The Revenue in this appeal wants reversal of the order of the Appellate Commissioner wherein he has directed the Assessing Officer not to assess the capital gains tax on the sale of gold ornaments and silver articles by the assessee.
2.1 The assessment year involved is 1982-83 for which the previous year ended on S.Y. 2037. The assessee derives income from two temples one at Baroda and the other at Naroda. She has declared income from the aforesaid two temples owned by her estimating income at 6% of the total amount received from those two temples. This income is apart from other income from house property, dividend, etc. The Assessing Officer estimated the income from the two temples at 7-1/2% of the total receipts, but we are not concerned with this addition in this appeal.
During the previous year relevant to the year under appeal, the assessee on two different dates sold gold ornaments and silver articles which included Jaris, Katora and Kalva used in the temples for pooja purposes. A sum of Rs. 2,09,000 was realised from the sale of gold ornaments and Rs. 16,736 from the sale of silver ornaments. According to the assessee, she was not liable to capital gains tax on the surplus realised in respect of sale of those gold ornaments and silver articles as they were her personal effects though used for pooja purposes from which she derived and declared income and since personal effects are not considered as capital asset within the meaning of S. 2(14) of the IT Act 1961, no capital gain accrued or arose to her. A note was, therefore, appended by the assessee to the statement of taxable income accompanying the return of income. The Assessing Officer during the course of finalisation of assessment proceedings did not agree with the assessees contention and subjected the sale proceeds to capital gain tax, but gave deductions as are available under S. 80T of the Act.
According to the Assessing Officer gold ornaments and silver articles were jewellery as defined in the Expln. to S. 2(14) of the IT Act and to S. 5(1)(viii) of the WT Act. The Assessing Officer was also of the view that those assets were not personal effects and, therefore, their sale was exigible to capital gains tax under the provisions of the IT Act, 1961. In subjecting the assessee to capital gains tax, the Assessing Officer relied on the decision of the Bombay High Court in the case of G. S. Poddar vs. CWT (1965) 57 ITR 207 (Bom) and also drew support from the judgment of the Supreme Court in the case of H. H.Maharaja Rana Hemant Singhji vs. CIT (1976) 103 ITR 61 (SC).
3. The assessee was not satisfied with this view of the Assessing Officer and carried the matter to the desk of the Appellate Commissioner under S. 246 of the Act. The Appellate Commissioner reversed the finding and conclusion of the Assessing Officer holding that the gold ornaments and silver articles were not jewellery but personal effects and distinguished the judgment of the Supreme Court in the case of H. H. Maharaja Rana Hemant Singhji (supra) saying that in the case of Maharaja Rana Hemant Singhji (supra), assets/personal effects were substantial whereas in the case of the assessee they were not so. This view taken by the Appellate Commissioner in the impugned order is assailed by the Revenue in this appeal.
4. The Revenues representative appearing before us while relying on the order of the Assessing Officer further submitted that the gold ornaments and silver articles were jewellery and were not personal effects as has been erroneously understood by the Appellate Commissioner and those assets were clearly capital assets, the sale of which was liable to be taxed in terms of S. 45 of the Act. According to the Revenues representative, the Appellate Commissioner has unjustifiably distinguished the judgment of the Honble Supreme Court in the case of H. H. Maharaja Rana Hemant Singhji (supra), the facts and ratio of which amply and apparently fit into the facts of the instant case. In order to convince us that the Assessing Officer was right, the Departmental Representative took us through the relevant passages in the judgment of the Supreme Court in the case of H. H. Maharaja Rana Hemant Singhji (supra) and also the relevant passages in the judgment of the Bombay High Court in the case of CIT v. G. S. Poddar (supra).
The Departmental Representative further submitted that those gold ornaments and silver articles were items of jewellery and were held and used by the assessee for performing pooja and other rituals performed at the two temples and the income declared by the assessee from the two temples amply established that those items/assets were not held or used by her as personal effects. The Departmental Representative also emphasised that neither in the past nor during the previous year the assessee had led any evidence that the said assets were used as personal effects or were her personal belongings the sale of which did not attract any capital gain tax. The view taken by the Appellate Commissioner in the impugned order is wholly erroneous and not to be sustained in the present appeal.
5. Shri J. P. Shah, counsel who appeared before us for the assessee, submitted that gold ornaments and silver articles which were sold were neither jewellery nor capital assets but were assets used by the assessee as her personal belongings and, therefore, the surplus realised on those assets cannot be brought to tax under S. 45 of the Act. According to Shri J. P. Shah, the Appellate Commissioner correctly understood the facts of the assessees case and gave relief. Relevant passages were read out by him from the judgment of the Bombay High Court in the case of H. H. Maharaja Rana Hemant Singhji (supra) to convince us that the assessee was not liable for capital gains tax, as has been done by the Assessing Officer. To support the assessees case, reliance has been placed on several judgments and orders of various Tribunal Benches, citations of which are given below : (vi) Bhupendra Rasiklal Shah vs. ITO (1986) 25 TTJ (Ahd) 175 (TM) : (1986) 15 ITD 51 (Ahd) (TM) Addressing further, the assessees counsel submitted that though the gold ornaments and silver articles were used in the temples for the purpose of performing pooja and other rituals, the same were also used by the assessee in her individual capacity at her residence while performing pooja and other rituals. This user made of those gold ornaments and silver articles as personal effects brings them outside the definition and meaning provided in S. 2(14) of the IT Act, 1961.
There is no prohibition in law that the assets/articles used for the purpose of business or profession cannot be used for personal purposes and once it is established that those assets/articles are also used for personal purposes in addition to the user for profession/business purposes, then the same can be characterised as personal effects and any sale does not attract capital gains in view of the provisions of S.2(14) of the Act. It was, therefore, strenuously urged by Shri J. P.Shah that the Revenue has no case at all and the appeal filed by them deserves to be dismissed.
6. On a query from us, the assessees counsel replied that the assessee was assessed to wealth-tax and the gold ornaments and silver articles which were sold were not claimed as not taxable/exempt as personal effects under S. 5(1)(viii) of the WT Act. He has also furnished copies of the computation statements for the asst. yrs. 1981-82 and 1982-83. A letter dt. 22nd July, 1981 addressed to the Superintendent of Central Excise, Baroda, is also filed by the assessees counsel. On a further specific query from us, the assessees counsel replied that the Jaris resembled glass-tumbler with a funnel like opening on the top portion and were used in the temples for giving bath to the deity by pouring Gangajal at the time of Sandhya pooja.
7. We have given our anxious consideration to the facts of the case as well as the submissions and contentions advanced by the learned representatives of both the sides. The cases relied upon by the both sides were also thoroughly studied. The question to be decided is whether the gold ornaments and the silver articles sold by the assessee were jewellery and if in the negative, whether the same were personal effects so as to get excluded from the definition of the capital asset as laid down in S. 2(14) of the Act. The provisions of S. 2(14) read as under : "capital asset means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include - (i) any stock-in-trade, consumable stores or raw material held for the purposes of his business or profession; (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.
(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel; (b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel; The said provision has an Explanation appended to it defining jewellery which is inclusive and says that ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone and whether or not worked sewn into any wearing apparel. It also further says precious or semi-precious stones, whether or not set in any utensil or other article or sewn into any wearing apparel. By closely examining the definition of jewellery given in S.2(14) and applying the same to the facts of the case, we have no hesitation to come to the conclusion that the gold ornaments and silver articles which were sold by the assessee were jewellery. Therefore, the assessee cannot contend that the same is not a capital asset and, therefore, the surplus realised on sale of those assets is not liable to capital gains tax under S. 45 of the IT Act, 1961. The assessee herself stated in the note appended to the return that she has sold gold ornaments and silver articles. As per admission of the assessee, the same constituted jewellery and she cannot contend that the same is not a capital asset as per S. 2(14) and no capital gain is leviable upon her.
8. Since the assessees counsel has raised a contention that it is not jewellery but nonetheless personal effects, we, therefore, wish to deal with the same. The bone of contention of the assessees counsel is that the gold ornaments and silver articles, namely, Jaris, Katora and Kalva sold were also used by the assessee at her residence for the purpose of performing pooja apart from the user of those articles at the temples for performing pooja of the deity and were, therefore, in the nature of personal effects. We are unable to subscribe to this argument and contention raised by the assessees counsel. Their Lordships of the Bombay High Court in G. S. Poddars case (supra) have held that the personal effects should be such as are normally, commonly or ordinarily intended for personal or household use. This view of the Bombay High Court has been approved and upheld by the Honble Supreme Court in the case of H. H. Maharaja Rana Hemant Singhji (supra). To determine whether particular articles are of personal use or not, its dominant object and prominent purpose has to be seen. It is no doubt true that an asset/article may be used in a business or profession but at the same time there can be limited user by any assessee of such articles/assets for personal purposes. But such limited or partial user cannot make such assets/articles as intended for personal use or constitute personal effects so as to get excluded from the definition of capital asset as per S. 2(14) of the Act. To cite an example, an architect may use his professional tools and instruments for drawing up plans and designs for his own house but it cannot be said that those instruments and equipments become personal effects of the architect.
Similarly, a dental surgeon may use the dental chair for relaxation and comfort when such chair is not occupied or used by any patient. But such limited or partial user by the dental surgeon cannot make the dental chair personal effect. There can be multiplicity of examples in this regard. Therefore, from the facts gathered in the instant case, the limited or partial user by the assessee of those gold ornaments and silver articles for the purpose of performing pooja of her personal deity at the residence cannot constitute personal effects. Another significant factor which has weighed with us is the conduct of the assessee in treating those gold ornaments and silver articles as jewellery and offering them for tax for wealth-tax purposes as is evident from the computation statements for wealth-tax purposes filed before us for the asst. yrs. 1980-81 and 1981-82 along with the letter dt. 22nd July, 1981 addressed to the Superintendent of Central Excise, Baroda. Had the assessee considered the articles sold by her as personal effects and not as jewellery, she would have surely claimed the value of those articles as exempt under S. 5(1)(viii) of the WT Act. This leads to an irresistible conclusion that those articles were not personal effects either for wealth-tax purposes or income-tax purposes.
9. The assessee has been using the articles which were sold by her in temples for the purpose of performing pooja of deity on suitable occasions and she has been deriving income from temples and offering the same for the purpose of income-tax. To put in simple words, those gold ornaments and silver articles constituted professional tools in the hands of the assessee for deriving income from the temples. The provisions of S. 2(14) clearly lay down that capital asset means property of any kind held by the assessee whether or not connected with his business or profession. Judging from any angle, it cannot be held that the gold ornaments and silver articles sold by the assessee were not capital asset and, therefore, not liable to capital gains tax. We have found the facts in the instant case are more or less identical to the facts present in the case of H. H. Maharaja Rana Hemant Singhji (supra) wherein their Lordships of the Supreme Court have held that even silver bars, coins, etc., used for the purpose of pooja and placed before the deity cannot be called as personal effects. Our view, therefore, gets fortified from the judgment of the Honble Supreme Court in the aforesaid case.
10. The case law relied upon by the assessees counsel have given us more assistance rather than to the assessee in coming to the conclusion that the articles sold by her are jewellery and not personal effects and, therefore, liable to capital gains tax as capital asset. We, therefore, reverse the finding and conclusion of the Appellate Commissioner in the impugned order and uphold that of the Assessing Officer. The appeal stands allowed.