Asstt. Cit Vs. Narendra I. Bhuva - Court Judgment

Excerpt:
- bombay stamp act, 1958. schedule 1, article 36: [y.r. meena, cj & d.a. mehta & a.s. dave, jj] deed of mortgage liability to pay stamp duty held, any instruments in respect of transactions, relating to loans and advances, loans and mortgages, cash credit or overdraft bonds, agreements of pawn or pledge and letters of hypothecation executed by farmers for agricultural and land development purposes in favour of all commercial bank etc. are entitled to remission of entire duty chargeable under the stamp act with effect on and from 1.4.1979 under government notification dated 23.3.1979. thus, where loan was granted by bank of india under agricultural finance scheme towards purchase of air compressors, drilling rods and other accessories. use of the air compressors, drilling rods and other accessories in case of applicant who is a farmer can only be for purpose of drilling a bore-well for purpose of irrigation in process of carrying on agricultural activities. thus, it is apparent that loan was availed of by applicant-farmer for agricultural and land development purposes because a bore-well would go to increase the utility of agricultural land by ensuring round the year irrigation. the instrument in question would therefore fall within scope of complete remission granted to instrument of mortgage under government notification dated 23.3.1979 and hence not liable to stamp duty under article 36 of schedule i of the act. - ' 3. before coming to the actual issue involved in this appeal, it would be proper to narrate the facts of case in brief for better appreciation of the issue involved and decisions taken by the authorities below. as per the appellant, the car was parked at the family residence, as there was better parking facilities available at that place. regarding import of the car parts for the use of the car which is another issue raised by the assessing officer, learned commissioner (appeals) has observed that spare parts are easily fabricated at bombay as well and so far maintenance expenses is concerned, they were met out of regular withdrawals. the word 'the adventure in the nature of trade' clearly suggests that the transaction cannot be properly regarded as a trade or business. there are cases in which the purpose of transaction of purchase and sale is clearly discernable. what is desirable is that it should be realized clearly that it can be inferred from the surrounding circumstances in the absence of direct evidence of the seller's intention and even if necessary in the face of his own evidence. if we look at the present case in the light of above discussion, we find that the test lay down in venkataswami naidu's case are not satisfied. in other words, an intimate connection between the effects and the person of the assessee must be shown to exist to render them 'personal effects'.the enumeration of articles like wearing appearel, jewellery and furniture mentioned by way of illustrations in the above-quoted definition of 'personal effects' also shows that the legislature intended only those articles to be included in the definition which were intimately and commonly used by the assessee. it was further held in this case that the use as a decoration in the drawing room which is only calculated to give a pride of possession is not contemplated by the exemption and that the personal use which is contemplated by the exemption is the use of like nature as the use of other items mentioned in the clause, namely, furniture, household utensils, wearing apparel and provisions. we think that the expression 'intended for the personal or household use' would mean normally commonly or ordinarily intended for the personal or household use according to the ordinary ideas, habits, customs and notions of the class of society to which the assessee belongs or according to the well established habits, customs and traditions of the family of the assessee. 20. on perusal of the facts and decision given in the cases on which both the sides have placed reliance, we find that the decisions on which learned authorised representative has placed reliance are clearly distinguishable in the case of h. maharani usha devi (supra) personal use was clearly established. the assessee has failed to produce any evidence that some expenditure was incurred on repair of the car or running of the car or having used occasionally like participating in any car rally organized by government or by any other organization. the element of pride of possession call be understood, to some extent, in the case of maharaja or maharani, but it is difficult to understand in the case of a salary employee like the assessee.orderr.p. rajesh, amthis appeal is filed by the revenue against the order of commissioner (appeals)-xiii, mumbai passed on 31-08-1994 in respect of assessment year 1992-93.2. grounds taken in appeal is as under:'on the facts and in the circumstances of the case and in law, the learned commissioner (appeals) erred in deleting addition of rs. 20,80,000 made by the assessing officer on account of sale of motor car as business income without appreciating the fact that the assessee had purchased the car with a view to sell it on a future date for profit.'3. before coming to the actual issue involved in this appeal, it would be proper to narrate the facts of case in brief for better appreciation of the issue involved and decisions taken by the authorities below.4. the appellant is an employee of m/s. indu nishan oxo-chemical ind. ltd. is a salary employee (sic). besides, he has also income from house property, share income, dividend etc. the appellant filed return for assessment year 1992-93 on 20-11-1992 declaring total income of rs. 2,79,440. in the statement of income attached to the return of income, assessee has claimed following receipts as not taxable:-'(a) remittances in foreign exchange (immunities) scheme, 1991 rs. 10,08,843;(b) receipts and special bearer bonds, 1991 rs.1,20,000;(c) receipt of 1/4th share from estate of his mother rs. 34,957;(a) on sale of vintage motor car rs. 20,75,495'5. in the course of assessment proceeding, the assessee appeared personally and his statement was recorded. in the course of proceeding, the assessing officer noticed that assessee has purchased ford toured 1931 model car from one mr. jesraj singh of delhi sometimes in 1983 for a consideration of rs. 20,000. assessee contended before the assessing officer that this car was treated as personal asset disclosed in wealth-tax return and claimed exemption as the price of the car was rs. 20,000. the said car was sold during the year under consideration to one mrs. kamalaben babubhai patel for a total consideration of rs, 21,00,000. the assessee received the sale proceedings through n.r.e. account of the purchaser. the assessing officer raised a query as to why the sale proceeds should not be brought to tax. the assessee replied by letter-dated 28-1-1994 that this car was shown as personal asset in wealth-tax and claimed exempt asset. no depreciation was claimed or allowed on this car nor any expenses pertaining to the car were claimed from his taxable income. accordingly, it was submitted that the car cannot be treated as capital asset under section 2(14) of income tax act, 1961 and hence the sale proceeds receipts cannot be charged to tax. the assessing officer has made observation on the above submission that the car was more than 50 years old when it was bought by the assessee and these types of cars are known as vintage cars are not generally used regularly as the maintenance costs of these cars are very high. in the course of assessment proceeding, the assessing officer has raised another query before the assessee as to whether assessee had availed of any foreign exchange for import of spare parts. it was replied that assessee had not availed of any foreign exchange for import of car parts during the period the car was owned by him. the assessee had submitted before assessing officer that the spare parts requirement were met by getting them fabricated locally. learned assessing officer made further inquiry in the line whether the car was used for personal purposes and raised a query as where the car was being parked and the reply was that the car was being parked at his family residence i.e. bhuvan cottage, 143, sewree, wadala road no. 9a. mumbai-31. thereafter, the assessing officer examined the capital account of the assessee and found that assessee has not debited any expenditure on maintenance of motor car in any of the years. under the circumstances, the assessing officer concluded that at no point of time the car was used by the assessee for his personal purpose. the assessing officer has also observed that from the above facts it is clear that the car was business asset. it is sold at profit at future asset and in view of this, the transaction is an adventure in the nature of trade.6. without prejudice to above, the assessing officer concluded that the transaction in question in any case falls within the ambit of capital gain. as mentioned above the car was not used at any point of time for personal purposes and the very fact that no maintenance was carried out, shows that there was no intention of keeping the car in running condition and therefore the car amounted to a capital asset and not a personal asset. the assessing officer has drawn a strength on the decision of jurisdictional high court in the case of jayantilal a. shah v. k.n. anantharam aiyar cit : [1985]156itr448(bom) where it has been held that 'certain articles which are not in normally for daily use can be considered as personal effect so long as these are meant for personal use'. in the present case the vehicle could be considered to be a personal use, if it was maintained from time to time and was kept in running condition. the assessee over a period of seven to eight years has not incurred any expenditure on maintenance of the vehicles or running of the car. under the circumstances, the learned assessing officer have concluded 'therefore the only conclusion can be that either the car was not kept in running condition or the expenditure was incurred by the company where the assessee was employed as a managing director. in either case, the asset will become capital in nature. therefore, if it is held though not conceded that the purchase and sale was not an adventure in the nature of business, the difference will be taxable as long term capital gain.7. aggrieved by the order, assessee filed appeal before commissioner (appeals) and this issue has been raised by the assessee in the very first ground taken before commissioner (appeals), which is as under:'the learned assistant commissioner erred in adding rs. 20,80,000 being profit from the sale of motor cars to the income of the assessee even though the car was a personal car and was personal effect of the assessee and hence was out of the purview of income-tax.'8. before commissioner (appeals) assessee has filed written submission. it will be pertinent to reproduce the same, as it would be helpful in deciding the issue, the same is reproduced below:'(i) the assessee has bought and kept the car as personal assets meant for personal use and has also claimed deduction under section 5(i)(viii) of the wealth tax act, 1957 over the years which has been allowed to him. this goes to establish that the car was a personal effect therefore outside the purview of section 2(14) of the act.(ii) as far as the arguments of the assistant commissioner's are concerned we respectfully submit as under:(a) the assessee even though was using company car, the fact cannot be denied that the vintage car was not meant for his personal use.(b) the assessee had already stated to the assessing officer that whenever a part was required it was locally fabricated as it was impossible to get the parts from abroad because of the stoppage of manufacturing of the same by original manufacturers.(c) the fact that the car was parked at family house is that the family house has garage facility, and the assessee being a prudent business man will not think of parking such a valuable article in open compound or on the road at his matunga address where no garage facility is available. (emphasis here italicised in print supplied)(d) lastly the maintenance expenses of the car were shown along with his withdrawals which are debited to his capital account.the assessee's car was not used daily by him, which does not amount to its being a non personal asset and not meant for personal use. it was held by hon'ble bombay high court in j. a. shah v. commissioner (appeals) and others : [1985]156itr448(bom) that all personal effects need not be used daily. so long as they were meant for personal use they have to be considered as personal effects'.9. the learned commissioner (appeals) has accepted the plea of assessee that car was 'personal asset and has accordingly deleted the addition. the factors that has weighed most to commissioner (appeals) in these decisions are:(1) that assessee has shown this car as a 'personal effect' in the wealth-tax return and has claimed exemption as a personal effect.(2) that, no depreciation was claimed or allowed on this car.(3) no expenditure pertaining to this car was claimed from the taxable income of the assessee.10. therefore, learned commissioner (appeals) has observed that the car was a personal asset outside the purview of section 2(14) of income tax act. he has further observed that the term 'capital asset' as defined by section 2(14) does not include items held for personal use such as furniture, ac, refrigerators and motor cars etc. he has further stated that car used for personal purposes on which depreciation is not charged in the previous year is not a capital asset. accordingly, when such an asset is sold, the profit cannot be brought to income-tax. in respect of non-parking of the car at the residential premises of the assessee, an issue raised by the assessing officer, learned commissioner (appeals) has observed that parking of the car at his family residence also does not make one to reach a conclusion that the car was not used for personal purposes. as per the appellant, the car was parked at the family residence, as there was better parking facilities available at that place. regarding import of the car parts for the use of the car which is another issue raised by the assessing officer, learned commissioner (appeals) has observed that spare parts are easily fabricated at bombay as well and so far maintenance expenses is concerned, they were met out of regular withdrawals. in this way, the learned commissioner (appeals) has come to his above conclusion. the decision is not acceptable to revenue and as a result, the issue is before us.11. learned departmental representative smt. malathi sridharan, strongly supported the reasons adopted by the assessing officer. she contended that car was a vintage car and cannot be considered to be a 'personal effect' under section 2(14) and exempt from capital gains. she submitted that the car was a capital asset. only such items of movable property should be exempted which can be used for personal purposes. in support of her contention, she placed reliance on the decision of hon'ble bombay high court in the case of g. s. poddar v. cwt : [1965]57itr207(bom) and decision of hon'ble supreme court in the case of h.h. maharaja rana hemant singhji v. cit : [1976]103itr61(sc) .12. on the other hand, learned representative of the assessee submitted that car was shown as a personal asset in the wealth-tax return for assessment year 1986-87 to 1991-92 and assessments were completed under section 16(3) accepting the claim. the learned counsel placed reliance on the decision of hon'ble supreme court in the case of cit v. h.h. maharani usha devi : [1998]231itr793(sc) . he also drew our attention to the cases of painting being accepted under section 2(14) and cited the order of itat calcutta bench in the case of princess shri kumari of kishangarh v. ito (1982) 1 itd 85 (cal) and the judgment of rajasthan high court in cit v. motichand khaianchi .13. apart from the submission as above, learned counsel made his submission in regards to the question whether the transaction was adventures in the nature of trade. learned counsel is of the view that the burden was on the department to show that adventure in question was in the nature of trade. in this regard, he placed reliance on the decision of hon'ble supreme court in the case of saroj kumar majumdar v. cit : [1959]37itr242(sc) . learned counsel submitted that there was nothing to show that assessee had acquired a car in 1983 with a view to resale the same for profit. learned counsel in support of his claim that sale transaction was not an adventure in the nature of trade, placed reliance on further two decisions : (1) bhogilal h. patelv. cit : [1969]74itr692(bom) and ashok kumarjalan. v. cit : [1991]187itr316(bom) . it is further submitted that the seller shri jasraj singh was in urgent need of funds. therefore the assessee purchased the car to have the prized possession of the antique car for treating foreign guests in the course of employment as chairman of m/s. indo nipoon chemical ltd.14. we have considered carefully the facts and the rival contentions. at the outset, it is to be clarified that though the assessing officer has brought the surplus on the sale of the car to tax and adventure in nature of the trade or in the alternative as long term capital gains, it is learned commissioner (appeals) who has discussed the issue whether the subject car was a personal effect as mentioned in section 2(14) and has examined the question, as to whether the car can be considered as 'personal effect'. he has not given attention to the question whether the sale can be considered to be an adventure in the nature of trade. to that extent, learned commissioner (appeals) is justified because no such ground was before him as it is obvious from the grounds taken before him (supra). as a natural corollary, the argument of learned departmental representative was confined to the applicability of section 2(14), though departmental representative touched both the aspects in the course of his arguments. be that it may, we are to decide the appeal on both the aspects for the sake of completeness.15. as regards the question as to whether the sale of car was an adventure in the nature of trade, it is not always easy to discern the circumstances, which will make a transaction an adventure in the nature of trade. there is a consensus among the judicial authorities that it is not possible to evolve a single test or formula which can be applied to determine whether a transaction is an adventure in the nature of trade. the word 'the adventure in the nature of trade' clearly suggests that the transaction cannot be properly regarded as a trade or business. it is allied to transaction that constitutes trade or business but may not be trade or business itself. it is characterized by some of the essential features that make up trade or business but not by all of them and so, even an isolated transaction can satisfy description of an adventure in the nature of trade. for that it will not be necessary that there should he series of transaction of purchase and sales. a single transaction of purchase and sale outside assessee's line of business may constitute adventure in the nature of trade. neither the petition nor continuity of similar transaction is necessary. if there is a repetition and continuity, the assessee would be continuing business and the question whether the action is an adventure in the nature of trade can hardly arise. therefore it is not possible to formulate any such rule to determine whether a particular transaction is adventure in the nature of trade or not. major relevant circumstances that will determine whether a particular transaction is adventure in the nature of trade are -subject-matter of the transaction, length of the period of ownership, frequency or number of similar transaction by the same person, supplementary work on or in connection with the property realized, circumstances that were responsible for the realization and the motive. there are cases in which the purpose of transaction of purchase and sale is clearly discernable. motive is never irrelevant in any of these cases. what is desirable is that it should be realized clearly that it can be inferred from the surrounding circumstances in the absence of direct evidence of the seller's intention and even if necessary in the face of his own evidence. so, the issue is to be decided on consideration of all the relevant facts and circumstances involved in peculiar circumstances. in g. venkataswami naidu & co. v. cit : [1959]35itr594(sc) the supreme court has prescribed certain test, but has finally observed that none of the test is in itself conclusive. the court must look at the cumulative effect of all the factors and arrive at a conclusion as to whether the transaction was an instance of investment or an adventure in the nature of trade. if we look at the present case in the light of above discussion, we find that the test lay down in venkataswami naidu's case are not satisfied. in the present case there is an isolated transaction and there is no repetition. the assessee is also not trader or businessman rather he is holding important position in the state government. therefore, the purchase of car cannot be stated to be usual trade or business or even incidental thereto. under the circumstances it will be difficult to accept the observation of the assessing officer that the transaction is an adventure in the nature of trade. accordingly, we hold that the purchase and sale of antique car by the assessee is not an adventure in the nature of trade.16. now we will turn to the other question which has been adjudicated by commissioner (appeals) against which the revenue is in appeal before us ie. whether the surplus on sale of the car is taxable as long term capital gain or the car in question is a part of 'personal effect' for the purpose of definition of capital asset in section 2(14) to mean, property of any kind held by an assessee whether or not connected with his business or profession. the learned departmental representative has vehemently argued that the car was not a personal effect as mentioned under section 2(14)(ii). in support of the submission, the learned departmental representative has placed reliance on following decisions:(1) h.h. maharaja rana hemant singhji's case (supra)(2) g.s poddars case (supra)(3) cwt v. arti goenka : [1980]121itr632(mad) 17. on the other hand, the learned counsel of the assessee submitted that right from assessment year 1986-87 to 1991-92 the car has been held as 'personal effect' in w.t. assessment by the department. in a right of filed by the learned authorised representative it is mentioned that the assessee was appointed as a director of bank of baroda, a prestigious indian bank in 82-85, at that time it will treat as a pride and has a status symbol to entertainment guest, so he purchased one old antique car as the seller was in urgent need of funds. the seller shri jesraj singh of u.p. i.a.s. officer, govt. of india was in urgent need of funds. it is further mentioned in the right up that it was desired to have prized possession of antique car etc. for treating foreign guests. in support of his claim that the car constitute personal effect as mentioned in section 2(14)(ii) the learned counsel has placed reliance on the following decisions:(1) h.h. maharani usha devis case (supra)(2) moti chand kajanchis case (supra)(3) princess shri kumari of kishangarhs case (supra)18. we have considered the submissions made from both sides. at the outset, we must make it clear that in none of the cases relied by both the sides, the asset involved was an antique car. therefore, it will be difficult to conclude that the issue before us is directly covered by any of the decision relied upon by either side. under the circumstances, we have to deal with each of the case relied from both sides to see the facts and ratio laid down by these decisions. first we will take up the case laws relied by learned departmental representative.(1) h.h. maharaja rana hemant singhji v. cit (supra): in this case maharaja shri udebhan singhji of dholpur died issueless in 1954. consequently all the movable valuables possessed by him were taken over by the govt. on december 1956 maharaja shri hemant singhji who was then a minor, was recognized by govt. of india as successor of maharaja and the assets were released by the govt. to rajmata in her capacity as the adoptive mother and guardian of the appellant. in the financial year 1957-58 the sovereigns, silver coins and silver bars which were inherited were so learned it was pleaded before the assessing officer that these sovereign of silver coins and silver bars were held for personal use by the assessee and the members of his family as was evident from the fact that they used for the purpose of mahalaxmi puja and other religious festivals and rituals in the family. the assessing officer rejected the above contention and took the market value of the asset as on 1-1-1954 and worked out capital gains, the decision of assessing officer was upheld by appellate assistant commissioner and the tribunal also agreed to the authorities below. while agreeing to the authorities below, tribunal was of the view that expression 'personal effect' meant such items of movable property as were necessary adjuncts to an individual's own personality and the nature of sale being voluntary or otherwise was irrelevant. when the matter came before high court, hon'ble high court agreed to the view taken by the authorities below that the assets sold were capital asset. in this way, the matter reached the apex court. the relevant observation and decision of hon'ble supreme court is reproduced below:for a proper decision of the point in question, it is necessary to refer to section 2(4a) of the act, the relevant portion where of runs thus :'2(4a) 'capital asset' means property of any kind held by an assessee, whether or not connected with his business, profession or vocation, but does not include-(ii) personal effect, that is to say, movable property (including wearing apparel, jewellery and furniture) held for personal use by the assessee or any member of his family dependent on him;'the expression 'personal use' occurring in clause (ii) of the above quoted provision is very significant, a close scrutiny of the context in which the expression occurs show that only those effects can legitimately be said to be personal which pertain to the assessee's person. in other words, an intimate connection between the effects and the person of the assessee must be shown to exist to render them 'personal effects'.the enumeration of articles like wearing appearel, jewellery and furniture mentioned by way of illustrations in the above-quoted definition of 'personal effects' also shows that the legislature intended only those articles to be included in the definition which were intimately and commonly used by the assessee.the meaning assigned to the expression 'personal effects' in various dictionaries also lends support to this view. in the unabridged edition of the random house dictionary of the english language, at page 1075, the expression is given the following meaning:'personal effects, privately owned articles consisting chiefly of clothing, toilet items etc. for intimate use by an individual.'in black's law dictionary, fourth edition, at page 1301, the expression is assigned the following meaning:'personal effects, articles associated with person, as property having more or less intimate relation to person of possessor.'in cyclopedia law dictionary, third edition, at page 832, the expression .personal effects' without qualifying words is interpreted to include generally such tangible property as is worn or carried about the person.in 'words and phrases' (permanent edition), volume 32, at page 277, it is stated that the words 'personal effects' when used without qualification, generally include such tangible property; as is worn or carried about the person, or to designate articles associated with the person. at another place at the same page, it is stated that the words 'personal effects' are used to designate articles associated with person, as property having more or less intimate relation to person of possessor or such tangible property as attends the person.bearing in mind the aforesaid meaning assigned to the expression in various dictionaries and cases, the silver bars or bullion can by no stretch of imagination be deemed to be 'effects' meant for personal use. even the sovereigns and the silver coins which are alleged to have been customarily brought out of the iron safes and boxes on two special occasions, namely, the ashtami day of 'sharadh paksh' for maha lakshmi puja and for worship on the occasion of diwali festival cannot also be designated as effects meant for personal use. they may have been used for puja of the deities as a matter of pride or ornamentation but it is difficult to understand how such user can be characterized as personal use. as rightly observed by the income-tax authorities if sanctity of puja were considered so essential by the assessee, the aforesaid articles would not have been delivered by his guardian to the banks for sale.while deciding the above case, hon'ble supreme court approved the decision of hon'ble bombay high court in the case of g.s. poddar (supra) on which the reliance has been placed by learned departmental representative therefore, it will be pertinent to reproduce the quotation which is as under:'where the assessee at the time of his appointment in the year 1945 as a justice of the peace was presented with two gold caskets, a gold tray, two gold glasses, a gold cup, saucer and spoons, and photo frames as souvenirs by the dealers and brokers in cloth with whose business he was connected and he kept these articles in a glass show case for display in his drawing room and in assessment year 1959-60, claimed exemption in respect of these articles under the above-quoted provision i.e. under section 5(1)(viii) of the wealth tax act, 1957, it was held that merely because the gold caskets were kept in the show case did not make them part of the furniture and the rest of the articles could not be considered to be household utensils as that expression did not embrace within its sweep gold articles meant for ornamental use for special occasions, but meant household articles which were normally, ordinarily and commonly so used. it was further held in this case that the use as a decoration in the drawing room which is only calculated to give a pride of possession is not contemplated by the exemption and that the personal use which is contemplated by the exemption is the use of like nature as the use of other items mentioned in the clause, namely, furniture, household utensils, wearing apparel and provisions. it was further held in that case that the expression 1ntended for personal or household use' did not mean capable of being intended for personal or household use. it meant normally, commonly or ordinarily intended for personal or household use. this in our opinion is the true concept of the expression 'personal use'.(2) cwt v. arti goenka (supra)-in this case, the assessee is a lady, who filed w.t. return for ays 1967-68 to 1969-70. she has declared value of jewellery consisting of gold ornaments, jewellery and loose diamonds valuing rs. 4,20,000, rs. 4,60,000 and rs. 5,06,800 respectively. the assessee claimed before wealth tax officer that the value of jewellery, gold ornaments and loose diamonds should not be taken into account in computing the net value as these were exempt under section 5(1)(viii) of w.t. act which was not accepted by assessing officer. however on appeal appellate assistant commissioner treated the entire value of jewellery gold ornaments and loose diamonds as exempt. when the matter came before itat, itat held that there was sufficient justification to hold that the loose diamonds were articles intended f or personal use of the assessee and that the value of gold ornaments and jewellery should not be included in the w.t. assessment of the assessee. subsequently there was an amendment in the order of itat and it was held in the amended order that the value of gold ornaments and jewellery should be included in wealth-tax assessment. when the matter came before hon'ble madras high court, hon'ble madras high court by following the decision of hon'ble bombay high court in the case of g. s. poddar (supra) and the decision of supreme court in the case of h.h. maharaja rana hemant singhji (supra) held that the expression 'personal use' would require that the article must be capable of being used as such by the person. the expression intended for 'personal use' has been used in section 5(1)(viii) of w.t. act, 1957 only to provide for inclusion of items, which are not in daily use. the intention has to be tested in the light of what a reasonable person will do and cannot be examined in the light of individual preferences. while deciding the issue hon'ble madras high court has quoted a portion of the judgment of hon'ble bombay high court in the case of g.s. poddar (supra), the same is reproduced here, as it will throw sufficient light on the issue before us:'we think that the expression 'intended for the personal or household use' would mean normally commonly or ordinarily intended for the personal or household use according to the ordinary ideas, habits, customs and notions of the class of society to which the assessee belongs or according to the well established habits, customs and traditions of the family of the assessee. the mere possibility, therefore, that the articles are capable of being put to a personal or household use would not be sufficient to treat them as intended for the personal or household use. moreover the question whether the articles are intended for personal or household use has got to be considered with reference to the facts and circumstances as they exist at the time when the question has to be determined!'19. now we will deal with the cases on which learned authorised representative has placed reliance:(1) cit v. h.h. maharani usha devi (supra): in this case the assessee is the ex-ruler of the erstwhile holkar state. the assessee was assessed as individual and the ay involved is 1972-73. in 1948 the ministry of states, new delhi has accepted certain heirloom jewellery as private properties of his late highness maharaja keshavrao holkar of indore. this included a 'sirpech' and a ceremonial belt. all the listed jewellery and gold used by the ruler of indore on ceremonial occasions as in the past were exempt under the provisions of section 5(1)(xiv) of w.t. act. in the accounting year relevant to ay 1972-73 assessee sold two items of heirloom jewellery for rs. 13,80,001. it was claimed by the assessee that it constituted personal effect of the assessee within the meaning of section 2(14) of the income tax act, 1961 and therefore the sale of these jewellery did not give rise to any taxable capital gains, the same was not accepted by the tribunal. however reference was made to high court. hon'ble high court has held that heirloom jewellery is also meant for the personal use of the assessee. it is however not meant for daily use but for use on ceremonial occasions, as such they would form a part of his personal effect. heirloom jewellery may be passed down from generation to generation but it is never the lays for the personal use of the owner. merely because from the nature of property, it can be used on ceremonial occasions only it does not follow that the property is not held by the assessee for personal use. while deciding the case, hon'ble supreme court also referred to the decision given by it in the case of h.h. maharaja rana hemant singhji (supra) and distinguished the same in the following words:'in that case silver bars, sovereigns and rupees coins which were said to be used on special occasions for worship were held not to be the personal effect of the assessee. this court said that only though the articles which were 'intimately and commonly used by the asessee' would be considered as 'personal effects'. the phrase 'intimately and commonly' should not be taken literally. what was meant was property which is individually or personally used. one must remember that even furniture is included. it dealt with gold sovereign, silver rupees and silver bars. this court rightly held that this could not be considered as a personal effect of the assessee.'the supreme court has further observed that the legislature intended only those articles to be included in the definition which were intimately and commonly used by the assessee.'(2) cit v. moti chand khaianchi (supra) - in this case property realized from the sale of paintings and curios was treated as casual and nonrecurring receipts not assessable as business profit for capital gain.in this case, assessee would derive income from interest, dividend, shares from the partnership firm and income from property, filed return showing a receipt of rs. 3,00,000 from the sale of paintings and was claimed as not liable to tax on the ground that it was neither business profit nor capital gain. the sale was not effected with a motive of making profit but to serve the national interest of the country and that the articles were his personal effect. the assessing officer rejected the above contention and treated the same as an adventure in the nature of trade. on appeal tribunal treated the same as casual and non-recurring receipts.hon'ble high court held that assessee has collected old paintings, curios etc. since the year 1940 when he was a boy of 16/17 years olearned since 1940 till ay 1964-65 ie. within 25 years only 3 sales to the three institutions were made. at that time it could not be said that there was any profit motive in his mind. the collection of the assessee were held in high esteem by various curators, authors and lovers of the art. there was mention of the assessee's painting in the bulletin of the prince of wales museum of western india, 1953-54 and kanha dade prabandh of padmanablia written by professor k. b. vyas and published under the orders of the government of rajasthan. he was described as an enlightened connoisseur in the foreword to the catalogue of his miniature paintings published by the lalit kala academy. eminent people were attracted to see his paintings. files name was also suggested for the membership of the regional art advisory committee formed in rajasthan. the assessee also loaned his paintings and art objects for exhibition in the year 1954 to g.g.s.j. museum, bikaner, and they were taken back in the year 1962. exhibitions of his paintings were held by the lalit kala academy at various places. he donated 8,000 manuscripts to the government of rajasthan. he made no purchases with borrowings. he did not keep any account of the purchases because he was acquiring them in pursuit of a hobby. the first sale of paintings was made to vidyapeth, sangaria, on the insistence of swami keshavanandji for rs. 4,000 in the year 1949-50. the wealth-tax officer did not include the value of the paintings and curios in the wealth-tax assessment of the assessee for the years 1960-61 and 1961-62. the commercial tax officer also did not levy tax on the sales made by the assessee. only on the persuasion of the member, art purchase committee, national museum, new delhi, the assessee sold the paintings to the national museum, new delhi for rs. 3 lakhs. the assessee requested the ministry of scientific research and cultural affairs to move the finance ministry and find out if there would be any tax on the sales proposed to be made to the national museum. he was informed by the ministry of scientific research and cultural affairs that if he was not a dealer in the articles, the transaction would not amount to any adventure in the nature of trade and the amount paid by the government would not be treated as business receipts. under these circumstances, the assessee sold the paintings for rs. 3 lakhs to the national museum, new delhi, in the interest of the nation. therefore the tribunal was right in holding that the assessee was neither carrying on any business of purchase and sale of paintings nor the transaction was an adventure in the nature of trade. therefore, the receipts from the sale of paintings were of a casual and non recurring nature not arising from business, profession or vocation.(3) princess shri kumari of kishangarh (supra)- in this case, the assessee sold certain paintings handed over to her by her father and claimed exemption from capital gain tax on the ground that they were personal effect. income tax officer and the appellate assistant commissioner disallowed the claim. on appeal hon'ble tribunal held that the language of section 2(14) makes it clear that articles other than jewellery in which there is an intimate connection between the effect and the person must be treated as personal effect. such a connection is on facts found in this case and there is no material on record to show that paintings were not commonly used by the assessee. they are thus articles of personal effects. the sale of which could not attract capital gain tax.here we must mention that while deciding the case hon'ble tribunal has considered the affidavit filed by shri sardar singh, elder brother of late maharaja shri sumer singhji sahib of kishangarh who has deposed before the income tax officer that the painting in question were being regularly used for decorating the room of the assessee as it was usual custom of the family. finally the hon'ble itat held that there was no material on record to show that paintings were not commonly used by the assessee. therefore, the paintings that were sold by the assessee during the year were articles of personal effect and hence sale of those articles will not attract the provisions of section 45 of the act.20. on perusal of the facts and decision given in the cases on which both the sides have placed reliance, we find that the decisions on which learned authorised representative has placed reliance are clearly distinguishable in the case of h.h. maharani usha devi (supra) personal use was clearly established. the hon'ble court found that there was use of jewellery on ceremonial occasion at least. but in the instant case there is not an iota of evidence to show that the car was used even on ceremonial occasion. therefore, the ratio of decision in the case of h.h. maharani usha devi (supra) will not be applicable in the instant, case.21. so far the ratio in the case of moti chand khajanchi (supra) is concerned; it is clear from the facts that there was no profit motive behind the sale. the assessee was informed by the ministry of scientific research and cultural affairs that he was not a dealer in the articles, the transaction would not amount to any adventure in the nature of trade and the amount paid by the government would not be treated as business receipts. under these circumstances, assessee sold the paintings and the hon'ble high court has treated it casual and non-recurring receipt.22. in the case of princess shri kumari of kishangarh (supra), hon'ble itat has decided the issue on the strength of affidavit filed by the brother of late maharaja who had deposed that the painting in question was regularly used for decorating the room'of the assessee as it was usual custom of the family. finally hon'ble itat was of the opinion that there was no material on record to show that paintings were not commonly used by the assessee. therefore, the ratio of these decisions will also not come to the help of the assessee.23. after going through all the decisions, we find that the test which is to be applied for ascertaining, whether a particular asset is 'personal effect' would be whether the particular asset was intimately and commonly used by the assessee. if we apply this test to the facts of the case, which is before us, we find that the antique car in question cannot be taken as 'personal effect' of the assessee. from the facts gathered by the assessing officer, it is clear that the subject car was not used even occasionally by the assessee for his personal purpose. whatever submissions has been made before authorities below and before us, in support of the claim that car was used for personal purposes, is not supported by any evidence. whatever evidence has been produced, they are self-serving unsupported by any evidence. the assessee has failed to produce any evidence that some expenditure was incurred on repair of the car or running of the car or having used occasionally like participating in any car rally organized by government or by any other organization. the fact that the car was not even parked at the residence of the assessee also strengthen the case of the income tax officer that it was not used by the assessee. the reason for parking at a distant place at the residence of relative has been given by the assessee before the commissioner (appeals) ie. .assessee being prudent business man will not think of parking such a valuable article in open compound or on the road,' also goes against the assessee. one of the plea taken by the assessee that assessee had purchased the car as a pride of possession. it may have been kept as a matter of pride but it is difficult to understand how such user can be characterized as a 'personal use'. the 'personal use', which is contemplated by the exemption is not a pride of possession. the element of pride of possession call be understood, to some extent, in the case of maharaja or maharani, but it is difficult to understand in the case of a salary employee like the assessee.24. therefore, on the given facts and in light of the ratio laid down by the decisions relied upon the by the departmental representative unlike the ones relied by learned authorised representative which are distinguishable, we hold that the antique car held by the assessee is not a 'personal effect' as occurring in section 2(14)(ii) rather it is a capital asset. consequently, the surplus realized on its sale is chargeable to capital gain under section 45 of income tax act, 1961.25. accordingly, the decision of commissioner (appeals) is reversed and that of assessing officer is restored.26. in the result, the appeal by the revenue is allowed.

Judgment:
ORDER

R.P. Rajesh, AM

This appeal is filed by the revenue against the order of Commissioner (Appeals)-XIII, Mumbai passed on 31-08-1994 in respect of assessment year 1992-93.

2. Grounds taken in appeal is as under:

'On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in deleting addition of Rs. 20,80,000 made by the assessing officer on account of sale of Motor car as business income without appreciating the fact that the assessee had purchased the car with a view to sell it on a future date for profit.'

3. Before coming to the actual issue involved in this appeal, it would be proper to narrate the facts of case in brief for better appreciation of the issue involved and decisions taken by the authorities below.

4. The appellant is an employee of M/s. Indu Nishan Oxo-Chemical Ind. Ltd. is a salary employee (sic). Besides, he has also income from house property, share income, dividend etc. The appellant filed return for assessment year 1992-93 on 20-11-1992 declaring total income of Rs. 2,79,440. In the statement of income attached to the return of income, assessee has claimed following receipts as not taxable:-

'(a) Remittances in Foreign Exchange (Immunities) Scheme, 1991 Rs. 10,08,843;

(B) Receipts and Special Bearer Bonds, 1991 Rs.1,20,000;

(c) Receipt of 1/4th share from Estate of his mother Rs. 34,957;

(a) On sale of Vintage Motor car Rs. 20,75,495'

5. In the course of assessment proceeding, the assessee appeared personally and his statement was recorded. In the course of proceeding, the assessing officer noticed that assessee has purchased Ford Toured 1931 Model car from one Mr. Jesraj Singh of Delhi sometimes in 1983 for a consideration of Rs. 20,000. Assessee contended before the assessing officer that this car was treated as personal asset disclosed in Wealth-tax return and claimed exemption as the price of the car was Rs. 20,000. The said car was sold during the year under consideration to one Mrs. Kamalaben Babubhai Patel for a total consideration of Rs, 21,00,000. The assessee received the sale proceedings through N.R.E. Account of the purchaser. The assessing officer raised a query as to why the sale proceeds should not be brought to tax. The assessee replied by letter-dated 28-1-1994 that this car was shown as personal asset in Wealth-tax and claimed exempt asset. No depreciation was claimed or allowed on this car nor any expenses pertaining to the car were claimed from his taxable income. Accordingly, it was submitted that the car cannot be treated as capital asset under section 2(14) of Income Tax Act, 1961 and hence the sale proceeds receipts cannot be charged to tax. The assessing officer has made observation on the above submission that the car was more than 50 years old when it was bought by the assessee and these types of cars are known as Vintage cars are not generally used regularly as the maintenance costs of these cars are very high. In the course of assessment proceeding, the assessing officer has raised another query before the assessee as to whether assessee had availed of any foreign exchange for import of spare parts. It was replied that assessee had not availed of any foreign exchange for import of car parts during the period the car was owned by him. The assessee had submitted before assessing officer that the spare parts requirement were met by getting them fabricated locally. Learned assessing officer made further inquiry in the line whether the car was used for personal purposes and raised a query as where the car was being parked and the reply was that the car was being parked at his family residence i.e. Bhuvan Cottage, 143, Sewree, Wadala Road No. 9A. Mumbai-31. Thereafter, the assessing officer examined the capital account of the assessee and found that assessee has not debited any expenditure on maintenance of motor car in any of the years. Under the circumstances, the assessing officer concluded that at no point of time the car was used by the assessee for his personal purpose. The assessing officer has also observed that from the above facts it is clear that the car was business asset. It is sold at profit at future asset and in view of this, the transaction is an adventure in the nature of trade.

6. Without prejudice to above, the assessing officer concluded that the transaction in question in any case falls within the ambit of Capital gain. As mentioned above the car was not used at any point of time for personal purposes and the very fact that no maintenance was carried out, shows that there was no intention of keeping the car in running condition and therefore the car amounted to a capital asset and not a personal asset. The assessing officer has drawn a strength on the decision of Jurisdictional High Court in the case of Jayantilal A. Shah v. K.N. Anantharam Aiyar CIT : [1985]156ITR448(Bom) where it has been held that 'certain articles which are not in normally for daily use can be considered as personal effect so long as these are meant for personal use'. In the present case the vehicle could be considered to be a personal use, if it was maintained from time to time and was kept in running condition. The assessee over a period of seven to eight years has not incurred any expenditure on maintenance of the vehicles or running of the car. Under the circumstances, the learned assessing officer have concluded 'Therefore the only conclusion can be that either the car was not kept in running condition or the expenditure was incurred by the company where the assessee was employed as a Managing Director. In either case, the asset will become capital in nature. Therefore, if it is held though not conceded that the purchase and sale was not an adventure in the nature of business, the difference will be taxable as long term capital gain.

7. Aggrieved by the order, assessee filed appeal before Commissioner (Appeals) and this issue has been raised by the assessee in the very first ground taken before Commissioner (Appeals), which is as under:

'The learned Assistant Commissioner erred in adding Rs. 20,80,000 being profit from the sale of Motor cars to the income of the assessee even though the car was a personal car and was personal effect of the assessee and hence was out of the purview of income-tax.'

8. Before Commissioner (Appeals) assessee has filed written submission. It will be pertinent to reproduce the same, as it would be helpful in deciding the issue, the same is reproduced below:

'(i) The assessee has bought and kept the car as personal assets meant for personal use and has also claimed deduction under section 5(i)(viii) of the Wealth Tax Act, 1957 over the years which has been allowed to him. This goes to establish that the car was a personal effect therefore outside the purview of section 2(14) of the Act.

(ii) As far as the arguments of the Assistant Commissioner's are concerned we respectfully submit as under:

(a) The assessee even though was using Company car, the fact cannot be denied that the vintage car was not meant for his personal use.

(b) The assessee had already stated to the assessing officer that whenever a part was required it was locally fabricated as it was impossible to get the parts from abroad because of the stoppage of manufacturing of the same by original manufacturers.

(c) The fact that the car was parked at family house is that the family house has garage facility, and the assessee being a prudent business man will not think of parking such a valuable article in open compound or on the road at his Matunga address where no garage facility is available. (Emphasis here italicised in print supplied)

(d) Lastly the maintenance expenses of the car were shown along with his withdrawals which are debited to his Capital Account.

The assessee's car was not used daily by him, which does not amount to its being a non personal asset and not meant for personal use. It was held by Hon'ble Bombay High Court in J. A. Shah v. Commissioner (Appeals) and others : [1985]156ITR448(Bom) that all personal effects need not be used daily. So long as they were meant for personal use they have to be considered as personal effects'.

9. The learned Commissioner (Appeals) has accepted the plea of assessee that car was 'personal asset and has accordingly deleted the addition. The factors that has weighed most to Commissioner (Appeals) in these decisions are:

(1) That assessee has shown this car as a 'personal effect' in the Wealth-tax return and has claimed exemption as a personal effect.

(2) That, no depreciation was claimed or allowed on this car.

(3) No expenditure pertaining to this car was claimed from the taxable income of the assessee.

10. Therefore, learned Commissioner (Appeals) has observed that the car was a personal asset outside the purview of section 2(14) of Income Tax Act. He has further observed that the term 'Capital asset' as defined by section 2(14) does not include items held for personal use such as furniture, AC, Refrigerators and Motor cars etc. He has further stated that car used for personal purposes on which depreciation is not charged in the previous year is not a capital asset. Accordingly, when such an asset is sold, the profit cannot be brought to income-tax. In respect of non-parking of the car at the residential premises of the assessee, an issue raised by the assessing officer, learned Commissioner (Appeals) has observed that parking of the car at his family residence also does not make one to reach a conclusion that the car was not used for personal purposes. As per the appellant, the car was parked at the family residence, as there was better parking facilities available at that place. Regarding import of the car parts for the use of the car which is another issue raised by the assessing officer, learned Commissioner (Appeals) has observed that spare parts are easily fabricated at Bombay as well and so far maintenance expenses is concerned, they were met out of regular withdrawals. In this way, the learned Commissioner (Appeals) has come to his above conclusion. The decision is not acceptable to revenue and as a result, the issue is before us.

11. Learned Departmental Representative Smt. Malathi Sridharan, strongly supported the reasons adopted by the assessing officer. She contended that car was a vintage car and cannot be considered to be a 'personal effect' under section 2(14) and exempt from capital gains. She submitted that the car was a capital asset. Only such items of movable property should be exempted which can be used for personal purposes. In support of her contention, she placed reliance on the decision of Hon'ble Bombay High Court in the case of G. S. Poddar v. CWT : [1965]57ITR207(Bom) and decision of Hon'ble Supreme Court in the case of H.H. Maharaja Rana Hemant Singhji v. CIT : [1976]103ITR61(SC) .

12. On the other hand, learned representative of the assessee submitted that car was shown as a personal asset in the Wealth-tax return for assessment year 1986-87 to 1991-92 and assessments were completed under section 16(3) accepting the claim. The learned counsel placed reliance on the decision of Hon'ble Supreme Court in the case of CIT v. H.H. Maharani Usha Devi : [1998]231ITR793(SC) . He also drew our attention to the cases of painting being accepted under section 2(14) and cited the order of ITAT Calcutta Bench in the case of Princess Shri Kumari of Kishangarh v. ITO (1982) 1 ITD 85 (Cal) and the judgment of Rajasthan High Court in CIT v. Motichand Khaianchi .

13. Apart from the submission as above, learned Counsel made his submission in regards to the question whether the transaction was adventures in the nature of trade. Learned Counsel is of the view that the burden was on the department to show that adventure in question was in the nature of trade. In this regard, he placed reliance on the decision of Hon'ble Supreme Court in the case of Saroj Kumar Majumdar v. CIT : [1959]37ITR242(SC) . Learned counsel submitted that there was nothing to show that assessee had acquired a car in 1983 with a view to resale the same for profit. Learned counsel in support of his claim that sale transaction was not an adventure in the nature of trade, placed reliance on further two decisions : (1) Bhogilal H. Patelv. CIT : [1969]74ITR692(Bom) and Ashok Kumarjalan. v. CIT : [1991]187ITR316(Bom) . It is further submitted that the seller Shri Jasraj Singh was in urgent need of funds. Therefore the assessee purchased the car to have the prized possession of the antique car for treating foreign guests in the course of employment as Chairman of M/s. Indo Nipoon Chemical Ltd.

14. We have considered carefully the facts and the rival contentions. At the outset, it is to be clarified that though the assessing officer has brought the surplus on the sale of the car to tax and adventure in nature of the trade or in the alternative as long term capital gains, it is learned Commissioner (Appeals) who has discussed the issue whether the subject car was a personal effect as mentioned in section 2(14) and has examined the question, as to whether the car can be considered as 'personal effect'. He has not given attention to the question whether the sale can be considered to be an adventure in the nature of trade. To that extent, learned Commissioner (Appeals) is justified because no such ground was before him as it is obvious from the grounds taken before him (supra). As a natural corollary, the argument of learned Departmental Representative was confined to the applicability of section 2(14), though Departmental Representative touched both the aspects in the course of his arguments. Be that it may, we are to decide the appeal on both the aspects for the sake of completeness.

15. As regards the question as to whether the sale of car was an adventure in the nature of trade, it is not always easy to discern the circumstances, which will make a transaction an adventure in the nature of trade. There is a consensus among the judicial authorities that it is not possible to evolve a single test or formula which can be applied to determine whether a transaction is an adventure in the nature of trade. The word 'the adventure in the nature of trade' clearly suggests that the transaction cannot be properly regarded as a trade or business. It is allied to transaction that constitutes trade or business but may not be trade or business itself. It is characterized by some of the essential features that make up trade or business but not by all of them and so, even an isolated transaction can satisfy description of an adventure in the nature of trade. For that it will not be necessary that there should he series of transaction of purchase and sales. A single transaction of purchase and sale outside assessee's line of business may constitute adventure in the nature of trade. Neither the petition nor continuity of similar transaction is necessary. If there is a repetition and continuity, the assessee would be continuing business and the question whether the action is an adventure in the nature of trade can hardly arise. Therefore it is not possible to formulate any such rule to determine whether a particular transaction is adventure in the nature of trade or not. Major relevant circumstances that will determine whether a particular transaction is adventure in the nature of trade are -subject-matter of the transaction, length of the period of ownership, frequency or number of similar transaction by the same person, supplementary work on or in connection with the property realized, circumstances that were responsible for the realization and the motive. There are cases in which the purpose of transaction of purchase and sale is clearly discernable. Motive is never irrelevant in any of these cases. What is desirable is that it should be realized clearly that it can be inferred from the surrounding circumstances in the absence of direct evidence of the seller's intention and even if necessary in the face of his own evidence. So, the issue is to be decided on consideration of all the relevant facts and circumstances involved in peculiar circumstances. In G. Venkataswami Naidu & Co. v. CIT : [1959]35ITR594(SC) the Supreme Court has prescribed certain test, but has finally observed that none of the test is in itself conclusive. The court must look at the cumulative effect of all the factors and arrive at a conclusion as to whether the transaction was an instance of investment or an adventure in the nature of trade. If we look at the present case in the light of above discussion, we find that the test lay down in Venkataswami Naidu's case are not satisfied. In the present case there is an isolated transaction and there is no repetition. The assessee is also not trader or businessman rather he is holding important position in the State Government. Therefore, the purchase of car cannot be stated to be usual trade or business or even incidental thereto. Under the circumstances it will be difficult to accept the observation of the assessing officer that the transaction is an adventure in the nature of trade. Accordingly, we hold that the purchase and sale of antique car by the assessee is not an adventure in the nature of trade.

16. Now we will turn to the other question which has been adjudicated by Commissioner (Appeals) against which the revenue is in appeal before us ie. whether the surplus on sale of the car is taxable as long term capital gain or the car in question is a part of 'personal effect' for the purpose of definition of capital asset in section 2(14) to mean, property of any kind held by an assessee whether or not connected with his business or profession. The learned Departmental Representative has vehemently argued that the car was not a personal effect as mentioned under section 2(14)(ii). In support of the submission, the learned Departmental Representative has placed reliance on following decisions:

(1) H.H. Maharaja Rana Hemant Singhji's case (supra)

(2) G.S Poddars case (supra)

(3) CWT v. Arti Goenka : [1980]121ITR632(Mad)

17. On the other hand, the learned counsel of the assessee submitted that right from assessment year 1986-87 to 1991-92 the car has been held as 'personal effect' in W.T. Assessment by the department. In a right of filed by the learned authorised representative it is mentioned that the assessee was appointed as a Director of Bank of Baroda, a prestigious Indian bank in 82-85, at that time it will treat as a pride and has a status symbol to entertainment guest, so he purchased one old antique car as the seller was in urgent need of funds. The seller Shri Jesraj Singh of U.P. I.A.S. Officer, Govt. of India was in urgent need of funds. It is further mentioned in the right up that it was desired to have prized possession of antique car etc. for treating foreign guests. In support of his claim that the car constitute personal effect as mentioned in section 2(14)(ii) the learned counsel has placed reliance on the following decisions:

(1) H.H. Maharani Usha Devis case (supra)

(2) Moti Chand Kajanchis case (supra)

(3) Princess Shri Kumari of Kishangarhs case (supra)

18. We have considered the submissions made from both sides. At the outset, we must make it clear that in none of the cases relied by both the sides, the asset involved was an antique car. Therefore, it will be difficult to conclude that the issue before us is directly covered by any of the decision relied upon by either side. Under the circumstances, we have to deal with each of the case relied from both sides to see the facts and ratio laid down by these decisions. First we will take up the case laws relied by learned Departmental Representative.

(1) H.H. Maharaja Rana Hemant Singhji v. CIT (supra): In this case Maharaja Shri Udebhan Singhji of Dholpur died issueless in 1954. Consequently all the movable valuables possessed by him were taken over by the Govt. On December 1956 Maharaja Shri Hemant Singhji who was then a minor, was recognized by Govt. of India as successor of Maharaja and the assets were released by the Govt. to Rajmata in her capacity as the adoptive mother and guardian of the appellant. In the financial year 1957-58 the sovereigns, silver coins and silver bars which were inherited were so learned It was pleaded before the assessing officer that these sovereign of silver coins and silver bars were held for personal use by the assessee and the members of his family as was evident from the fact that they used for the purpose of Mahalaxmi puja and other religious festivals and rituals in the family. The assessing officer rejected the above contention and took the market value of the asset as on 1-1-1954 and worked out capital gains, The decision of assessing officer was upheld by Appellate Assistant Commissioner and the Tribunal also agreed to the authorities below. While agreeing to the authorities below, Tribunal was of the view that expression 'personal effect' meant such items of movable property as were necessary adjuncts to an individual's own personality and the nature of sale being voluntary or otherwise was irrelevant. When the matter came before High Court, Hon'ble High Court agreed to the view taken by the authorities below that the assets sold were capital asset. In this way, the matter reached the Apex Court. The relevant observation and decision of Hon'ble Supreme Court is reproduced below:

For a proper decision of the point in question, it is necessary to refer to section 2(4A) of the Act, the relevant portion where of runs thus :

'2(4A) 'Capital Asset' means property of any kind held by an assessee, whether or not connected with his business, profession or vocation, but does not include-

(ii) personal effect, that is to say, movable property (including wearing apparel, jewellery and furniture) held for personal use by the assessee or any member of his family dependent on him;'

The expression 'personal use' occurring in clause (ii) of the above quoted provision is very significant, A close scrutiny of the context in which the expression occurs show that only those effects can legitimately be said to be personal which pertain to the assessee's person. In other words, an intimate connection between the effects and the person of the assessee must be shown to exist to render them 'personal effects'.

The enumeration of articles like wearing appearel, jewellery and furniture mentioned by way of illustrations in the above-quoted definition of 'personal effects' also shows that the legislature intended only those articles to be included in the definition which were intimately and commonly used by the assessee.

The meaning assigned to the expression 'personal effects' in various dictionaries also lends support to this view. In the Unabridged Edition of the Random House Dictionary of the English Language, at page 1075, the expression is given the following meaning:

'Personal effects, privately owned articles consisting chiefly of clothing, toilet items etc. for intimate use by an individual.'

In Black's Law Dictionary, Fourth Edition, at page 1301, the expression is assigned the following meaning:

'Personal effects, articles associated with person, as property having more or less intimate relation to person of possessor.'

In Cyclopedia Law Dictionary, Third Edition, at page 832, the expression .personal effects' without qualifying words is interpreted to include generally such tangible property as is worn or carried about the person.

In 'Words and Phrases' (permanent edition), Volume 32, at page 277, it is stated that the words 'personal effects' when used without qualification, generally include such tangible property; as is worn or carried about the person, or to designate articles associated with the person. At another place at the same page, it is stated that the words 'personal effects' are used to designate articles associated with person, as property having more or less intimate relation to person of possessor or such tangible property as attends the person.

Bearing in mind the aforesaid meaning assigned to the expression in various dictionaries and cases, the silver bars or bullion can by no stretch of imagination be deemed to be 'effects' meant for personal use. Even the sovereigns and the silver coins which are alleged to have been customarily brought out of the iron safes and boxes on two special occasions, namely, the Ashtami Day of 'Sharadh Paksh' for Maha Lakshmi Puja and for worship on the occasion of Diwali festival cannot also be designated as effects meant for personal use. They may have been used for puja of the deities as a matter of pride or ornamentation but it is difficult to understand how such user can be characterized as personal use. As rightly observed by the income-tax authorities if sanctity of puja were considered so essential by the assessee, the aforesaid articles would not have been delivered by his guardian to the banks for sale.

While deciding the above case, Hon'ble Supreme Court approved the decision of Hon'ble Bombay High Court in the case of G.S. Poddar (supra) on which the reliance has been placed by learned Departmental Representative Therefore, it will be pertinent to reproduce the quotation which is as under:

'Where the assessee at the time of his appointment in the year 1945 as a Justice of the Peace was presented with two gold caskets, a gold tray, two gold glasses, a gold cup, saucer and spoons, and photo frames as souvenirs by the dealers and brokers in cloth with whose business he was connected and he kept these articles in a glass show case for display in his drawing room and in assessment year 1959-60, claimed exemption in respect of these articles under the above-quoted provision i.e. under section 5(1)(viii) of the Wealth Tax Act, 1957, it was held that merely because the gold caskets were kept in the show case did not make them part of the furniture and the rest of the articles could not be considered to be household utensils as that expression did not embrace within its sweep gold articles meant for ornamental use for special occasions, but meant household articles which were normally, ordinarily and commonly so used. It was further held in this case that the use as a decoration in the drawing room which is only calculated to give a pride of possession is not contemplated by the exemption and that the personal use which is contemplated by the exemption is the use of like nature as the use of other items mentioned in the clause, namely, furniture, household utensils, wearing apparel and provisions. It was further held in that case that the expression 1ntended for personal or household use' did not mean capable of being intended for personal or household use. It meant normally, commonly or ordinarily intended for personal or household use. This in our opinion is the true concept of the expression 'personal use'.

(2) CWT v. Arti Goenka (supra)-In this case, the assessee is a lady, who filed W.T. return for AYs 1967-68 to 1969-70. She has declared value of jewellery consisting of gold ornaments, jewellery and loose diamonds valuing Rs. 4,20,000, Rs. 4,60,000 and Rs. 5,06,800 respectively. The assessee claimed before Wealth Tax Officer that the value of jewellery, gold ornaments and loose diamonds should not be taken into account in computing the net value as these were exempt under section 5(1)(viii) of W.T. Act which was not accepted by assessing officer. However on appeal Appellate Assistant Commissioner treated the entire value of jewellery gold ornaments and loose diamonds as exempt. When the matter came before ITAT, ITAT held that there was sufficient justification to hold that the loose diamonds were articles intended f or personal use of the assessee and that the value of gold ornaments and jewellery should not be included in the W.T. assessment of the assessee. Subsequently there was an amendment in the order of ITAT and it was held in the amended order that the value of gold ornaments and jewellery should be included in Wealth-tax assessment. When the matter came before Hon'ble Madras High Court, Hon'ble Madras High Court by following the decision of Hon'ble Bombay High Court in the case of G. S. Poddar (supra) and the decision of Supreme Court in the case of H.H. Maharaja Rana Hemant Singhji (supra) held that the expression 'personal use' would require that the article must be capable of being used as such by the person. The expression intended for 'personal use' has been used in section 5(1)(viii) of W.T. Act, 1957 only to provide for inclusion of items, which are not in daily use. The intention has to be tested in the light of what a reasonable person will do and cannot be examined in the light of individual preferences. While deciding the issue Hon'ble Madras High Court has quoted a portion of the judgment of Hon'ble Bombay High Court in the case of G.S. Poddar (supra), the same is reproduced here, as it will throw sufficient light on the issue before us:

'We think that the expression 'intended for the personal or household use' would mean normally commonly or ordinarily intended for the personal or household use according to the ordinary ideas, habits, customs and notions of the class of society to which the assessee belongs or according to the well established habits, customs and traditions of the family of the assessee. The mere possibility, therefore, that the articles are capable of being put to a personal or household use would not be sufficient to treat them as intended for the personal or household use. Moreover the question whether the articles are intended for personal or household use has got to be considered with reference to the facts and circumstances as they exist at the time when the question has to be determined!'

19. Now we will deal with the cases on which learned Authorised Representative has placed reliance:

(1) CIT v. H.H. Maharani Usha Devi (supra): In this case the assessee is the ex-ruler of the Erstwhile Holkar State. The assessee was assessed as individual and the AY involved is 1972-73. In 1948 the Ministry of States, New Delhi has accepted certain Heirloom jewellery as private properties of His Late Highness Maharaja Keshavrao Holkar of Indore. This included a 'Sirpech' and a ceremonial belt. All the listed jewellery and gold used by the ruler of Indore on ceremonial occasions as in the past were exempt under the provisions of section 5(1)(xiv) of W.T. Act. In the accounting year relevant to AY 1972-73 assessee sold two items of Heirloom jewellery for Rs. 13,80,001. It was claimed by the assessee that it constituted personal effect of the assessee within the meaning of section 2(14) of the Income Tax Act, 1961 and therefore the sale of these jewellery did not give rise to any taxable capital gains, the same was not accepted by the Tribunal. However reference was made to High Court. Hon'ble High Court has held that Heirloom jewellery is also meant for the personal use of the assessee. It is however not meant for daily use but for use on ceremonial occasions, as such they would form a part of his personal effect. Heirloom jewellery may be passed down from generation to generation but it is never the lays for the personal use of the owner. Merely because from the nature of property, it can be used on ceremonial occasions only it does not follow that the property is not held by the assessee for personal use. While deciding the case, Hon'ble Supreme Court also referred to the decision given by it in the case of H.H. Maharaja Rana Hemant Singhji (supra) and distinguished the same in the following words:

'In that case silver bars, sovereigns and rupees coins which were said to be used on special occasions for worship were held not to be the personal effect of the assessee. This court said that only though the articles which were 'intimately and commonly used by the asessee' would be considered as 'personal effects'. The phrase 'intimately and commonly' should not be taken literally. What was meant was property which is individually or personally used. One must remember that even furniture is included. It dealt with gold sovereign, silver rupees and silver bars. This court rightly held that this could not be considered as a personal effect of the assessee.'

The Supreme Court has further observed that the legislature intended only those articles to be included in the definition which were intimately and commonly used by the assessee.'

(2) CIT v. Moti Chand Khaianchi (supra) - In this case property realized from the sale of paintings and curios was treated as casual and nonrecurring receipts not assessable as business profit for capital gain.

In this case, assessee would derive income from interest, dividend, shares from the partnership firm and income from property, filed return showing a receipt of Rs. 3,00,000 from the sale of paintings and was claimed as not liable to tax on the ground that it was neither business profit nor capital gain. The sale was not effected with a motive of making profit but to serve the national interest of the country and that the articles were his personal effect. The assessing officer rejected the above contention and treated the same as an adventure in the nature of trade. On appeal Tribunal treated the same as casual and non-recurring receipts.

Hon'ble High Court held that assessee has collected old paintings, curios etc. since the year 1940 when he was a boy of 16/17 years olearned Since 1940 till AY 1964-65 ie. within 25 years only 3 sales to the three institutions were made. At that time it could not be said that there was any profit motive in his mind. The collection of the assessee were held in high esteem by various curators, authors and lovers of the art. There was mention of the assessee's painting in the bulletin of the Prince of Wales Museum of Western India, 1953-54 and Kanha Dade Prabandh of Padmanablia written by Professor K. B. Vyas and published under the orders of the Government of Rajasthan. He was described as an enlightened connoisseur in the foreword to the catalogue of his miniature paintings published by the Lalit Kala Academy. Eminent people were attracted to see his paintings. Files name was also suggested for the membership of the Regional Art Advisory Committee formed in Rajasthan. The assessee also loaned his paintings and art objects for exhibition in the year 1954 to G.G.S.J. Museum, Bikaner, and they were taken back in the year 1962. Exhibitions of his paintings were held by the Lalit Kala Academy at various places. He donated 8,000 manuscripts to the Government of Rajasthan. He made no purchases with borrowings. He did not keep any account of the purchases because he was acquiring them in pursuit of a hobby. The first sale of paintings was made to Vidyapeth, Sangaria, on the insistence of Swami Keshavanandji for Rs. 4,000 in the year 1949-50. The Wealth-tax Officer did not include the value of the paintings and curios in the Wealth-tax assessment of the assessee for the years 1960-61 and 1961-62. The Commercial Tax Officer also did not levy tax on the sales made by the assessee. Only on the persuasion of the Member, Art Purchase Committee, National Museum, New Delhi, the assessee sold the paintings to the National Museum, New Delhi for Rs. 3 lakhs. The assessee requested the Ministry of Scientific Research and Cultural Affairs to move the Finance Ministry and find out if there would be any tax on the sales proposed to be made to the National Museum. He was informed by the Ministry of Scientific Research and Cultural Affairs that if he was not a dealer in the articles, the transaction would not amount to any adventure in the nature of trade and the amount paid by the government would not be treated as business receipts. Under these circumstances, the assessee sold the paintings for Rs. 3 lakhs to the National Museum, New Delhi, in the interest of the nation. Therefore the Tribunal was right in holding that the assessee was neither carrying on any business of purchase and sale of paintings nor the transaction was an adventure in the nature of trade. Therefore, the receipts from the sale of paintings were of a casual and non recurring nature not arising from business, profession or vocation.

(3) Princess Shri Kumari of Kishangarh (supra)- In this case, the assessee sold certain paintings handed over to her by her father and claimed exemption from capital gain tax on the ground that they were personal effect. Income Tax Officer and the Appellate Assistant Commissioner disallowed the claim. On appeal Hon'ble Tribunal held that the language of section 2(14) makes it clear that articles other than jewellery in which there is an intimate connection between the effect and the person must be treated as personal effect. Such a connection is on facts found in this case and there is no material on record to show that paintings were not commonly used by the assessee. They are thus articles of personal effects. The sale of which could not attract capital gain tax.

Here we must mention that while deciding the case Hon'ble Tribunal has considered the affidavit filed by Shri Sardar Singh, elder brother of Late Maharaja Shri Sumer Singhji Sahib of Kishangarh who has deposed before the Income Tax Officer that the painting in question were being regularly used for decorating the room of the assessee as it was usual custom of the family. Finally the Hon'ble ITAT held that there was no material on record to show that paintings were not commonly used by the assessee. Therefore, the paintings that were sold by the assessee during the year were articles of personal effect and hence sale of those articles will not attract the provisions of section 45 of the Act.

20. On perusal of the facts and decision given in the cases on which both the sides have placed reliance, we find that the decisions on which learned authorised representative has placed reliance are clearly distinguishable in the case of H.H. Maharani Usha Devi (supra) personal use was clearly established. The Hon'ble court found that there was use of jewellery on ceremonial occasion at least. But in the instant case there is not an iota of evidence to show that the car was used even on ceremonial occasion. Therefore, the ratio of decision in the case of H.H. Maharani Usha Devi (supra) will not be applicable in the instant, case.

21. So far the ratio in the case of Moti Chand Khajanchi (supra) is concerned; it is clear from the facts that there was no profit motive behind the sale. The assessee was informed by the Ministry of Scientific Research and Cultural Affairs that he was not a dealer in the articles, the transaction would not amount to any adventure in the nature of trade and the amount paid by the Government would not be treated as business receipts. Under these circumstances, assessee sold the paintings and the Hon'ble High Court has treated it casual and non-recurring receipt.

22. In the case of Princess Shri Kumari of Kishangarh (supra), Hon'ble ITAT has decided the issue on the strength of affidavit filed by the brother of Late Maharaja who had deposed that the painting in question was regularly used for decorating the room'of the assessee as it was usual custom of the family. Finally Hon'ble ITAT was of the opinion that there was no material on record to show that paintings were not commonly used by the assessee. Therefore, the ratio of these decisions will also not come to the help of the assessee.

23. After going through all the decisions, we find that the test which is to be applied for ascertaining, whether a particular asset is 'personal effect' would be whether the particular asset was intimately and commonly used by the assessee. If we apply this test to the facts of the case, which is before us, we find that the antique car in question cannot be taken as 'personal effect' of the assessee. From the facts gathered by the assessing officer, it is clear that the subject car was not used even occasionally by the assessee for his personal purpose. Whatever submissions has been made before authorities below and before us, in support of the claim that car was used for personal purposes, is not supported by any evidence. Whatever evidence has been produced, they are self-serving unsupported by any evidence. The assessee has failed to produce any evidence that some expenditure was incurred on repair of the car or running of the car or having used occasionally like participating in any car rally organized by government or by any other organization. The fact that the car was not even parked at the residence of the assessee also strengthen the case of the Income Tax Officer that it was not used by the assessee. The reason for parking at a distant place at the residence of relative has been given by the assessee before the Commissioner (Appeals) ie. .assessee being prudent business man will not think of parking such a valuable article in open compound or on the road,' also goes against the assessee. One of the plea taken by the assessee that assessee had purchased the car as a pride of possession. It may have been kept as a matter of pride but it is difficult to understand how such user can be characterized as a 'personal use'. The 'personal use', which is contemplated by the exemption is not a pride of possession. The element of pride of possession call be understood, to some extent, in the case of Maharaja or Maharani, but it is difficult to understand in the case of a salary employee like the assessee.

24. Therefore, on the given facts and in light of the ratio laid down by the decisions relied upon the by the Departmental Representative unlike the ones relied by learned authorised representative which are distinguishable, we hold that the antique car held by the assessee is not a 'personal effect' as occurring in section 2(14)(ii) rather it is a capital asset. Consequently, the surplus realized on its sale is chargeable to Capital gain under section 45 of Income Tax Act, 1961.

25. Accordingly, the decision of Commissioner (Appeals) is reversed and that of assessing officer is restored.

26. In the result, the appeal by the revenue is allowed.