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Jayantilal A. Shah Vs. K.N. Anantharam Aiyar, Commissioner of Income-tax and Others - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberWrit Petition No. 1379 of 1980
Judge
Reported in(1985)46CTR(Bom)189; [1985]156ITR448(Bom); [1985]23TAXMAN14(Bom)
ActsIncome Tax Act, 1961 - Sections 2(14) and 264
AppellantJayantilal A. Shah
RespondentK.N. Anantharam Aiyar, Commissioner of Income-tax and Others
Excerpt:
.....and such silver utensils were used personally by the members of his family and..........the petitioner declared an income of rs. 43,530. the petitioner owned, inter alia, certain silver utensils which he claimed to be his personal effects. the utensils consisted of 18 plates (thalis) 54 katoris, 12 glasses and 1 jug. according to the petitioner, these utensils were meant for personal use of the petitioner and the members of his family. the utensils were sold in the course of the relevant previous year for a total consideration of rs. 81,119. these utensils had been purchased during the years 1958-60. the cost of these utensils was about rs. 14,813. on the sale of these utensils, therefore, the petitioner made a net gain of rs. 66,306. in this return for the assessment year 1977-78, in part iii, the petitioner showed the net surplus of rs. 66,306 as non-taxable.....
Judgment:

Sujata V. Manohar, J.

1. The petitioner is assessed as an individual under the provisions of the Income-tax Act, 1961. The petitioner is also an assessee under the provisions of the Wealth-tax Act, 1957.

2. For the assessment year 1977-78, the petitioner declared an income of Rs. 43,530. The petitioner owned, inter alia, certain silver utensils which he claimed to be his personal effects. The utensils consisted of 18 plates (thalis) 54 Katoris, 12 glasses and 1 jug. According to the petitioner, these utensils were meant for personal use of the petitioner and the members of his family. The utensils were sold in the course of the relevant previous year for a total consideration of Rs. 81,119. These utensils had been purchased during the years 1958-60. The cost of these utensils was about Rs. 14,813. On the sale of these utensils, therefore, the petitioner made a net gain of Rs. 66,306. In this return for the assessment year 1977-78, in Part III, the petitioner showed the net surplus of Rs. 66,306 as non-taxable capital gain on the basis of the provisions of section 2(14) of the Income-tax Act, 1961.

3. The Income-tax Officer, however, in his order held that the silver utensils cannot be called personal effects and, hence, the capital gains arising from the sale of silver utensils would be subject to capital gains tax.

4. Being aggrieved by this order, the petitioner preferred a revision petitioner under section 264 of the Income-tax Act before the Commissioner, the 1st respondent herein. The Commissioner by his order dated August 12, 1980, held that these articles cannot be considered as personal effects 'as they were not in use ordinarily and normally by the assessee but only on occasions...... Having regard to the various decisions on the point and also the fact that all the articles were sold and it is also seen that they were not in every day normal use by the assessee, it is difficult to hold that the articles which have been sold represented the personal effects of the assessee.' This decision of the 1st respondent is challenged in the present petition.

5. Can these silver utensils be considered as personal effects of the assessee If so, are they excluded from the definition of 'capital asset' under section 2(14) of the Income-tax Act, 1961 Under section 2(14), 'capital asset' means 'property of any kind held by an assessee.......but does not include (i).....; (ii) personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him;'. The petitioner submits that these silver utensils were held by him for personal use of himself and members of his family dependent on him. The silver utensils were such as were required for their personal use. The petitioner as well as members of his family were all assessees not merely under the Income-tax Act but also under the Wealth-tax Act, 1957. He submitted that he belonged to a wealthy family and such silver utensils were used personally by the members of his family and himself.

6. In the case of CIT v. Sitadevi N. Poddar : [1984]148ITR506(Bom) , a Division Bench of this court (of which I was a member) was required to consider a similar question in a somewhat different context. In that case, the assessee had sold certain silver utensils. The court held that such utensils were personal effects because they were ordinarily intended for personal or household use. In the case of H. H. Maharani Usha Devi v. CIT : [1982]133ITR43(MP) , jewellery which was meant for use by the assessee on ceremonial occasions was considered as 'personal effects' of the assessee.

7. The respondents, however, placed emphasis on the observations of the Supreme Court in the case of H. H. Maharaja Rana Hemant Singhji v. CIT : [1976]103ITR61(SC) . In that case, the Supreme Court was required to consider old silver rupee coins, gold sovereigns and silver bars which were used by the assessee on religious festivals. The Supreme Court observed that the silver bars or bullions can, by no stretch of imagination, be deemed to be 'effects' meant for personal use. In that case, the Supreme Court has in effect held that the expression 'intended for personal or household use' meant normally, commonly or ordinarily intended for personal or household use. It would not be correct to hold that the Supreme Court has considered only those items as personal effects which have been intimately connected with the person of the assessee. The very fact that furniture is also included in personal effects would show that the articles need not have an intimate connection with the person of the assessee. All that is required is that the article should be meant for the personal use of the assessee in the ordinary course.

8. In the present case, the Commissioner had applied a restrictive test not warranted by section 2(14) of the Income-tax Act. He has held that because these articles were not normally in daily use, they could not be considered as personal effects. This appears to be an incorrect test because all personal effects need not be used daily. So long as they are meant for personal use, they will have to be considered as personal effects. Since the decision of the Commissioner is based on a misleading of the decision of the Supreme Court in the case of H. H. Maharaja Rana Hemant Singhji v. CIT : [1976]103ITR61(SC) , there is an error apparent on the face of the record.

9. In the premises, the rule is made absolute in terms of prayer (a) of the petition.

10. The respondents will pay to the petitioner the costs of the petition.


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