Income Tax Appellate Tribunal - Mumbai
Assistant Commissioner Of Income-Tax vs Mrs. Dilnavaz S. Variava on 31 July, 2002
Equivalent citations: [2003]87ITD113(MUM)
ORDER
M.K. Chaturvedi, Vice President
1. This appeal by the revenue is directed against the order of Commissioner of Income-tax (Appeals)-XX, Bombay and relates to the assessment year 1992-93.
2. The solitary ground raised in this appeal projects the following grievance:-
On the facts and in the circumstances of the case and in law the learned CIT(A) erred in holding that the transaction cannot be considered as an adventure in the nature of trade and hence deleting the addition of Rs. 78,540.
3. We have heard the rival submissions in the light of material placed before us and precedents relied upon. A sum of Rs. 1,00,000 was credited into the Bank Account of the assessee on 26-8-1991. This was stated to be realised from the sale proceeds of four paintings. The said paintings were disposed of in favour of Shri N.D. Sidhwa as under:
1 Oil Painting Landscape with Shr in by Rs.
3 6" X 41" Badri Narayan 10000 1 Oil Painting "View from window"
26" X 34" by J Sabavala 50000
1 Oil Painting "Oil No. VI"
48" X 36" by Rasik Sonhi 30000
1 Oil Painting "Flowers"
32"X42" by Ara 10000
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100000
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4. It was submitted before the Assessing Officer that the profit on sale of paintings was not exigible to tax under the head "Capital gain" or any other head of income as the paintings were purely personal effects held by the assessee for the past ten years. The first painting was procured in 1980 for Rs. 3,000. The second was inherited by the assessee from her father. Third and fourth paintings were purchased at a price of Rs. 2,000 and Rs. 1,550 during the financial years 1974 and 1978 respectively. Assessing Officer did not accept the explanation offered by the assessee. He opined that the paintings sold to Shri N.D. Sidhwa were of commercial artists. The transaction was held as an adventure in the nature of trade. As such, he added the income from sale of paintings at Rs. 78,450 while computing the total taxable income. CIT(A) reversed the order of Assessing Officer and deleted the addition. Being aggrieved of the order of the CIT(A), revenue is in appeal.
5. At the time of hearing, Shri Sebastian, learned Departmental Representative raised an additional ground that the paintings cannot be construed to be the personal effect. We have heard both the parties on this aspect also.
6. The expression "adventure or concern in the nature of trade, commerce or manufacture" occurring in the definition of "business" in Section 2(13) of the Income-tax Act, 1961 (hereinafter called the Act) has itself not been defined in the Act. It is therefore not easy to discern the circumstances which will make a transaction an adventure in the nature of trade. It is not possible to evolve any single test or formula which can be applied in determining whether a transaction is an adventure in the nature of trade or not. The answer to the question must necessarily depend in each case on the total impression and effect of all the relevant factors and circumstances proved therein and which determine the character of the transaction. Where the purchase is made solely with an intention to resell at a profit and the purchaser has no intention of holding the property for himself, the transaction made constitute an adventure in the nature of trade. The singleness or isolation of a transaction cannot be a test. The nature and quantity of the subject-matter of the transaction at times indicates the purpose for which the transaction was entered into. Where a particular transaction is not in the ordinary course or line of business of the assessee, but is an isolated or single instance of a transaction, the onus to prove that the transaction is an adventure in the nature of trade is on the Department. This onus cannot be discharged by merely rejecting the assessee's explanation apropos the transaction. The mere earning of the surplus is not tantamount to embarking upon an adventure in the nature of trade.
7. In the present case, we find that the assessee is a Management Consultant. She was stated to be a connoisseur of art. She purchased the paintings because of her aesthetic tastes. It gave her tremendous pleasure and pride of possession. She is owning other paintings also. Neither in the preceding years nor in the subsequent years assessee did ever make any sale of her paintings collection. It is abundantly clear from the details that selling of paintings was not the business of the assessee. The paintings were acquired by the assessee for her own collection. She kept those paintings for more than 25 years. Therefore, the incidence of sale cannot be construed to be adventure in the nature of trade. We have perused the reasoning adduced in the impugned order. We are inclined to agree with the same on this count.
8. The next question is whether paintings could be construed to be articles of personal effects. As per the prescription of Section 2(14)(ii) of the Act, personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him. The meaning of "personal effect" is not exhaustively defined in the Act. It only refers that movable property held for personal use by the assessee or any member of his family dependent on him can be construed as personal effect. Movable property includes wearing apparel and furniture, but excluding jewellery.
9. In the case of G.S. Poddar v. CWT [1965] 57 ITR 207 (Bom.), two gold caskets, a gold tray and two gold glasses were presented to the assessee.
He kept these articles in the glass show-case for display in his drawing room. He claimed exemption in respect of these articles under Section 5(1)(vii) of the Wealth-tax Act, 1957. Hon'ble High Court has 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 the household utensils. It was further held that the use as a decoration in the drawing room, which is only calculated to get a pride of possession is not contemplated by the exemption. This decision was rendered in the context of Wealth-tax Act.
10. In the present case we find that the assessee is a connoisseur of art. The object of art is not only the pride possession but it also satiates the aesthetic quench for the art of the connoisseur. It gives joy to the possessor which is different from the pride of possession. The expression 'personal effect' as per the Black's Law Dictionary means articles associated with person, as property having more or less intimate relation to person of possessor. In Re Collins Will Trusts v. Hewetson [1971] 1 W.L.R. 37, valuable stamp collection was held to be personal effect. In the case of Lippincott's Estate 173 Pa. 368,34 Atl. 58, furniture and pictures were held to be articles of personal effects. The Apex Court in the case of H.H. Maharaja Rana Hemant Singhji v. CIT [1976] 103 ITR 61 has said that an intimate connection between the effects and the person of the assessee must be shown to exist to render them 'personal effects' within the meaning of that expression used in Clause (ii) of the exceptions in Section 2(4A) of the Indian Income-tax Act, 1922. The Legislature intended only those articles to be included within the expression 'personal effects' which were intimately and commonly used by the assessee.
11. The paintings were used to decor the house. Assessee loved paintings. A good painting transmits good vibe across The element of personal attachment with the object did exist in the facts of the case. Therefore, in our opinion, paintings could be construed to be the personal effects, as such not exigible to tax. Accordingly we uphold the impugned order.
12. In the result, appeal of the revenue stands dismissed.