh Shah and margin money and security deposits kept by him with the Stock Exchange. The stand of Stock Exchange is that under its rules, bye-laws and regulations on the death or default of a member, member\u2019s right of nomination ceases and it vests inthe Exchange and belongs absolutely to the exchange \u00a0and the Governing Board is entitled to deal with or dispose of such right of membership as it may think fit. On 5.12.1994, the Governing Board of the Stock Exchange passed resolution disposing of membership right of deceased Rajesh Shah vested in the Stock Exchange in favour of UTI Security Ltd. for Rs. Twenty Seven Lakhs. A garnishee notice dated 14.06.1995, under Section 226(3) of the IT Act, 1961, in the sum of Rs. Twelve Lakhs Twenty Four Thousand Eight Hundred and Eighty Seven was also issued to the executive director, Stock Exchange, by\u00a0\u00a0\u00a0 the ACIT. In reply thereto, the Stock Exchange reiterated the stand that no amount was due from it to Rajesh Shah or his legal heirs and the Exchange does\u00a0 not hold any money for and on behalf of Rajesh Shah or his legal heirs. The plea of the\u00a0 Stock Exchange was not acceptable to the respondent. Thereafter, the appellant- Stock Exchange filed a writ petition in\u00a0 the\u00a0 High Court challenging the orders\u00a0 of provisional attachment and the garnishee notice. The writ petition has been dismissed by the High Court which judgment is under challenged in this appeal.<\/p>\n
\u00a0<\/p>\n
Whether the Stock Exchange Card in the name of Rajesh Shah 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 representative and heirs after his death has ceased and the said right has vested in the Exchange?<\/p>\n
\u00a0<\/p>\n
\u00a0<\/p>\n
On examination of various rules of the Stock Exchange relating to membership\u00a0\u00a0 and payment of outstanding dues of an ex-member,it is clear that right of membership is merely a personal privilege granted to a member, it is non- transferable and incapable ofalienation by the member or his legal representatives and heirs except to the\u00a0 limited extent\u00a0 as\u00a0 provided in\u00a0 the\u00a0 rules on\u00a0 fulfilment of conditions provided therein. The nomination wherever provided for is not automatic and hedged by rules. On its vesting the right of nomination 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.<\/p>\n
\u00a0<\/p>\n
Membership of the Stock Exchange is a personal permission from the Exchange to exercise the rights and privileges attached thereto. It is not a private asset. That\u00a0 was a case of a defaulter but in principle it would make no difference as under\u00a0 rules both in the case of the death or default of a member, his right of nomination ceases and vests in the Stock Exchange. The heirs and legal representatives had informed the Stock Exchange that they were unable to\u00a0 meet\u00a0 the\u00a0 liabilities of the deceased and did not pay or satisfy the dues and claims as required under Rule15 of. Under these circumstances the\u00a0 Governing Board exercised\u00a0 the\u00a0 right\u00a0 of nomination in respect of membership of\u00a0 Rajesh Shah which had\u00a0 vested in\u00a0 the Stock Exchange. In the present case Rule 16 was properly applied by the Stock Exchange. The membership right in question was not the property of the assessee and, therefore, it could not be attached under Section 281B of the\u00a0 IT Act. No amount on account of Rajesh Shah was due from or held by the Stock Exchange and, therefore, Section 226(3) of the IT Act\u00a0 could not be\u00a0 invoked.\u00a0 We\u00a0 are unable to sustain the judgment under appeal holding that in substance\u00a0\u00a0\u00a0the right of membership or membership card was a right of property which could be attached under Section 281B of the IT Act. The order of provisional attachment dated 14\/02\/1994, and garnishee notice dated 14.06.1995, issued under Section 226(3) are quashed. (Vinay Bubna v. State Exchange, Mumbai & Ors. (1999) 155 CTR 519\/97 Comp Cas 874\/6 SCC 215 (SC) relied on) (CA Nos. 1727 (NT) of 1998 and 7571 of 1999 dt. 2-3-2001)<\/em><\/strong><\/p>\n Editorial<\/em><\/strong>: Decision of the Gujarat High Court in Stock Exchange, Ahmedabad<\/em><\/strong><\/p>\n \u00a0<\/em><\/strong><\/p>\n \u00a0<\/em><\/strong><\/p>\n & Stocks Ltd. v. CIT (2010) 327 ITR 323 (SC) <\/em><\/strong>to hold that the Membership Card ceases to be an asset only when the member commits a default in which event\u00a0\u00a0\u00a0\u00a0 the card vests in the Exchange free from all encumbrances.<\/p>\n \u201cMan falls from the pursuit of the ideal of plain living and high thinking the moment he wants to multiply his daily wants.\u201d<\/em><\/p>\n – Mahatma Gandhi<\/p>\n","protected":false},"excerpt":{"rendered":" S. 281B: Provisional attachment- Recovery-Stock Exchange Card\u2014Stock Exchange Rules clearly indicate that on right of nomination vesting in the Stock Exchange under the rules, that right belongs to Exchange absolutely\u2014 The membership right is not the property of assessee \u2013 Cannot be attached . [ S.226(3) , The Stock Exchange, Ahmedabad ]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-13489","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-3vz","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13489","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=13489"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13489\/revisions"}],"predecessor-version":[{"id":13490,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13489\/revisions\/13490"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=13489"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=13489"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=13489"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n