H. H. Maharaj Rana Hemant Singhji,
Dholpur Vs. Commissioner of Income-Tax, Rajasthan [1976] INSC 30 (17 February
1976)
SINGH, JASWANT SINGH, JASWANT GUPTA, A.C.
CITATION: 1976 AIR 662 1976 SCR (3) 423 1976
SCC (1) 996
ACT:
Income Tax Act (11 of 1922), s.
2(4A)(ii)-'Personal effects', what are.
HEADNOTE:
Section 2(4A) (ii), Income Tax 'Act, 1922,
provides that '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 dependent on him,' shall not be included
in the 'capital assets' of the assessee.
The context in which the expression 'personal
effects' occurs and the enumeration of articles like wearing apparel, jewellery
and furniture, show that only those articles are to be included as personal
effects which are intimately and commonly used by the assessee. The dictionary
meaning of the expression is also the same. Therefore, 'personal effects' mean
those items which are normally, commonly or ordinarily intended for personal
use and not items which are capable of being intended for personal use.
[425E-426F-427C-D] Where the assessee was in possession of a large number of
gold sovereigns, silver rupee coins and silver bars, which were used at the
time of the puja of deities on special religious festivals or rituals, they
could not be deemed to be 'effects' meant for Personal use. They are capital
assets and not personal effects and so, when sold, could not be excluded while
computing the capital gains liable to capital gains tax under s. 12B, Income
Tax Act, 1922. [427F] G. S. Poddar v. The Commissioner of Wealth Tax, Bombay
City, II, I.L.R. [1965] Bom. 1062, approved.
^
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 779 of 1971 Appeal by special leave. from the judgment and order dated the
2nd December, 1969 of the Rajasthan High Court in I.T.R. No. 5 of 1966.
S. T. Desai, Rameshwar Nath, for the
appellant.
B. B. Ahuja and S. P. Nayar, for the
respondent.
The Judgment of the Court was delivered by
JASWANT SINGH, J.-This appeal by special leave is directed against the judgment
dated December 2,1 1969 of the High Court of Rajasthan.
Briefly stated the facts giving rise to this
appeal are: Maharaja Shri Udebhan Singhji of Dholpur died issueless on October
22, 1954. On the day following his demise all the movable valuables possessed
by him were taken over and sealed by the Government of Rajasthan because of the
dispute regarding succession to the gaddi. On December 13, 1956 Maharaja Shri
Hemant Singhji, the appellant herein, who was then a minor, was recognised by
the Government of India as successor of the former Maharaja and t-he aforesaid
assets which inter alia consisted of 4,825 gold sovereign, 7,90,440 old silver
rupee coins and silver bars weighing 2,54,174 totals were released by the
Rajasthan Government and handed over to Rajmata in her capacity 424 as the
adoptive mother and guardian of the appellant on March 24 1957. During the
financial year 1957-58, the aforesaid sovereigns, silver coins and silver bars
were sold at the suggestion of the Government of India for a net consideration
of Rs. 20,78"257. Overruling the contentions raised on behalf of the
appellant to the effect that as there was no voluntary sale chargeable to
capital gains tax under section 12B of the Indian Income Tax Act, 1922,
hereinafter-referred to as 'the Act'" and the aforesaid items did not
constitute 'capital assets' as contemplated by section 2(4A) of the Act but
fell within the purview of the exception carved out by clause (ii) thereof and
as such were to be excluded in computing the gains because they were held for
personal use by the assessee and the members of his family as was evident from
the fact that they were used for the purpose of Maha Lakshmi Puja and other
religious festivals and rituals in the family, and taking into account the
market value of the assets as on January 1, 1954, the Income Tax officer,
Bharatpur, worked out capital gains at Rs. 3,44"303. Dissatisfied with
this order, the appellant took the matter in appeal to the Appellate Assistant
Commissioner but remained unsuccessful. A further appeal to the Income Tax
Appellate Tribunal was taken by the appellant but the same also proved abortive
as the Tribunal was of the view that the expression "personal
effects" 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 for the purpose of section 12B in view of the decision
of this Court in James Anderson v. Commissioner of Income Tax, Bombay City(1).
The Tribunal, however, referred the following question of law at the instance
of the appellant to the High Court of Rajasthan at Jodhpur under section 66(1)
of the Act.
"Whether on the facts and in the
circumstances of the case the assets sold were capital assets within the
meaning of section 2(4A) chargeable to capital gains tax under section 12B of
the Income-tax Act, 1922." By its order dated December 2, 1969" the
High Court answered the question in the affirmative holding that in order that
an article should constitute a part of personal effects, it is necessary that
the article must be associated with the person of the possessor and that the
aforesaid items consisting of gold sovereigns, silver rupees and silver bars
could not be deemed to fall within the exception carved out by clause (ii) of
section 2(4A) of the Act merely because they were placed before Goddess Lakshmi
while performing Puja. The appellant thereupon made an application to the High
Court of Rajasthan for a certificate of fitness which was refused. Thereafter,
the appellant applied to this Court far special leave under Article 136 of the
Constitution which was granted on May 6, 1971.
Appearing in support of the appeal, Mr. Desai
has vehemently contended that the question as whether an item of movable
property held for personal use is a part of personal effects of an assessee
should be determined not in a commercial sense but according to the (1) [1960]
39 I.T.R. 123, 131 425 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 his family. He has in support of
his contention referred us to a decision in Commissioner of Wealth-tax. Gujarat
v. Arundhati Balkrishna(l). He has further urged that in construing section
2`(4A) of the Act it must be borne in mind that the Legislature intended to lay
emphasis on the nature of the use of the article rather than on the person of
the assessee.
Mr. B. B. Ahuja appearing for the Revenue
has, on the other hand, urged that the interpretation sought to be placed on
behalf of the assessee on the expression "personal effects" is not
correct and while determining whether the effects are personal it is essential
to see whether they are meant for the personal use of the assessee.
We have given our earnest consideration to
the submissions, of learned counsel for the parties. For a proper decision of
the point in question, it is necessary to refer to section 2(4A) of the Act,
the relevant portion whereof 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- (i) ................
(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 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
an; which the expression occurs shows that only those effects can legitimately
be said to be personal which pertain to the assessse'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
apparel, 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" 'm 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".
(1) 77 I.T.R. 505.
426 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 Cyclopedic 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 Ashtmi Day of 'Sharadh Pakh' 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 characterised as personal use. As rightly observed
by the Income Tax authorities if sanctity of puja were considered so essential
by the asses see, the aforesaid articles would not have been delivered by this
guardian to the Banks for sale.
The language of section 5(1)(viii) of the
Wealth Tax Act, 1957 which is pari materia with the definition of the
expression "personal effects" as given in section 2(4A) (ii) of the
Act is also helpful in cons truing the latter provision. That provision runs as
follows:- "5. (1) Subject to the provisions of sub-section (1-A),
wealth-tax shall not be payable by an assessee in respect of the following
assets, and such assets shall not be included in the net wealth of the
assessee.
...........................
(viii) furniture, household utensils, wearing
apparel, provisions and other articles intended for the personal or household
use of the assessee but not including jewellery;" In S. Poddar v. The
Commissioner of Wealth Tax, Bombay City-II(1) where the assessee at the time of
his appointment in the year (I) I.L.R. [1965] Bom.1062.
427 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 "intended 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".
It is also significant that no exemption on
behalf of the assessee was claimed in respect of the aforesaid effects under
the aforesaid provision of the Wealth-Tax Act.
The decision of this Court in Commissioner of
Wealth Tax, Gujarat v. Arundhati Balkrishna (supra) on which strong reliance
has been placed by Mr. Desai is of no assistance to the appellant as the point
now sought to be agitated before us was never canvassed or considered in that
case.
We are, therefore" of the considered
view that the aforesaid articles were capital assets and not personal effects
as contended on behalf of the assessee-appellant and as such could not be
excluded while computing the gains.
For the foregoing reasons, we do not find any
merit in this appeal which is hereby dismissed with costs.
V.P.S. Appeal dismissed.
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