ORDER
K.T. Thakore, Accountant Member
1. This appeal is filed by the assessee against the order of the Commissioner (Appeals), challenging his decision to confirm the action of the ITO to tax capital gains on silver utensils weighing 46.89 kgs.
2. The assessee held certain silver utensils and other silver articles weighing 80 kgs., which were sold for a sum of Rs. 91,023 during the previous year. The assessee claimed that the surplus realised on the sale of the said silver articles was not exigible to capital gains, inasmuch as the silver utensils were his ‘personal effects’. This contention of the assessee stood rejected by the ITO, firstly, on the ground that the assessee had come in possession of these silver utensils, etc., during the periods relevant to the assessment years 1961-62 to 1967-68 as per the information disclosed under the Voluntary Disclosure of Income and Wealth Act, 1976. Secondly, the assessee’s family consisted of himself, his wife and two minor children. Therefore, the actual use of these articles by the family was very much restricted. Thirdly, one of the sales bill did not contain necessary details or particulars of utensils sold. Thus, according to the ITO, the assessee had given details of sales of 33.11 kgs. The details of remaining utensils weighing 46.89 kgs., were not available. Lastly, the silver utensils were not the articles of daily use, but represented wealth of the assessee. In the above view of the matter, the ITO brought to tax a sum of Rs. 40,813, as capital gains, after giving statutory deduction under Section 80T of the Income-tax Act, 1961 (‘the (Act’).
3. Being aggrieved the assessee carried the matter in appeal before the Commissioner (Appeals) and contended that the assessee had held 106 kgs. of silver, out of which 80 kgs. of silver utensils were sold. Relying on the decision of the Tribunal referred to in para 6 of the order of the Commissioner (Appeals), it was contended that the silver utensils being articles of personal use should not be treated as a ‘capital asset’. According to the Commissioner (Appeals), the assessee’s claim was sustainable, in regard to sale of 33.11 kgs. being the items described in one of the bills produced by the assessee. As regards the balance amount, he held that in the absence of any details, the assessee’s claim was not tenable. He, therefore, upheld the addition in respect of sale of silver utensils weighing 46.89 kgs.
4. Being aggrieved, the assessee has come up in appeal before us. Shri Divetia contended that the assessee had held the silver utensils right from the assessment year 1961-62 and had made a disclosure thereof under the Voluntary Disclosure of Income and Wealth Act. He next pointed out that the assessee had disclosed the fact that the silver utensils contained articles of day to day use like thalis, vatkas, etc., which were his personal effects in the statement of total wealth filed in course of wealth-tax proceedings and had claimed exemption therefor in course of the said proceedings. The assessee’s claim in this regard was duly accepted by the WTO. Shri Divetia then relied on the decision of the Tribunal in the case of D.B.M. v. ITO [IT Appeal No. 1448 (Ahd.) of 1977-78] in which on more or less similar facts, the assessee’s claim was accepted. Shri Divetia also referred another decision of the Tribunal, Jaipur Bench in the case of ITO v. Smt. M. Jaipur [IT Appeal No. 1578 (Jp.) of 1979]. The learned departmental representative, on the other hand, submitted that the burden of proving that the articles sold, i.e., silver utensils were his personal effects was on the assessee. Sinoe no details were furnished in the bill, under which the articles were sold, there was no evidence to substantiate the assessee’s claim. He, therefore, submitted that the Commissioner (Appeals) had fairly granted relief to the assessee and that no further relief was due on the facts of the case.
5. We have considered the rival submissions. The expression ‘capital asset’ is defined in Section 2(14) of the Act which excludes personal effects held for personal use by the assessee or any member of his family dependent on him. The scope of expression ‘personal effects’ had come up for consideration before the Supreme Court in the case of H.H. Maharaja Rana Hemant Singhji v. CIT [1976] 103 ITR 61, the following principle is laid down in the above case:
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.(p. 61)
That apart in the case of CWT v. Mrs. Arundhati Balkrishna [1968] 70 ITR 203, the Gujarat High Court observed as follows:
…Moreover, in the case of each assessee, depending upon his personal status, class of society, habits, customs, notions, usages, etc., the category of articles intended for personal use will have to be decided…. (p. 224)
Keeping in mind the above decisions, it is clear firstly that the articles in question were silver utensils like thalis, vatkas, etc., and this fact is eminently established by the statement of net wealth filed by the assessee in the course of wealth-tax proceedings and the WTO had accepted the claim of the assessee, in this regard. Secondly, the words ‘intimate use’ have to be broadly construed having regard to the social status of the person and should not be confined to actual daily use. In other words, the test applied by the ITO for the ‘actual user’ by the family, having regard to the size of the family, is not the correct test. The nature of the articles, namely, silver utensils like thalis, etc., are normally used at the time of dinner or on auspicious or festive occasions, not only for the use of the family, but also to entertain guests and relations. Therefore, by the very nature of the articles, it cannot be said that they were not intended for personal use. It may be also pointed out that the Commissioner (Appeals) had rejected the claim of the assessee, on a narrow ground that the full details of the articles were not available. This defect no longer survives, as the necessary particulars were filed by the assessee, in the course of wealth-tax proceedings much earlier, as pointed out above and the same have been accepted by the WTO. In the above view of the matter, therefore, we uphold the claim of the assessee and hold that the assessee was not liable to capital gains on sale o)f silver utensils weighing 46.89 kgs.
6. In the result, the appeal is allowed.
K.R. Dixit, Judicial Member
1. I have read and considered the views of my learned brother but with utmost respect I beg to differ. The facts have been well set out by him.
2. I have taken an opposite point of view in the case of Himatlal C. Valia [IT Appeal No. 726 (Ahd.) of 1982] where exactly the same point was involved. We have to consider whether the articles in question would be covered by interpretation of the term ‘personal use’ quoted above from the Supreme Court judgment in the case of H.H. Maharaja Rana Himant Singhji (supra). The Supreme Court also stated as follows:
The expression ‘personal use’ occurring in Clause (ii) of the above-quoted provision is very significant. A close scrutiny of the context in which the expression occurs shows that only those effects can legitimately be said to be personal which pertain to the assessee’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.” (p. 64)
Therefore, while taking into account the status of the assessee the above test laid down by the Supreme Court has also to be applied. Normally the ordinary people use utensils made of cheaper material but taking into account the status of the assessee, silver utensils can be regarded as his personal effects. Now applying the test means that only those articles which would have the kind of connection specified in the test can be regarded as the personal effects of the assessee. Therefore, the silver articles used by the assessee for entertainment of guests cannot be regarded as his personal effects. The tenor of the Supreme Court’s observations quoted above is such that the use by the guests cannot be regarded as personal use by the assessee. Intimate connection between the effects and the person of the assessee is required. The test requires that the articles should be intimately and commonly used by the assessee. When the assessee’s guests use them it cannot be said that the assessee has used them in that manner. Secondly, the definition of capital asset provides for use by a member of the assessee’s family dependent upon him. It is important to note that not even those members of the assessee’s family are included in this, if they are not dependent upon him. When this is so, surely, by implication the guests cannot be included. Thirdly, it is obvious from this definition of capital asset that the Legislature wanted to lay down some definite and objective criteria which would also limit a number of persons for whom the exception can be made. If the guests are to be taken into account the number would be uncertain, very large and limitless. That would make the entire definition and its purpose useless.
3. For the above reasons I am of the view that only that number of silver utensils which is equal to the number of persons made up of the assessee and members of his family who are dependent upon him, are to be excluded for the purpose of calculation of capital gains. The balance has to be included for that purpose. In this case the Commissioner (Appeals) has sustained the claim of the assessee in regard to the sale of 33.11 kgs. being items described in one of the bills produced by the assessee. The assessee’s family consisted of himself, his wife and two minor children. It is seen from the details mentioned in the said bill, that number of utensils is so large that more than that cannot be regarded as of personal use for the assessee and his said family. Therefore, the assessee would be liable for capital gains on the sale of silver utensils weighing 46.89 kgs.
REFERENCE UNDER Section 255(4) OF THE INCOME-TAX ACT, 1961
As a difference of opinion on the following question has arisen amongst the members who constituted the Bench, it is referred to the Hon’ble President of the Tribunal under Section 255(4) of the Act:
“Whether the assessee would be liable for capital gains on the sale of silver utensils weighing 46.89 kgs. ?”
THIRD MEMBER ORDER
A. Krishnamurthy, Vice President
1. The point of difference referred under Section 255(4) in this case is as under:
“Whether the assessee would be liable for capital gains on the sale of silver utensils weighing 46.89 kgs. ?”
2. The short facts may be stated as follows: The assessee sold during the relevant year, according to his claim, 80 kgs. of silver utensils for Rs. 91,023.24. It was claimed that capital gains charge is not attracted in respect of the sale of these items as they were personal effects and were excluded from the expression ‘capital asset’ within the meaning of Section 2(14). The ITO rejected this claim. But in appeal, the Commissioner (Appeals) upheld the assessee’s claim in regard to an amount of Rs. 37,546 as being sale proceeds of utensils meant for personal use of the assessee covered by a bill No. 838 dated 12-1-1976 of Kantilal Chunilal Choksi in respect of sale of 33,110 grams of silver utensils. As regards the remaining quantity he refused to accept the assessee’s claim on the ground of absence of details of silver utensils sold. In appeal before the Tribunal preferred by the assessee in regard to the balance of sale covering 46.89 kgs., the learned Accountant Member gave a finding that rejection of the assessee’s claim on the ground of absence of details does not survive because the fact that the articles in question were silver utensils like thalis, vatkas, etc., is eminently established by the statement of net wealth filed by the assessee in the course of wealth-tax proceedings and which claim has been accepted by the WTO, and the necessary particulars were filed by the assessee in wealth-tax proceedings much earlier.
3. He held that having regard to the nature of the articles, viz., silver utensils like thalis, etc., which were normally used at the time of dinner or on auspicious or festive occasions,not only for the use of the family, but also to entertain guests and relations, it cannot be said that they were not intended for personal use. He, therefore, upheld the claim of the assessee that in regard to the sale of silver utensils weighing 46.89 kgs. capital gains charge was not attracted.
4. The learned Judicial Member has disagreed with the learned Accountant Member. According to him, the assessee would be liable for capital gains on the sale of silver utensils weighing 46.89 kgs. He, however, agreed that the facts relating to the dispute have been well set out by the learned Accountant Member.
5. At the hearing before me as Third Member, Shri Divetia, the learned counsel for the assessee, drew my attention to the following:
(1) The declaration by the assessee dated 21-2-1980 in which it is stated that amongst the movable properties the assessee is also holding utensils which are being used by the assessee for day-to-day purpose and silver utensils possessed by him are personal effects and are being used for personal purpose.
(2) Note No. 5 in statement of wealth for the assessment year 1976-77 wherein it is stated that silver utensils of day-to-day use were thalis, vatkas, etc., and these are of personal use and, therefore, it is claimed that these are personal effects and are not taxable.
(3) In the wealth-tax assessment order of that year under the head ‘Movable property’ is included a sum of Rs. 92,400 as the value of silver utensils. He also referred to para 3 of the assessment order setting forth the assessee’s claim that no capital gains tax is chargeable in respect of the sale because the silver utensils sold are personal effects and, therefore, not capital assets under Section 2(14).
He also referred to the order of the learned Accountant Member in para 4 where in the claim of the assessee is stated that the silver utensils contained articles of thalis, vatkas, etc., which are stated as personal effect in the statement of total wealth, and also the observations in last para of his order to the effect that the nature of the articles was such that silver utensils like thalis, vatkas^etc, are normally used at the time of dinner or other festive occasions not only for the use of family members but also to entertain guests and relations.
6. He then referred to the order of the learned Judicial Member wherein it is observed that the silver articles used by the assessee for entertainment of guests cannot be regarded as personal effects as according to the Supreme Court decision in H.H. Maharaja Rana Hemant SinghjVs case (supra) intimate connection between the effects and the person of the assessee is required and further that according to the definition of ‘capital asset’ personal effects should be for use by the assessee or by member of the assessee’s family dependent upon him and not even other members who are not dependent upon him. He, therefore, submitted that the view in the observations of the learned Judicial Member that only that number of silver utensils which is equal to the number of persons made up of the assessee and members of his family who are dependent upon him, that are to be excluded and not others which are used by the guests, is not justified because there is no finding at any stage that any of the utensils held by the assessee which were sold were kept or earmarked for the use of the guests or other members who are not dependent upon the assessee. He then relied on the decision of the Bombay High Court in Jayantilal A. Shah v. K.N. Anantharam Aiyer, CIT [1985] 156 ITR 448 at p. 450 wherein it is held that for being considered as personal effects the concerned articles need not be necessarily used daily and it is sufficient if they are meant for personal use even on occasions only. He also referred to the meaning of the word ‘utensil’ in the Shorter Oxford English Dictionary, Third edn., Vol. II, p. 2443 wherein the meaning given is ‘Domestic vessels, appliances and furniture ; any article useful or necessary in a household ; a domestic implement, vessel, or article of furniture.’ It was also submitted that according to the decision of the Supreme Court in the case of H.H. Maharaja Rana Hemant Shinghji (supra) personal use includes use by the members of the family. He also referred to the decision of the Bombay High Court in CIT v. Sitadevi N. Poddar [1984] 148 ITR 506 wherein the meaning of ‘personal effects’ is stated to mean articles intended for the personal or household use which means normally, commonly and ordinarily intended for personal or household use.
7. The learned departmental representative strongly supported the order of the learned Judicial Member and also tried to support the disallowance on the ground stated by the Commissioner (Appeals), viz., absence of details for the sale of articles weighing 46.89 kgs. He also submitted that both the Accountant Member and the Judicial Member have referred to the same decision of the Supreme Court, viz., H.H. Maharaja Rana Hemant Singhji’s case (supra). According to the learned departmental representative, the learned Judicial Member has applied the ratio of the decision of the Supreme Court correctly. He also contended that according to the order of the teamed Accountant Member not only silver utensils but also other articles were included in personal effects sold but in the absence of details it is difficult to support the assessee’s contention that they were silver utensils which were sold.
8. On consideration of the facts and in the circumstances of the case, 1 agree with the finding of the learned Accountant Member. The facts adverted to earlier clearly show that what was sold were the silver utensils intended for personal use of the assessee and members of his family. There is no force in the contention sought to be raised by the departmental representative that there were also other articles apart from the silver utensils sold by the assessee during the relevant year as per the bills produced as there is no material to support the contention. The statement and declaration of the assessee in connection with wealth-tax proceedings, the bills produced for the sale and the claim made by the assessee in the course of assessment proceedings all clearly point to the fact that what were sold were utensils and not any other articles. Indeed there is no dispute or disagreement on this fact between the two members as would be clear from the point of difference referred, viz., whether the assessee would be liable for capital gains on the sale of silver utensils weighing 46.89 kgs. Now, as pointed out by the learned counsel for the assessee, there is no material on record to hold that any of the utensils sold were specifically intended for use by the guests or that so far as such utensils are concerned, it could be said that they are not meant for personal or household use by the assessee. Therefore, I am of the view that there is no basis for the assumption that there were silver utensils used by the assessee which were intended for the guests and they cannot be regarded as personal effects. Probably the observations of the learned Accountant Member in para 5 of his order that the nature of articles like silver utensils like thalis, vatkas, etc., indicates that they are normally used at the time of dinner or on auspicious or festive occasions not only for the use of the family but also for entertaining guests and relations has given cause for this assumption. I do not think that the observation of the learned Accountant Member was a finding of fact supported by materials considered by him in this regard. It appears to be a general observation concerning as a matter of practice or custom that the utensils and other articles of personal and household use are also used on occasions to entertain the guests. As already stated there is no finding or any materials on record to hold that any of the utensils sold were earmarked or set apart for use of guests. It is also my view that to constitute personal effects it is not necessary that the concerned utensils or other articles should be used daily by the assessee or members of his family as held in the Bombay High Court decision referred to by the assessee’s counsel in Jayantilal A. Shah’s case (supra) and in Sitadevi N. Poddar’s case (supra) and also that they should always be used only by the assessee and nobody else. This is evident from the fact that items like furnitures are also contemplated and it is obvious that they are meant not only for the use of the assessee and members of his family but also of the guests or visitors. To confine the me aning of the expression ‘intended for personal use by the assessee or members of his family’ to only use personally by the assessee or any member of his family dependent upon him is too narrow and impracticable an interpretation or construction. The normal and ordinary meaning according to me is that the assessee or any member of his family has the right or benefit of the use of these articles for himself or for receiving or entertaining his guests or visitors. For instance, a sofa set as a furniture may be used by the assessee to receive his visitors or guests and similarly can be used by any member of his family to receive the guests or relations and for that reason it cannot be said that the furniture is not meant for personal use by the assessee or members of his family. Of course, there may be some articles which cannot be used by any other person than the assessee himself or members of his family such as a ring or personal clothing, etc., but the nature of use in this context, namely whether it should be confined to the personal or physical use of the assessee or members of his family or not will depend upon the nature or type of articles. Under the circumstances, I agree with the learned Accountant Member that silver-utensils intended for household use of the assessee are personal effects of the assessee within the meaning of Section 2(14) and the sale thereof is not liable to capital gains charge.
9. The matter will now go to regular Bench for passing order in accordance with Section 255(4).