Calcutta High Court
Commissioner Of Income-Tax vs Benarashilal Kataruka on 23 December, 1988
Equivalent citations: [1990]185ITR493(CAL)
JUDGMENT Ajit K. Sengupta, J.
1. At the instance of the Commissioner of income-tax, questions of law have been referred to this court under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1977-78.
"1. Whether, on the facts and in the circumstances of the case and on a correct interpretation of Section 2(14)(ii) of the Income-tax Act, 1961, silver utensils are personal effects of the assessee ?
2. Whether, on the facts and in the circumstances of the case, the surplus on the sale of silver utensils is liable to capital gains tax ?"
The facts relating to this question are stated as follows :
The assessee made a disclosure under Section 3(1) of the Voluntary Disclosure of Income and Wealth Ordinance, 1975, and one of the items included therein was silver utensils weighing 200 kgs. valued at Rs. 8,000. Out of the said 200 kgs. the assessee claimed to have sold 49.521 kgs. of silver utensils for a total consideration of Rs. 54,859 and credited the said amount in his books of account during January-April, 1976. On the sale of the silver utensils of 49.521 kgs., the assessee claimed to have made a profit of Rs. 52,879 (Rs. 54,859 minus cost of silver utensils Rs. 1,980).
The assessee submitted that the silver utensils were for personal use and that they were not capital assets within the meaning of Section 2(14)(ii) of the Income-tax Act, 1961. So he claimed that the profit of Rs. 52,879 on the sale of the silver utensils was not liable to be taxed as capital gains.
2. The Income-tax Officer did not accept the claim of the assessee, On a perusal of the income-tax and wealth-tax records of the assessee, details of which are given below, the Income-tax Officer found that the assessee was not a man of such affluence as to use silver utensils weighing more than 200 kgs. as common utensils of the kitchen or dining table. The Income-tax Officer observed that the income-tax and wealth-tax records of the assessee clearly indicated that these utensils were owned by him as items of decoration to give pride of possession. Particulars of the income and wealth of the assessee of the past three years :
Assessment year Gross total income LIC, etc., paid (1) (2) (3) Rs.
Rs.
1976-77 23,900 2,981 1975-76 16,710 3,029 1974-75 23,590 2,981 Wealth-tax Assessment year Gross wealth shown Jewellery, etc., included Rs.
1976-77 1,53,611 Nil 1975-76 1,02,603 Nil 1974-75 1,56,647 Nil The Income-tax Officer, therefore, rejected the assessee's claim that the silver utensils were personal effects. According to the Income-tax Officer, those were never personal effects. He observed that those were capital assets in the hands of the assessee. Another point which lent support to the Income-tax Officer to arrive at his view is the fact that the assessee had also disclosed that he purchased stainless steel utensils weighing 150 kgs. during the accounting year relevant to the assessment year 1961. The Income-tax Officer, therefore, was of the opinion that a man who had so many stainless steel utensils could not be supposed to use again silver utensils. Further, if the assessee was using silver utensils since 1931-32 as alleged, why should he purchase stainless steel utensils in 1961-62. Besides, if the assessee was so rich, why had he to disclose under the Voluntary Disclosure Scheme some water heaters purchased in 1974-75. The Income-tax Officer, therefore, concluded that the claim of personal use was bogus.
3. The Income-tax Officer noted that the assessee claimed to have the silver utensils because he-was rich and a religious man and also because the use of utensils of any other metal would have been looked down upon by the elders and the family members. The Income-tax Officer, therefore, was of the opinion that if that was so, then why he should sell his silver utensils when there was no sign of decline in his affluence as per his income-tax records and wealth-tax records.
4. The Inc6me-tax Officer held that the silver utensils at any rate could not be treated as personal effects so as to be exempt from capital gains on the sale thereof.
5. On appeal, the Appellate Assistant Commissioner accepted the assessee's claim holding that the silver utensils in question were for the personal or household use of the assessee according to the ordinary ideas, habits, customs and notions of the class of the society to which the assessee belongs and as such, according to the Appellate Assistant Commissioner, those are not capital assets within the meaning of Section 2(14)(ii) of the Income-tax Act, 1961.
6. Being aggrieved, the Revenue filed an appeal before the Tribunal against the said order of the Appellate Assistant Commissioner. The Tribunal held that the contention made by the Revenue that the assessee could not be having 200 kgs. of silver utensils for personal use, could not be accepted in view of the factual position that the utensils consist of thalis, katoris, tumblers, etc. The Tribunal observed that the very use of the word "utensils" presupposes personal use.
7. The Revenue has relied on the decision in the case of H.H. Maharaja Rana Hemant Singhji v. CIT [1976] 103 ITR 61, where the Supreme Court has held that (headnote) :
"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."
A similar question came up for consideration before us in Income-tax Reference No. 273 of 1982 (CIT v. Smt. Sushila Devi) in which judgment was delivered on December 22, 1988. In that case, we have held that whether the silver utensils sold are personal effects or not is primarily a question of fact. The answer to this question depends not only on the status of the assessee but mainly on the nature of the articles sold. From the finding of the Tribunal, it appears that the old utensils sold comprised thalis, spoons, plates, etc. Accordingly, these silver articles are not only capable of being used as personal effects but are, in their very nature, personal effects of the assessee.
8. In this case also, the Tribunal found that the utensils consist of thalis, katoris, tumblers, etc., which are meant for personal use although they may not be used daily. We are of the view that the Tribunal came to the correct conclusion on the facts of this case that the silver utensils would come within the purview of Section 2(14)(ii) of the Act.
9. We, therefore, answer the first question in the affirmative and in favour of the assessee and the second question is answered in the negative and also in favour of the assessee,
10. There will be no order as to costs.
J.N. Hore, J.
11. I agree.