The Commissioner Of Income Tax, Madhya Pradesh, Bhopal v. H.h. Maharani Usha Devi

THE COMMISSIONER OF INCOME TAX, MADHYA PRADESH, BHOPAL v. H.H. MAHARANI USHA DEVI MAY 14, 1998 (SUJATA v: MANOHAR ANDS. RAJENDRA BABU, JJ.] Income Tax: Income Tax Act, 1961-Sec.2(/4), Sec.45-Gainsfrom sale of heirloom jewellery-Used in ceremonial occasions - Held, are personal effects-The profits and gains arising from sale of the items are not taxable. The assessee, an ex-Ruler of erstwhile Holkar State, sold two of her D [heirloom jewellery. She claimed ][that ][they were her personal effects and for ]sale of these items capital gains tax. is not payable. Though the Tribunal rejected the contention, it referred the matter to the High Court. The High Court held in favour of the assessee. On appeal it was contended that because the jewellery is meant for use on ceremonial occasions, it will not be a part of the asseesee's personal effects. Dismissing the appeal, the Court HELD : 1. The definition of "capital asset" in Section 2(14) of the Income tax does not include personal effects including jewellery. On the facts found by the Tribunal, the items of jewellery in question were the F personal effects of the assessee held for personal use by assessee were excluded from the definition of the term capital asset. As such, profits and gains arising from the sale of these items was not taxable under the provisions of Section 45. (462-F] H.H. Maharaja Rana Hemant Singhji v. Commissioner of Income Tax, G Rajasthan, 103 ITR 61, distinguished. Commissioner of Income Tax, Bombay City-VI!/ v. Sita Devi N. Poddar, 148 ITR 506; Jayantilal A. Shah v. K.N. Anantharam Aiyar; Commissioner of Income Tax and Ors., 156 ITR 448 and G.S. Poddar v. Commissioner of H [Wealth ][Tax. ][Bombay City-II; ][57 ] [207, referred to. ] C.I.T. v.H.H.MAHARANIUSHADEVI [SUJATA V. MANOHAR,J.] Commissioner of Income Tax A.P. Hyderabad v. Trustees of H.E.H. The A Nizam's Wedding Gifts Trusts, 154 ITR 573, approved. 2. The frequency of use of the Jewellery must necessarily depend on its nature and merely because it can be used on ceremonial occasions only, it does not follow that the property is not held by the assessee for personal use. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 10004 of 1983. From the Judgment and Order dated 21.2.81 of the Madhya Pradesh High Court in M.C.C. No. 152of197.8. Dr. V. Gouri Shanker, Tara Chand Sharma, B.K. Prasad, C. Radhakrishan and S. Rajappa the Appellant. Joseph Vellapally, Manoj Wad, Tarun Gulati and Ms. J.S. Wad for the Respondent. The Judgment of the Court was delivered by MRS. SUJATA V. MANOHAR, J. The assessee is the ex-Ruler of the erstwhile Holkar State. The assessee was assessed as an individual and the assessment year involved is 1972-73. In 1949, the Ministry of States, New Delhi had accepted certain heirloom jewellery as private properties of His late Highness Maharaja Keshaw Rao Holkar of Indore. These included a "Sirpech" and a Ceremonial belt. All the listed jewellery and gold in the Huzur Jawahirkhana at Indore in 1949 and used by the Ruler of Indore on ceremonial occasions as in the past, were exempt F under the provisions of Section 5(l)(xiv) of the Wealth-Tax Act. During the accounting year relating to the assessment year 1972-73, the assessee sold two items of heirloom jewellery for Rs. 13,80,001. The assessee claimed before the Tribunal that the heirloom jewellery constituted personal effects of the assessee within the meaning of Section 2(14) of the Income-Tax Act, 1961, and, therefore, the sale of this jewellery did not give rise to any taxable capital gains. This contention was negatived by the Tribunal. The Tribunal, however, framed the following question for reference before the High Court of Madhya Pradesh under Section 256(1) of the Income-Tax Act, 1961: 14 ਮਈ, 1998 TE Mat OT Ma. HTT el aT| Se ATAA 1988 B afOfa BH arr 26 ary Hal Met|UNI 30 (ER) G We sidel a Gera ae By Gel zea oT onde orem ag wear GT.|Wool ak gio eH Te after AUR ae S sie SA Teer anata Ger aaaS aka BroR Gd &fee Sea wares A yer ar A very ay ape fergeil we ant BE waaad “el ot ef| ora: ea veel Yt aM orga GH ag cise gate aye, en ene aHTy Henfvenferatwore ¥, warerh at ay RS BY aA S wae yey > ane we oa18. TH AMe Ya GT Ae F| wa 1952 3 afdhray B Pat fet HAASWauaise fae area, 1988 & afar a emi 30(2) d arene wx are artawy ort waWa & Gl Ts Get wt snavawar wel 8 fe 1988 S afar F oni asa Ay se oyvale eeWig area Ol ay Tta Rae ot 29 Ws Ars, ox 1904 wea &ary sik Pula ool 4 ge or aifkfaaita ano ox ae waa fen & en Area Re teh Reve aa Ree Sa19. FH sr ae aftPaiRa er fae, wet oe A &, org freer vet fey war & rs 8 fee amy fers anton rants (werawa Parre aw F afoPiaa)| aa: 3 [1999] 3 34. fA. 7. 172 ;14 FZ, 1998;nary Bet Goren ah atey sity ayy eels aT aaa sft, 1961 — ant 2(14) (1.4.1973 & a fea) site ar 45 [aaisa easitet, 1957 — uret 5(1) (xiv)] — sire — ot afford — Yoh anferat yt Ranta at went& HAMA ST Got MT 2(14) S Yon ane ve wt were S arom wa wd — aa: was aeBey ory — aeons at 45 S aga wena ae F|| maT a1972-73 8 dala car at & cee Paika gears ampo a a13,80,001/-©. 4 edt| Putt A parma anys wr ara-ax afore, 1961 @l aR 2114) &oR & thee Raitt at Pot cher @xg) B wa 4 after& wae gar oa oa: WS ayeot fia Y olg aee got afiert sé gy| afer ger sa acta al ater ox Rar aa| aenft, after ¥ array afSfrat, 1961 a are 256(1) & alta Aer We Ged Aaa G Waagrace afiPrert 1961 HA ane 2(14)-H sataar & sinta (Prof diel) & site exiifery saat famaae wa wea eh aftavet dren & 2" Vea wares FY Ga we oT So Prete w var 4 afieifta — sra-ax afar at oe 45 @ ade gd as FA fy ay arg ay aaa aftaiyioirra anes & afer Y ert wt ete “oh after’ S anita araS WASs| WA aM sera2(14) ¥ oRurftra foa war & fener 2(14) Gert wre we ga WH off —- MRT 2(14) ot smh’ Gfind ware at Ot waft aftta 8 ol Pathe ar enka & ae ae vad OnaR a gfGT wad ~7s. -ottap& fg daft arysm ar adi Gg) ® Plt sete Beh a va cine waftWw ana (RR was oat Hers wer G fort & as wae an IR , aKACKea* ERK .Prot aio (aegati) 4 ot Got onfeet Oo arex wah ag Soh ooaso WH wafer &| HEfaa wer & fe an Reid ae Pot serra @ fare way anysu, Reif6 para snp:& aia art| para aypsor Paik& Prot setae & fore A afta &| cent guar attora*tar sera & fae ae 3 aftg arpohie acai w sear8 8| ve WH arse at awaiftora frarrerdi/faarel serat aioe set ox gaara U @; foe Yorwart ael fear ora&| fee8 ce aa & Pot sera @ fay fend ore FI ge VaR, a eat fof dol Sapret Sh |warre arysor Wat ax AS weaiafta a weed &| fog fix Hh ae ee S Ahsara & fae aa €| sea rea 9 Sew A afiPaitta fear 8 fe watt & sere a aMPeawaft at wpfa ow PR et afeg| waft a mpi a, se onguire vamwe etware sel wa 7 S| (ART 5), ent, ada ane 3 amps Paid S ek Ww yeA ord SF1 a ae car 4, Peteot Profdni eh| ge yout & df ere 2(14) A got anfat afern anys aféa Pot del awfeta ad oedt & sufver sare4 de & ue feed Pore & fH afte a wy AGix afford IRI 45 @ Vadel @ aris Hees, set ey| (ART 10)7wey water— Raffel qiail deere Rare a yf erage eft| Peior aahcEaafee & wa # Pear wen ar six Refer ak 1972-73 &||-ogFERN2. af 1949 4 PPD sim eeu, ag Reh a Oe pana apo a eek S wate aeratewy 1949 4PUG. Wa ga 4 Seay ft Gt ga mgde coRREMT wWalsat 8 AAT aphag on | wer SA ate ays sie sik aqu aaria an fora wade wT where gee g|WG EN apasrewe fora VTE at Yaarwt vile, oy Hx aferaq at omer 5(1)(xiv) dVidal & sey we wre F| 3. Peo ag 1972-73 W data oat a & che. Paik A gers aryS ad ahi 13,80,001/- 6. 4 aft| Feit + para srysor at ara-we afer, 1961 at ae 2(14) oaie& hae Reiki ot Pot dtr Greg) & wr 4 offen } wae cen fear aa: WY amps BY awa & ats wee Gah aiare Te gL siareor rer get eller BH aretha Rar TT| ites.ra-ae afta, 1961 a aT 256(1) & anita wer wee Tea wares a TA gent, 7‘em arta@ edt aieoRRURa, parma ary areas afoaH, 1961 at aT2(14) & stead & sieia (Prot ae) & sik exifery Seer fwd oeWw ory aT Tl 4. Seq Sarees Fo Wa Wet ar Gar Petit S vet t feat| ga were ada anita wget at "Whether on the facts and in the circumstances of the case, the heirloom jewellery constituted 'personal effects' within the meaning of Section 2(14) of the Income-tax Act, 1961, therefore, the sale thereof did not give rise to any taxable capital gains?" The High Court has answered the question in favour of the assessee. B Hence the present appeal. Under Section 45 of the Income-tax Act any profits or gains arising from the transfer of a capital asset effected in the previous year is chargeable to Income-tax under the head 'Capital Gains'. Such profits or gains shall be deemed to be the income of the previous year in which the transfer took place. C The term 'capital asset' has been defined in Section 2(14) of the Income-Tax Act. Section 2(14 ), as it stood at the relevant time, was as follows: • Section 2(14): "Capital asset means property of any kind held by an assessee whether or not connected with his business or profession, but does not include: (ii) personal effects, 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 dependant on him. F Personal effects which are excluded from capital assets include jewellery for personal use. We have to consider whether jewellery held for personal use by the assessee would cover heirloom jewellery of the assessee. 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. This does not G deprive such jewellery of its character as jewellery meant for personal use. For example, clothes meant for use at weddings or formal occasions are not used daily. Yet they are stitched for personal use of the wearer. As such, they would form a part of his personal effects. Heirloom jeweJlery may be passed down from generation to generation. But it is neverthel1ess for the personal use of the owner. The High Court has rightly held that the frequency of use H of the prpperty must necessarily depend on the nature of the property. Merely because from the nature of the property, it can be used on ceremonial occasions A only, it does not follow that the property is not held by the assessee for personal use. On behalf of the department, however, it is contended that because the jewellery is meant for use on ceremonial occasions, it will not be a part of the assessee's personal effects. Learned counsel for the department has relied B upon a decision of this Court in the case of H.H. Maharaja Rana Hemant Singhji v. Commissioner of Income-Tax, Rajasthan, (I 03 ITR 61 ). In that case silver bars, sovereigns and rupee coins which were said to be used on special occasions for worship were held not to be the personal effects of the assessee. This Court said that only those articles which were "intimately and commonly C used by the assessee" 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 in personal effects. Also this judgment does not deal with jewellery which is meant to be worn personally be the assessee. It deals with gold sovereigns, silver rupees and silver bars. This Court rightly D held that these could not be considered as personal effects of an assessee. It also observed that enumeration of articles like wearing apparel, jewellery and furniture, mentioned by way of illustrations in the definition of "personal effects" also showed that the legislature intended only those articles to be included in the definition which were intimately and commonly used by the E assessee. gent, 65areax afifaa at ann 45 & ania qi af a fey ag as ory sere aftery Goin2(14) 4 oftarfia fora wat &| MRT 2(14) Gea WAT UE SA HHI et —: |Sas GRAN Wags T wae a aT ae, fog gas arevta Prevferfeac tet F -— Whee & fg orgs aa 8) Paid a va we anfva Goa s forth weet gM Prot do (agat) A -ot teh afer B aex wa ag &. Sot oer Se oryso A afer BF _Reaa & wate at api oe Pek et afeg| waft at opi a; ea anguite oar wat 6. aeift, fart at sie @ ue acta @ ae 8 fH AS ays anguihe cami w ga F @ gerra fea ort wer war on, Patt ot fot ahi ad arr wa| gaze aatta ¢ |e Poly a ot quit aid S way sik wid at os S aR As| ga eA da aae ofthatfrat on fs ge Paikat Prot dht set wasn ot wear @| ue of aafeafes amg of fee vect dene, amo sik odfar at wife agai ot at or ‘Prot dhe at ofr aage ar at alae eet at at Pett eer ceo sik Gare wr a sera at ordfflTa SO7. ays Geta BI IRI way we 2(14) fees S eff apa| sree Paid sigan, wr Prot Wad dh weevil ar after Ta wa Middl 8 alee wa. Wr fear(iret et 4S A vas om) ae amet A Aas ver =aFW ama wR fter fear oT RiedPraia + pw uiet & ada or an ot wiser aera ator wer 4 setae feu waXY| Paid Aaottel at et fe aidt ot att Paik at Poh det eff site gditfere ana-oe offi, i961 aat 2(14) de ater Yoh snferat vet eff| -araqhet ana (at aa we ue ae a) 2 Aerafea wT Saar4 ay aticof ot Paik ar deco sik ure wT SY getae St ure of| Prof, diet ar waare ot aaceet B wi wry acltea adios eri| 8. Waa we UMEAT &. WA. aRrae aaa oad aie ora a Awae’ ae ae 4 ue afiPathd fear sf ot aprot angere sai w geTaSyafta & 3 Prot garra & fey ata amyvet of sie o amet 2(14) S ads ‘Gut anfer aH amet We9. fra OR. Ua. fea WER on ae GA pe aaa org, FR weel S oer A et a Swt ahi wea de 4 Ge yas anfs, wea we = a Paid Fw ' (4976) 103 amg. ¢t. a. 61.a,.7'? (1984) amg. a. aire 506.seso| * (1985) aig. ft. SIR, 448.0 *"(1985) aig. a. SIR. .573..-;_"© (1965) ag. &. SIR. 207.”otSO ant at wg of | ae cen war on fe aequ Pei@ waa wa G ede A wht eg off| a:Toe4 we afiaiRe fa fe geht a agg ug awgail & anaA off fg wes a at PethetwR area1Pathe at Prot choi wet off| 10. cenit, ata Aer F anys Prati a wee we vet Ge & 1a ae aan a, Paid adhe eh| segs& df ore 2(14) A hen anf@ aRarer argent aed Prof dit arufeaifed ae oe & safer seq wareF de & ae Peed Pare & fo afew ax av agTea WRT ayat aegu Preaikdt at rot dro of al wad ant Prot wort & fay wet wgsix sifteny URI 45 @ Badal BS sey Hea wet | 11, oa: Ge atte ARG St art F| cenit Gat St aaa Gry sez el rT|.:onderGR at ag |a airy .[1999]3 U4. FX. 0.4177:ar facet faexrn Fraaor afar, 1958 (1958 GI 59) — art 14(%),14(71), 14(8) alte 14(1)(S) ak 25-a(5)— Vahaqfa & wed Pad at ada snavaamarene wW aaueitart fever— FEA aara wertt ae fr — weeell atterell 1 at Gaal aitl fara vata @ —aaa OAT veri U1 — & aqueh fe veri sider Gd. a 2WMFA see UX aaa feoat ort fe ufe wert dW: 2 aes an fear wiaa fear onan & ateet Wd. 4 & fleg andar saa aT silk weal W. 2 w faeg Mt onaea erm ails andea Fat well a.4 cr feergar se aca Ta — qariaT after WRAY ot Ged wan Ta:wa ora ¢ — gafeu aff ae yeni d wa 4 ve afas at dala Sen 2 wl vad agarura aRax at gon é ct ae flare fe ata feucer 2 aecadia at ore 2 | frat| aot Sega A wert ae ea fear for weal 1 weet fever s fq sad ofa wei Jewellery is expressly inducted in the personal effects of an assessee as per Section 2( 14) as it stood at the relevant time. In the case of Commissioner of Income-Tax, Bombay City-VJJJ v. Sitadevi N. Poddar, (148 ITR 506) (to which one of us was a party) the Bombay High Court considered a case where F the assessee sold certain silver utensils of the type which were used in the kitchen or in the dining room. The assessee contended that the silver articles were the personal effects of the assessee and hence were not capital assets within the definition of Section 2(14) of the Income-Tax Act, 1961. Kania, J. (as he then was,) distinguished the decision in the case of H.H. Maharaja Rana Hemani Singhji (supra) and held that "personal effects" would.include G articles which were intimately and commonly used by the assessee. Personal effects need not be confined only to those articles which were worn on the person of the assessee. The inclusion, for example, of furniture would negative such a contention. The above case of Sitadevi N. Poddar, (supra) has been followed by H SUPREME COURT REPORTS A the Bombay High Court in a subsequent decision in Jayantila/ A. Shah v. K.N. Anantharam Aiyar, Commissioner of Income-tax & Ors., ( 156 !TR 448). The Andhra Pradesh High Court, however, in the case of Commis.sioner of Income-tax, A.P., Hyderabad v. Trustees of H.E.H The Nizam 's Wedding Gifts Trusts (I 54 ITR 573) has held that jewellery which was meant for use on ceremonial occasions was not jewellery meant for personal use and would not B be covered by the definition of "Capital asset" under Section 2(14). In our view, this decision of the Andhra Pradesh High Court does not appear to be correct. The occasion on which the jewellery is used will depend upon the nature of the jewellery. But if it is meant for the assessee's personal use, it will form a part of the assessee' s personal effects. In the case of G.S. Poddar v. Commissioner of Wealth-tax, Bombay City, II (57 ITR 207), the Bombay High Court considered a case where certain gold certain gold articles made in the shape of utensils like cups, saucers, trays were sold by the assessee. It was found that the articles were kept in a show-case in the drawing room of the assessee. The court, therefore, held D that though the articles had the shape of household articles, they were neither regarded as household utensils by the assessee nor were they used or intended to be used as such. They were not personal effects of the assessee. In the present case, however, the jewellery is to be worn on the person of the assessee. It would, in any event, form a part of the personal effects E of the assessee. In the premises, since the definition of "Capital asset" in Section 2(14) does not include personal effects including jewellery, the High Court rightly came to the conclusion that on the facts found by the Tribunal, the items of jewellery in question were the personal effects of the assessee held for personal use by her and were, therefore, excluded from the definition p of the term capital asset. As Such, profits and gains arising from the sale of these items was not taxable under the provisions of Section 45. The appeal is, therefore, dismissed. There will, however, be no order as to costs. G V.M. Appeal dismissed. Advocate Megha Tak