Income Tax Appellate Tribunal - Jaipur
Princess Shri Kumari Of Kishangarh vs Income-Tax Officer on 31 May, 1996
Equivalent citations: [1982]1ITD85(JP)
ORDER
Shri A.R. Halder, Judicial Member
1. This appeal by the assessee is directed against the order of the AAC on the following two grounds :
"1. That, on the facts and in the circumstances of the case, the learned AAC has erred in holding that the sale of paintings were capital assets within the meaning of section 2(14) charitable to capital gains tax under section 45 of the Income-tax Act, 1961.
2. In alternative, the appellant objects to the confirmation of estimation of the value of the paintings taken on 1-1-1954 at Rs. 50,000."
2. The assessee is one of the daughters of late H. H. Maharaja of Kishangarh who handed over paintings and jewellery and other articles to the assessee before his death. During the year under consideration the assessee sold paintings for Rs. 1 lakh and claimed that the paintings having been personal effects were not liable to capital gains tax. The ITO found that the paintings in question were sold to Lila Agencies & Exports, Jaipur, and that a similar point had already been decided in the case of late H. H. Shri Sumersinghji in the assessment year 1964-65 wherein it was held that the paintings held by him were capital assets. The ITO paid a personal visit to the assessee's house and found that the room used by the lady was not so big as to accommodate the paintings that were sold for a sum of Rs. 1 lakh. The ITO also rejected the affidavit filed by Shri Sardar Singh stating that the paintings in question were hanging on the walls and used to be changed from time to time. The ITO was of the opinion that Kishangarh School of Art was renowned and well known for production of quality paintings and had a good market for its paintings because people were crazy of old paintings. He, therefore, came to the conclusion that the argument of the assessee that paintings were meant as personal effects was not correct. The ITO, however, asked the assessee to file a valuation report if so desired from the expert or approved valuer with regard to the acquisition price of such paintings. As the assessee, failed to do so, the ITO estimated the acquisition value of the paintings at Rs. 50,000 and thereby he determined the capital gains at Rs. 50,000.
3. The assessee being aggrieved appealed to the AAC and contended that the paintings were personal effects and hence were not covered by the definition of capital asset under section 2(14) of the Income-tax Act, 1961 ("the Act"). Reliance was placed on the decision of the Supreme Court in the case of H. H. Maharaja Rana Hemant Sinhghji v. CIT [1976] 103 ITR 61 wherein it has been held that the personal effects should have direct link with the person and it was pointed out that the paintings were being used for decoration of the rooms by the assessee and the same were personal effects and as such they were not covered by the definition of the capital asset as provided in section 2(14). The AAC confirmed the action of the ITO by observing as under :
"I have considered the arguments of the learned counsel of the appellant. In this case paintings which were sold cannot be regarded as the personal effects of the assessee in view of the fact that they were not being used by the assessee and were being preserved by her in order to sell the same at some opportune time at a high profit. These paintings were intended for same as is evidence from the conduct of late H. H. Maharaja of Kishangarh who sold some of the paintings in 1964 and also of the appellant who sold the paintings in the year under consideration. In the case of late H. H. Maharaja of Kishangarh capital gains tax was levied on the sale of the paintings in the year 1964-65. I am, therefore, of the opinion that the ITO was justified in bringing to tax the capital gain on the sale of the paintings in question for a sum of Rs. 1 lakh. He was also justified in estimating the value of the paintings at Rs. 50,000 as the acquisition price. The order of the ITO is, therefore, confirmed."
4. The assessee has carried the matter in this further appeal before us, and the learned counsel for the assessee contended that the lower authorities were wrong in interpreting the provisions of section 2(14) (ii). He urged that as per Black's Law Dictionary, 4th edn., at page 1361, the expression "personal effects" means articles associated with person, as property having more or less intimate relation to person or possessor. Reliance was also placed on the decision of the Supreme Court in the case of Reliance was also placed on the decision of the Supreme Court in the case of Rana Himant Singhji (supra) wherein the expression "personal effects" has been defined. He invited our attention to the affidavit filed by Shri Sardar Singh, elder brother of late Maharaja Shri Sumer Singhji Sahib of Kishangarh, who deposed before the ITO that the paintings in question were being regularly used for decorating the room of the assessee as it was the usual custom of the family. The learned counsel for the assessee, therefore, urged that the paintings having been used as household furniture, they were exempt from capital gains tax as it is expressly excluded by section 2(14) (ii). He took us through the orders of the AAC and pointed out that the AAC confirmed the action of the ITO on the main ground that the paintings were intended for sale. He further pointed out that the Tribunal in the case of the assessee herself in WT Appeal Nos. 749, 750 & 752 (Jp.) of 1980 recorded a finding of fact that the said sale of paintings could not establish the intention for sale of the paintings on the part of the assessee. To sum up, the submission of the learned counsel for the assessee is that the paintings in question having been commonly used by the assessee and unintended for sale, the lower authorities were wrong in holding that the paintings were capital assets and, hence, capital gains tax was attracted on the sale of such paintings. Alternatively, the learned counsel for the assessee submitted that the acquisition value of the paintings or the value of the same as on 1-1-1954 was on the same price on which they were sold during the previous year relevant to the assessment year under consideration. He urged that the paintings were collected by the late H. H. Maharaja of Kishangarh as a matter of taste and, therefore, the value that was paid by him was on a consideration of taste of arts. He further submitted that there is no material on record to show that the value of those paintings had increased to a considerable extent by the lapse of time. Reference was made to the order passed by the Commissioner under section 264 of the Act wherein he set aside the assessment with a direction of re-doing the same after taking into consideration the acquisition value of the paintings. He, therefore, wanted us to exclude the capital gains from the total income of the assessee.
5. The learned departmental representative, on the other hand, highlighted the reasons given by the lower authorities and contended that in the case of the assessee's father it was held that the paintings were not part of "personal effects" and, therefore, on the sale of those paintings capital gains tax were attracted. He pointed out that the Tribunal allowed exemption of the paintings from the net wealth of the assessee under section 5(1) (xiii) and not under section 5(1) (viii) of the Wealth-tax Act. He relied on the decision in the case of G. S. Poddar v. CWT [1965] 57 ITR 207 (Bom.) wherein the Bombay High Court held that gold caskets, gold glasses, gold cups, saucer and spoons, and photo-frames used for display in the drawing room could not be considered to be household utensils and that the use of paintings as a decoration in the drawing room, which is only collected 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 viz., furniture, household utensils, wearing apparel and provisions, etc. According to him, the lower authorities had given enough reason for coming to the conclusion that the paintings that were sold during the year under consideration were capital assets and therefore, the sale of the same attracted capital gains.
Coming to the alternative submission of the learned counsel for the assessee, the learned departmental representative contended that the assessee was afforded opportunity to produce the acquisition value or the value of the paintings as on 1-1-1954 but the assessee could produce no evidence to show that the acquisition value of the paintings in question was more than Rs. 50,000. He, therefore, wanted us to confirm the order of the AAC.
6. We have heard the submissions of both the parties and considered the facts of the case. It is the case of the assessee that the sale of the paintings in question did not attract capital gains as they were a part of personal effects as defined in "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include "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. It is, therefore, clear from the language employed in the section itself that articles other than jewellery in which there is an intimate connection between the effects and the person must be treated as an article of "personal effects". As per Black's Law Dictionary (supra), the expression "personal effects" means articles associated with person, as property having more or less intimate relation to person of possessor; and as per 'Words and Phrases' permanent edn., Vol 32, at page 277, the words "personal effects" mean articles which are used to designate articles associate with person, as property having more or less intimate relation to person or possessor of such tangible property as attends the person. On a consideration the facts of the case, it can be legitimately presumed that the paintings in question that were sold by the assessee during the year under appeal were articles associated with the assessee as property having more or less intimate relation to her. It may be mentioned here that the AAC concurred with the view taken by the ITO that the paintings sold were capital asset as he was of the opinion that the paintings were preserved by the assessee in order to sell them at some opportune time at a high profit. In this connection, reference may be made to the order of the Tribunal in WT Appeal Nos. 749, 750 & 752 (Jp.) of 1980 wherein (in the case of this very assessee) the Tribunal recorded a finding of fact that it could not be established that the paintings were preserved by the assessee with the intention of sale. We also do not find any material on record to show that the paintings were not commonly used by the assessee. Taking into consideration the entirety of the circumstances, we are of the opinion that the paintings that were sold by the assessee during the year under consideration were articles of "personal effects" and hence, sale of those articles did not attract the provisions of section 45 of the Act.
7. Coming to the alternative submission of the learned counsel for the assessee as to the value of the paintings at the time of acquisition or as on 1-1-1954 we find that there is no materiel on record to show that the acquisition value of the paintings was Rs. 50,000. The ITO has not given any comparable case to show the extent of increase in the value of paintings. In view of these facts, we are of the opinion that the ITO had no basis for determining the acquisition value of the paintings sold by the assessee at Rs. 50,000.
8. Having regard to the totality of the circumstances, we hold that the lower authorities were not justified in holding that the sale of the paintings attracted capital gains. The case relied on by the learned departmental representative does not apply to the facts of the present case.
9. In the result, the appeal is allowed.