2 Prior to the assessment year 1993-94, only certain specific assets were exempted and, under section 2(e) of the Wealth Tax Act, 1957 ("the WT Act"), an asset included property of every description, movable or immovable, other than the specific exclusions. However, from the assessment year 1993-94, it is only certain specifically included assets which are taxable under the WT Act.

3 In the leading case of Sejal R Dalal & Ors v The Stock Exchange, Bombay & Anr, the Bombay High Court held that the membership was not a transferable right, but a personal permission granted by the stock exchange. In the present case Mrs Sejal Dalal was nominated by her relatives for the membership of the BSE on the death of her father-in-law. Her application for membership resulted in some enquiries, which persuaded the majority of the governing body of the stock exchange not admit her as a member.

4 The Bombay High Court, after looking into the relevant rules of the stock exchange, held that the membership was not a transferable right but only a personal permission granted by the stock exchange to an individual member. It was, therefore, held that there was no property in the membership.

5 Another recent decision is that of the Supreme Court in Vinay Bubna v Stock Exchange, Mumbai & Ors,. Here, the appellant, Vinay Bubna had dealings with a share-broker, Yogesh Mehta, who was declared as a defaulter by the stock exchange and thereafter ceased to be a member. The appellant alleged that a large amount was due and payable by Yogesh Mehta but the payment was not made by him.

The appellant claimed that the membership of the stock exchange was an asset of the share broker and on its sale, proceeds should first be applied to pay off the creditors like the appellant. It was contended by him that the membership of the stock exchange was an asset which belonged to the concerned broker, Yogesh Mehta, and, on the sale of the same, to distribute the proceeds in the manner indicated by Rule 16 of the Stock Exchange Rules was unfair, unjust and arbitrary and was violative of the Article 14, 19(1) and 300A of the Constitution.

The stock exchange, however, took the stand that once the concerned member had been declared defaulter, he ceased to be a member of the stock exchange, whereupon his rights of membership vested in the exchange free of all rights, claims and interest, and the exchange was at the liberty to invite applications from other persons and to admit any one who offered to pay the highest amount. The proceeds so received do not belong to the ex-member and the order of priority contained in the Stock Exchange Rule 16 was just and fair and was not illegal, wrong or arbitrary.

6 In this background, the Supreme Court held that the membership of the exchange constituted a personal permission of the exchange to exercise the rights and privileges attached thereto, subject to the rules, bye-laws and regulations of the exchange.

The court also held that it would be incorrect to state that, on the stock broker ceasing to be a member, he still retained any right or interest in the permission which had been granted to him by the exchange to carry on business as member. It went on to hold that the membership card of a share broker is not his personal property which, on default being committed by him and his ceasing to be a member, can be sold and the proceeds be distributed amongst his creditors. Rules 53 and 54, according to the court, leave no manner of doubt that the member's right vests in the exchange after he is declared as a defaulter.

7 The decision in Sejal Dalal's case, persuaded the Mumbai tribunal to take the view that the membership of a stock exchange was not an asset for the purposes of the Wealth Tax Act, 1957 (Jasvantlal C Parekh v Dy Commissioner of Wealth Tax, {WTA Nos.436 & 437/Bom/93}).

8 Thereafter, the decision of the Mumbai Tribunal in VM Cantol v WTO, (50 ITD 386 Mum), has considered the case of Sejal Dalal, supra, but has held that the membership right is an asset for the purposes of Wealth Tax Act.Para 9 of the order reads as under:

"A perusal of the rules clearly shows that the argument of the assessee that the membership of stock exchange is akin to membership of such other professional bodies like institute of chartered accountants and medical association is without basis. By no stretch of imagination would it be said that a member or a chartered accountant can nominate a person unless he or she possess certain educational qualification.

If the incumbent person possesses such educational qualification then it is not necessary for anybody to select or elect such persons by vote or some other method. He becomes automatically a member, if he so desires, as in the case of an advocate or a chartered accountant or a doctor. Whereas to become a member of the stock exchange, a son or other can be selected, or if he so desires, he can select an outsider.

Not only that, even the legal heirs of a deceased person can also select, by virtue of the deceased member's right, certain person to be the successor-member. In the case of a doctor or an advocate or a chartered accountant no legal heirs get such power or authority to select anyone. Anyone becomes the member of the bar council or a chartered accountant or a doctor only because of a certain prescribed qualification by the relevant bodies. The assessee may state that even in the case of the members of the stock exchange qualifications are prescribed. But the material difference is that it is not necessary for one existing member or the legal heirs of the deceased member to select certain persons as their successor."