ACIT, Central Circle - XXIV, Kolkata, Kolkata V. Shri Suresh Sethi, Kolkata

ITA 763/KOL/2012

• Counselvise Citation: [2013] 119 COUNSELVISE.COM (IT) 2943 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2013
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 14-05-2012
• Court: TRIBUNAL
• Department Lawyers: K N JANA
• Keywords: Capital asset; Gift
• Section: 143(3); 2(14)

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE . . . . . . . . , ! /AND ' #!' , ) [BEFORE SHRI P. K. BANSAL, AM & SHRI MAHAVIR SINGH, JM] !$ !$ !$ !$ / I.T.A NO. 763/KOL/2012 #% &' #% &' #% &' #% &'/ // / ASSESSMENT YEAR: 2007-08 ASSISTANT COMMISSIONER OF INCOME-TAX VS. SHRI SUR ESH SETHI CENTRAL CIRCLE-XXIV, KOLKATA. (PAN: ASUPS1191G) ()* /APPELLANT ) (+,)*/ RESPONDENT ) & C.O. NO. 60/KOL/2012 IN !$ !$ !$ !$ / I.T.A NO. 763/KOL/2012 #% &' #% &' #% &' #% &'/ // / ASSESSMENT YEAR: 2007-08 SHRI SURESH SETHI VS. ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-XXIV, KOLKATA. (CROSS OBJECTOR) (RESPONDENT) DATE OF HEARING: 14.02.2013 DATE OF PRONOUNCEMENT: 15.03.2013 FOR THE APPELLANT: SHRI K. N. JANA, JCI T, SR. DR FOR THE CROSS OBJECTOR : SHRI SUBASH AGARWAL, ADVOCATE - / ORDER PER BENCH: THIS APPEAL BY REVENUE AND CROSS OBJECTION BY ASSES SEE ARE ARISING OUT OF ORDER OF CIT(A), CENTRAL-II, KOLKATA IN APPEAL NO. 167/CC-C- VII/CIT(A(CENTRAL)-II/10-11 DATED 16.02.2012. ASSESSMENT WAS FRAMED BY ACIT, C. C-VI I, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FO R ASSESSMENT YEAR 2007-08 VIDE HIS ORDER DATED 31.12.2009. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE AND CRO SS OBJECTION OF ASSESSEE IS AS REGARDS TO TAXABILITY OF ASSET SOLD I.E. SALE OF PAINTINGS WHE THER CAPITAL ASSET OR NOT WITHIN THE MEANING OF SECTION 2(14) CHARGABLE TO CAPITAL GAIN TAX U/S. 45 OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING TWO GROUNDS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE ASSETS SOLD WERE CAPITAL ASSETS WITHIN THE MEANING OF SECTION 2(14) CHARGEAB LE TO CAPITAL GAIN TAX U/S. 45 OF THE I. T. ACT, 1961. 2. FOR THAT ON THE FACTS IN THE CIRCUMSTANCES OF TH E CASE, THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER TREATING THE SALE OF PAINTINGS AS TRANSFER OF CAPITAL ASSET CHARGEABLE TO CAPITAL GAI N. 2 ITA NO. 763/K/2012 & C.O.60 OF 2012 SHRI SURESH SETHI, A.Y. 2007-08 WHEREAS THE CROSS OBJECTION OF THE ASSESSEE IS SUPP ORTIVE OF THE ORDER OF CIT(A). HENCE, NEEDS NO DELIBERATIONS. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE AO MADE ADDITION OF RS.35,00,000/- ON ACCOUNT OF SALE OF PAINTINGS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS CLAIMED EXEMPTION OF RS.35,00,000/ - ON ACCOUNT OF SALE OF M. F. HUSSAINS PAINTINGS AS PER SCHEDULE E TO THE RETURN OF INCOME . ASSESSEE, BEFORE THE AO PRODUCED XEROX COPIES OF PAINTING, BILLS, CORRESPONDENCE DATED 08. 07.2006 WITH ART GANNERY-88, A COPY OF BILL DATED 13.07.2006 RAISED IN THE NAME OF ART GAL LERY AS WELL AS COPIES OF DEBIT VOUCHER RAISED BY ART GALLERY-88. IT WAS CLAIMED BEFORE TH E AO THAT THE PAINTINGS WERE RECEIVED BY ASSESSEE AS GIFT FROM HIS GRAND MOTHER ON 08.04.200 6. IT WAS ALSO CLAIMED THAT THE PAINTINGS WERE PERSONAL EFFECT OF ASSESSEES GRAND MOTHER AND LATER ON AFTER RECEIVING AS GIFT FROM GRAND MOTHER BECAME PERSONAL EFFECT OF ASSESSEE. HENCE, THE SALE PROCEED OF THE SAID PERSONAL EFFECT IS CLAIMED AS EXEMPT. BEFORE THE AO, IT WAS CLAIME D THAT THE AMENDMENT IN SECTION 2(14)(II) IS W.E.F. 01.04.2008 I.E. AY 2008-09 AND THEREAFTER. IN THE PRESENT CASE, THE ASSESSMENT YEAR IS 2007-08. THE AO HAS NOT ACCEPTED THE CLAIM OF THE ASSESSEE AND TREATED THE RECEIPTS AS REVENUE RECEIPT AND TAXED ACCORDINGLY. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE ADDITION BY OBSERVING AS UNDER: (6) I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE REMAND REPORT, REJONDER AND THE DECISION OF HONBLE ITAT, MUMBAI RELIED UPON BY THE APPELLANT. O N PERUSAL OF THE ASSESSMENT ORDER IT IS APPARENT THAT THE A.O HAD ADDED SUM OF RS. 35 LAKHS TO THE INCOME OF THE APPELLANT ON ACCOUNT OF SALE OF PAINTING FOR TWO RE ASONS I.E THE PAINTING CLAIMED TO BE SOLD BY THE APPELLANT CAN NOT BE TREATED AS PERSONA L EFFECT EXEMPTED FROM TAX AND SECONDLY HE DOUBTED THE GENUINENESS OF TRANSACTION AND HELD THAT THE SALE OF PAINTNG WAS MERELY A PAPER WORK AND NOT ACTUAL SALE OF PAIN TING. AS FAR AS THE GENUINENESS OF TRANSACTION OF SALE OF PAINTING IS CONCERNED, THE S AME HAS BEEN ESTABLISHED IN FAVOUR OF THE APPELLANT BECAUSE IN THE COURSE OF REMAND PR OCEEDINGS, THE A.O ISSUED A QUESTIONNAIRE TO THE ART GALLERY 88 AND SENT HIS IN SPECTOR FOR VERIFICATION OF TRANSACTION OF SALE OF PAINTING. THE ART GALLERY 88 CONFIRMED THAT IT HAS PURCHASED THE MF. HUSSAINS PAINTING FROM THE APPELLANT FOR A CONSIDERATION OF RS. 35 LAKHS AND THE SAID PAINTNG WAS SOLD BY THE ART GALLERY 88 TO M/S. DEMPO INDUSTRIES PVT. LTD, GOA FOR A CONSIDERATION OF RS. 70 AKHS, THE SAID AR T GALLERY 88 PRODUCED ITS COPY OF PROFIT & LOSS ACCOUNT AND BALANCE SHEET ALONG WITH COPY OF BANK STATEMENT IN SUPPORT OF ITS CLAIM OF PURCHASE AND SALE OF PAINTI NG FROM THE APPELLANT. HENCE, AS FAR THE A.OS VIEW ABOUT GENUINENESS OF TRANSACTION IS CONCERNED, SAME DOES NOT HOLD GOOD IN VIEW OF AFORESAID ENQUIRY AND DESERVES TO B E REJECTED. AS MENTIONED ABOVE, THE APPELLANT HAS CLAIMED EXEMP TION U/S. 2(24)(II) OF THE I.T.ACT ON ACCOUNT OF SALE OF PAINTING BEING THE PERSONAL E FFECT. IN THE ASSESSMENT ORDER AS WELL AS THE REMAND REPORT, THE A.O HAS STATED THAT THE PAINTING CAN NOT BE TREATED AS PERSONAL EFFECT IN THE HANDS OF APPELLANT. HOWEVER, HE HAS NOT MENTIONED AS TO WHY THE SAID PAINTING COULD NOT BE TREATED AS APPELLANT S PERSONAL EFFECT. IT IS OBSERVED THAT AN AMENDMENT WAS BROUGHT IN THE STATUTE IN SEC TION 2(14)(II) BY THE FINANCE ACT, 2007 W.E.F 01-04-2008 IN THE DEFINITION OF PER SONAL EFFECTS. THE SAID AMENDMENT IS APPLICABLE FROM A.Y 2008-09 WHEREIN PAINTINGS WE RE BROUGHT WITHIN THE PURVIEW OF 3 ITA NO. 763/K/2012 & C.O.60 OF 2012 SHRI SURESH SETHI, A.Y. 2007-08 CAPITAL ASSET AND EXCLUDED FROM THE DEFINITION OF P ERSONAL EFFECTS. PRIOR TO THE AMENDMENT THE PAINTINGS WERE INCLUDED AND HELD AS P ERSONAL EFFFECTS. IN THE CASE OF APPELLANT, THE PAINTING UNDER QUESTION WAS OWNED BY THE APPELLANTS GRAND MOTHER AS PERSONAL EFFECTS FOR DECORATION OF HER HOUSE AND TH E SAME WAS, LATER ON, GIFTED BY HER TO THE APPELLANT. HENCE, I AM OF THE OPINION THAT I T CAN NOT BE SAID THAT THE PAINTING IN THE HANDS OF THE APPELLANT WAS NOT A PERSONAL EFFEC T. SINCE PAINTINGS WERE INCLUDED IN THE DEFINITION OF CAPITAL ASSSET FROM A.Y 2008-09 A ND HENCE THE SAME CAN NOT TREATED AS CAPTAL ASSSET IN THE HANDS OF APPELLANT IN THE YEAR UNDER APPEAL AND TRANSFER THEREOF IS NOT IIABLE TO TAX AS INCOME FROM CAPITAL GAIN. FURTHER, THE APPELLANT WAS NOT A TRADER OF PAINTINGS AND THAT HE HAD NOT PURCH ASED THE PAINTING IN QUESTION, THEREFORE, THE RECEIPT OF AMOUNT OF SALE OF SAID PA INTING CAN ALSO NOT TO BE TREATED AS ADVENTURE IN THE NATURE OF TRADE. IN THE CASE OF CI T VS MRS. DILNAVAZ S. VARIAVA, 88 TTJ 1134 (MUMBAI), THE ASSESSEE WAS A MANAGEMENT CO NSULTANT BY PROFESSION AND HAD THE PASSION FOR COLLECTING PAINTINGS. SHE SOLD CERTAIN PAINTING OUT OF HER COLLECTION AND CLAIMED EXEMPTION U/S 2(14)(II) CONT ENDING IT TO BE PERSONAL EFFECT. HOWEVER, THE A.O MADE ADDITION HOLDING IT TO BE AN ADVENTURE IN THE NATURE OF TRADE. IT IS HELD BY THE ITAT, MUMBAI THAT MERE EARNING OF SURPLUS DOES NOT TANTAMOUNT TO EMBARKING UPON AN ADVENTURE IN THE NATURE OF TRADE. SINCE PAINTINGS WERE ACQUIRED BY THE ASSESSEE FOR HER OWN COLLECTION, INCIDENCE O F SALE COULD NOT BE CONSTRUED TO BE AN ADVENTURE IN THE NATURE OF TRADE. THE ISSUE INVO LVED IS ALSO DECIDED BY THE HONBLE ITAT, KOLKATA BENCH-A IN FAVOUR OF ASSESSEE IN THE CASE OF BORENDRA NATH MUKHEREE VS I.T.O WARD 33(1), KOLKATA (2011) 47 SOT 23(KOI). IN THAT CASE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O NOTICED THAT ASS ESSEE RECEIVED CERTAIN SUM ON ACCOUNT OF SALE PROCEEDS FROM SALE OF OLD PAINTINGS , INHERITED BY HIM. THE A.O TREATED THE SAME AS CAPTAL ASSET, TRANSFER OF WHIC H WAS CHARGEABLE TO LONG TERM CAPITAL GAIN. HE, ACCORDINGLY, MADE AN ADDITION TO INCOME OF THE ASSESSEE. ON APPEAL, THE CIT(A) HELD THAT NO TAX WAS LEVIABLE ON PERSONAL EFFECTS AND THE LEGISLATURE HAS INTENDED ONLY THOSE ARTICLES TO BE INCLUDED IN THE DEFINITION OF PERSONAL EFFECTS WHICH WERE INTIMATELY AND COMMONLY USED BY THE ASSESSEE. HE CONCLUDED THAT SINCE NO INTIMATE CONNECTION BETWEEN THE PAINTINGS AND THE PERSON OF THE ASSESSEE HAD BEEN SHOWN TO EXIST, THE ORDER OF THE A.O WAS TO BE UPHELD. ON APPEAL BEFORE THE TRIBUNAL, THE ASSESSEE SUBMITTED THAT THE CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT THE A.O HAD MADE ADDITION BY MAKING A WRONG INTERPRETATION OF SECTION 2 (14) AND SECTION 47(IX) . IT IS HELD BY THE HONBLE ITAT, KOLKATA THAT VIDE THE AMENDMENT BROUGHT BY THE FINA NCE ACT, 2007 W.E.F 01-04-2008, THE DEFINITION OF CAPITAL ASSET IN SECTION 2(14) SU B CLAUSE (II) HAS BEEN AMENDED AND PAINTINGS ARE INCLUDED IN THE DEFINITION. HOWEVER, THIS APPLIES FOR AND FROM THE A.Y 2008-09 AND NOT TO THE RELEVANT ASSESSMENT YEAR UND ER CONSIDERATION, I.E. ASSESSMENT YEAR 2007-08. AS PER THE DEFINITION OF PERSONAL EF FECTS PRIOR TO AMENDMENT, THAT IS TO SAY, PHYSICAL CHATTELS HAVNG SOME PERSONAL CONN ECTION WTH THE ASSESSEE SUCH AS ARTICLES OF PERSONAL OR DOMESTIC USE, CLOTHINGS, FU RNITURE AND SO FORTH WHICH WOULD NOT INCLUDE MONEY OR SECURITIES FOR MONEY OR IN THE ACTUAL CONTEXT IT CAN NOT EXTEND TO CHOSES- IN- ACTION REPRESENTED BY PASSBOOKS AND PRO MISSORY NOTES. IN THE INSTANT CASE, THE ASSESSEE HAD SOLD PAINTINGS AND CLAIMED T HE SAME IN THE NATURE OF PERSONAL EFFECTS WHICH WERE NOT COVERED WITHIN THE DEFINTIO N OF CAPITAL ASSET OF 2(14)(II) OF THE ACT. THE ASSESSEE STATED THAT THESE PAINTINGS W ERE HELD FOR PERSONAL USE OF HIMSELF AND MEMBERS OF HIS FAMILY. THE VERY FACT THAT FURNI TURE IS ALSO INCLUDED A PERSONAL EFFECTS WOULD SHOW THAT THE ARTICLES NEED NOT HAVE A INTIMATE CONNECTION WITH THE PERSON OF THE ASSESSEE. ALL THAT IS REQUIRED IS THA T THE ARTICLE SHOULD BE MEANT FOR PERSONAL USE OF ASSESSEE IN THE ORDINARY COURSE. IN THE INSTANT CASE, REVENUE APPLIED RESTRICTIVE TEST NOT WARRANTED BY SECTION 2(14), BY HOLDING THAT BECAUSE THESE ARTICLES WERE NOT NORMALLY IN DAILY USE, THEY COULD NOT BE C ONSIDERED AS PERSONAL EFFCTS. THIS APPEARS TO BE AN INCORRECT TEST BECAUSE ALL PERSONA L EFFECTS NEED NOT BE USED DAILY. SO LONG AS THEY ARE MEANT FOR PERSONAL USE, THEY WILL HAVE TO BE CONSIDERED AS PERSONAL EFFFECTS, IN VIEW OF ABOVE IT WAS TO BE HELD THAT T HE SALE OF OLD PAINTING, INHERITED BY THE ASSESSEE, DID NOT FALL IN THE MISCHIEF OF SECTI ON 2(14)(II) IN THE DEFINITION OFF CAPITAL ASSET AND DID NOT ATTRACT CAPITAL GAINS TAX PRIOR TO AMENDMENT BROUGHT BY THE FINANCE ACT, 2007 W.E,F 01-04-08. ACCORDINGLY, THE APPEAL OF THE ASSESSEE WAS TO BE 4 ITA NO. 763/K/2012 & C.O.60 OF 2012 SHRI SURESH SETHI, A.Y. 2007-08 ALLOWED. IN THE CASE OF APPELLANT, THE FACTS ARE EX ACTLY SIMILAR TO THE FACTS BEFORE THE HONBLE ITAT, KOLKATA IN THE CASE OF BORENDRA NATH MUKHERJEE (SUPRA). HENCE, IT IS TO BE HELD THAT THE RECEIPT ON ACCOUNT OF SALE OF P AINTING BY THE APPELLANT IS NOT LIABFE TO TAX BEING SALE OF PERSONAL EFFECTS. THIS ISSUE W AS ALSO DECIDED BY THE HONBLE ITAT,CALCUTTA IN AN OLD CASE, IN THE CASE OF PRINCE SS SHRI KUMARI OF KISHANGARH VS ITO REPORTED IN 1 ITD 85 (CAL). IN THAT CASE THE AS SESSEE SOLD CERTAIN PAINTINGS HANDED OVE TO HER BY HER FATHER AND CLAIMED EXEMPTI ON FROM CAPITAL GAIN TAX ON THE GROUND THAT THEY WERE PERSONAL EFFECTS. HOWEVER, TH E ASSESSEES CLAIM WAS REJECTED BY THE A.O AS WELL AS IN THE FIRST APPEAL FOR THE R EASON THAT IN THE CASE OF THE ASSESSSEES FATHER FOR AN EARLIER YEAR, THE PAINTIN GS WERE HELD AS HS CAPITAI ASSET AND THAT THE PAINTINGS WERE NEVER USED BY THE ASSESSEE BUT PRESERVED BY HER WITH THE OBJECT OF EVENTUALLY SELLING THEM AT A HIGH PROFT. ON FURTHER APPEAL TO THE HONBLE ITAT, IT WAS HELD THAT LANGUAGE OF SECTION 2(14) MA KES IT CLEAR THAT ARTICLES OTHER THAN JEWELLERY IN WHICH THERE IS AN INTIMATE CONNEC TION BETWEEN THE EFFECTS AND THE PERSON BE TREATED AS PERSONAL EFFECT. SUCH A CONNEC TION, IS ON FACTS, FOUND IN THIS CASE, AND THERE IS NO MATERIAL ON RECORD TO SHOW TH AT THE PAINTINGS WERE NOT, COMMONLY USED BY THE ASSESSEE. THEY ARE, THUS, ARTI CLES OF PERSONAF EFFECTS, THE SALE OF WHICH CANNOT ATTRACT CAPITAL GAIN TAX. IN VIEW OF ABOVE FACTS AND RESPECTFULLY FOLLOWING THE DECISION OF JURISDICTIONAL OF ITAT AN D ITAT, DELHI IT IS TO BE HELD THAT THE A.O. WAS NOT JUSTIFIED IN MAKING THE ADDITION O F RS.35 LAKHS ON ACCOUNT OF SALE OF PAINTING AND THE SAME IS DIRECTED TO DELETED. THE GROUND NO.2 AND 3 ARE ALLOWED. AGGRIEVED AGAINST THE DELETION REVENUE IS NOW IN AP PEAL BEFORE US. 4. AT THE TIME OF HEARING BEFORE US, LD. COUNSEL FO R THE ASSESSEE STATED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY COORDINATE BENCH DECISION IN ITA NO.1623/K/2010, BORENDRA NATH MOOKERJEE VS. ITO , AY 2007-08 DATED 22.07.2011 WHEREIN ENTIRE ISSUE IS DISCUSSED AT PARA 6 OF THE SAID ORDER, WHICH IS AS UNDER: 6. FROM THE ABOVE, WE ARE OF THE VIEW THAT THE AME NDMENT BROUGHT BY FINANCE ACT, 2007 W.E.F. 1.4.2008, WHEREBY DEFINITION OF CAPITAL ASSET IN SECTION 2(14) SUB-CLAUSE (II) IS AMENDED AND PAINTINGS ARE INCLUDED IN THE DEFINI TION. HOWEVER, THIS WILL APPLY FOR AND FROM ASSESSMENT YEAR 2008-09 AND NOT TO THE REL EVANT ASSESSMENT YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2007-08. NOW, A S PER THE DEFINITION OF PERSONAL EFFECTS PRIOR TO AMENDMENT, THAT IS TO SAY PHYSICA L CHATTELS HAVING SOME PERSONAL CONNECTION WITH THE ASSESSEE SUCH AS ARTICLES OF PE RSONAL OR DOMESTIC USE, CLOTHINGS, FURNITURE AND SO FORTH WHICH WOULD NOT INCLUDE MONE Y OR SECURITIES FOR MONEY OR IN THE ACTUAL CONTEXT IT CANNOT EXTEND TO CHOSES-IN-ACTION REPRESENTED BY PASS BOOKS AND PROMISSORY NOTES. IN THE UNABRIDGED EDITION OF THE RANDOM HOUSE DICTIONARY OF THE ENGLISH LANGUAGE, AT PAGE 1075, THE EXPRESSION PER SONAL EFFECTS MEANS PRIVATELY OWNED ARTICLES CONSISTING CHIEFLY OF CLOTHING, TOIL ET ITEMS, ETC., FOR INTIMATE USE BY AN INDIVIDUAL. ACCORDING TO BLACKS LAW DICTIONARY, 5 TH EDITION, PAGE 1029, THE EXPRESSION MEANS ARTICLES ASSOCIATED WITH PERSON, AS PROPERTY HAVING MORE OR LESS INTIMATE RELATION TO PERSON OF POSSESSOR. IN CYCL OPAEDIC LAW DICTIONARY, THIRD EDITION, AT PAGE 832, THE EXPRESSION PERSONAL EFFECTS WITH OUT QUALIFYING WORDS IS INTERPRETED TO INCLUDE GENERALLY SUCH TANGIBLE PROPERTY AS IS WORN OR CARRIED ABOUT THE PERSON. THUS, SILVER BARS, SOVEREIGNS, BULLION AND SILVER COINS C AN BY NO STRETCH OF IMAGINATION BE DEEMED TO BE EFFECTS MEANT FOR PERSONAL USE. THE FACTS IN THE PRESENT CASE ARE THAT THE ASSESSEE HAS SOLD OLD PAINTINGS AND CLAIMED THE SAME IN THE NATURE OF PERSONAL EFFECTS AND ARE NOT COVERED WITHIN THE DEFINITION O F CAPITAL ASSET OF SECTION 2(14)(II) OF THE ACT. CAN THESE PAINTINGS BE, CONSIDERED AS PER SONAL EFFECTS OF THE ASSESSEE? IF SO, ARE THEY EXCLUDED FROM THE DEFINITION OF 'CAPITAL A SSET' UNDER SECTION 2(14) OF THE ACT, WHICH MEANS ' PROPERTY OF ANY KIND HELD BY AN ASSES SEE ...... BUT DOES NOT INCLUDE (I)... ; (II) PERSONAL EFFECTS, THAT IS TO SAY, MOVABLE PROP ERTY (INCLUDING WEARING APPAREL AND FURNITURE, BUT EXCLUDING JEWELLERY) HELD FOR PERSON AL USE BY THE ASSESSEE OR ANY MEMBER OF HIS FAMILY DEPENDENT ON HIM; '. THE ASSESSEE ST ATED THAT THESE PAINTINGS WERE HELD BY 5 ITA NO. 763/K/2012 & C.O.60 OF 2012 SHRI SURESH SETHI, A.Y. 2007-08 HIM FOR PERSONAL USE OF HIMSELF AND MEMBERS OF HIS FAMILY DEPENDENT ON HIM. THESE PAINTINGS WERE AS SUCH REQUIRED FOR THEIR PERSONAL USE AND THE USE OF MEMBERS OF HIS FAMILY AS WELL. WE FIND THAT HONBLE BOMBAY HIGH CO URT IN THE CASE OF CIT V. SITADEVI N. PODDAR [1984] 148 ITR 506(BOM) CONSIDERED A SIMI LAR QUESTION IN A SOMEWHAT DIFFERENT CONTEXT. IN THAT CASE, THE ASSESSEE HAD S OLD CERTAIN SILVER UTENSILS. THE COURT HELD THAT SUCH UTENSILS WERE PERSONAL EFFECTS BECAU SE THEY WERE ORDINARILY INTENDED FOR PERSONAL OR HOUSEHOLD USE. IN THE CASE OF H. H. MAH ARANI USHA DEVI V. CIT [1982] 133 ITR 43 (MP), JEWELLERY WHICH WAS MEANT FOR USE BY T HE ASSESSEE ON CEREMONIAL OCCASIONS WAS CONSIDERED AS 'PERSONAL EFFECTS' OF T HE ASSESSEE. THE REVENUE, HOWEVER, PLACED EMPHASIS ON THE OBSERVATIONS MADE BY HONBLE SUPREME COURT IN THE CASE OF H. H. MAHARAJA RANA HEMANT SINGHJI V CIT[1976] 103 ITR 61(SC). IN THAT CASE, HONBLE SUPREME COURT WAS REQUIRED TO CONSIDER OLD SILVER R UPEE COINS, GOLD SOVEREIGNS AND SILVER BARS WHICH WERE USED BY THE ASSESSEE ON RELI GIOUS FESTIVALS. HONBLE SUPREME COURT OBSERVED THAT SILVER BARS OR BULLION CAN, BY NO STRETCH OF IMAGINATION, BE DEEMED TO BE 'EFFECTS' MEANT FOR PERSONAL USE. IN THAT CAS E, HONBLE SUPREME COURT HAS IN EFFECT HELD THAT THE EXPRESSION 'INTENDED FOR PERSONAL OR HOUSEHOLD USE MEANT NORMALLY, COMMONLY OR ORDINARILY INTENDED FOR PERSONAL OR HOU SEHOLD USE. IT WOULD NOT BE CORRECT TO HOLD THAT HONBLE SUPREME COURT HAS CONSIDERED O NLY THOSE ITEMS AS PERSONAL EFFECTS WHICH HAVE BEEN INTIMATELY CONNECTED WITH THE PERSO N OF THE ASSESSEE. THE VERY FACT THAT FURNITURE IS ALSO INCLUDED IN PERSONAL EFFECTS WOUL D SHOW THAT THE ARTICLES NEED NOT HAVE AN INTIMATE CONNECTION WITH THE PERSON OF THE ASSES SEE. ALL THAT IS REQUIRED IS THAT THE ARTICLE SHOULD BE MEANT FOR PERSONAL USE OF THE ASS ESSEE IN THE ORDINARY COURSE. IN THE PRESENT CASE, REVENUE APPLIED A RESTRICTIVE TEST NO T WARRANTED BY SECTION 2(14) OF THE ACT. HE HELD THAT BECAUSE THESE ARTICLES WERE NOT NORMAL LY IN DAILY USE, THEY COULD NOT BE CONSIDERED AS PERSONAL EFFECTS. THIS APPEARS TO BE AN INCORRECT TEST BECAUSE ALL PERSONAL EFFECTS NEED NOT BE USED DAILY. SO LONG AS THEY ARE MEANT FOR PERSONAL USE, THEY WILL HAVE TO BE CONSIDERED AS PERSONAL EFFECTS. IN VIEW OF TH E ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE SALE OF OLD PAINTINGS, INHERITED BY ASSESS EE, DOES NOT FALL IN THE MISCHIEF OF SECTION 2(14)(II) OF THE ACT I.E. IN THE DEFINITION OF CAPITAL ASSET AND DOES NOT ATTRACT CAPITAL GAINS TAX PRIOR TO AMENDMENT BROUGHT BY FIN ANCE ACT, 2007 W.E.F. 1.4.2008. ACCORDINGLY, THIS APPEAL OF THE ASSESSEE IS ALLOWED . 5. TAKING A CONSISTENT VIEW AND RESPECTFULLY FOLLOW ING THE COORDINATE BENCH DECISION IN THE CASE OF BORENDRA NATH MOOKERJEE (SUPRA), WE UPH OLD THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 6. THE CROSS OBJECTION OF ASSESSEE IS SUPPORTIVE IN NATURE AND HENCE, DISMISSED BEING INFRUCTUOUS. 7. IN THE RESULT, BOTH APPEAL OF REVENUE AS WELL AS CROSS OBJETION OF ASSESSEE ARE DISMISSED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 15.03.2013 . SD/- SD/- . . . . . . . . , ' #!' ' #!' ' #!' ' #!' , (P. K. BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( . . . .) )) ) DATED : 15 TH MARCH, 2013 /0 #12 #3 JD.(SR.P.S.) 6 ITA NO. 763/K/2012 & C.O.60 OF 2012 SHRI SURESH SETHI, A.Y. 2007-08 - 4 +##5 65&7- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT ACIT, C.C. XXIV, KOLKATA. 2 +,)* / RESPONDENT SHRI SURESH SETHI, 51, NALINI SETH RO AD, KOLKATA-700 007. 3 . #- ( )/ THE CIT(A), KOLKATA 4. 5. #- / CIT KOLKATA 5 <#= +# / DR, KOLKATA BENCHES, KOLKATA ,5 +#/ TRUE COPY, ->/ BY ORDER, ' !2 /ASSTT. REGISTRAR .