HIMATLAL C VALIA Vs. COMMISIONER OF INCOME TAX

JUDGEMENT

(1.) This reference arises at the instance of the assessee under the provisions of Section 256(1) of the Income Tax Act (hereinafter referred to as the Act) for our opinion. The following 2 questions are required to be answered:-

(2.) The short facts necessary to be taken note of are that the assessee holds 790 silver items of dinner sets. The question arises is whether the assessee can be subjected to tax on capital gains. The case of the assessee is that the capital asset sold by him were his `personal effects' and excluded from the definition of `capital asset' by virtue of clause (ii) of Section 2(14) of the Income Tax. The alleged capital gain is exempt from payment of tax. The definition of `capital asset' contained in Section 2(14) as it stood in the relevant assessment year 1977-78, reads as under:-

(3.) The Tribunal in its order dated 22.12.1983 which has given rise to this reference has duly taken note of the decision of the Supreme Court in H.H.Maharaja Rana Hemant Singhji Vs. C.I.T., Rajasthan reported in 103 ITR 61, the decision of the High Court of Bombay in the case of Jayantilal A Shah Vs. K.N.Anantharam Aiyar Vs. Commissioner of Income Tax reported in 1985 156 ITR 448 and the decision of the Madhya Pradesh High Court in H.H.Maharani Usha Devi V. CIT (1982) 133 ITR 43. After considering the ratio of the aforesaid cases on the meaning and interpretation of words "personal effects" which are excluded from the definition of `Capital assets' under Section 2(14), the Tribunal came to the conclusion that all the silver items of dinner sets being intended for personal use even though occassionally and not frequently, are `person effects'. On the sale of them no tax by way of capital gain is leviable. Even after holding thus the Tribunal passed an order of remand of the case to the I.T.O. with directions `to ascertain the number of members of the assessee's family who are dependent upon him and allow the deduction of value only of one set each for the assessee and for the said members of the family dependent upon him.' The further direction made is that `in the case of common items i.e. coffee set, assorted utensils and water jug, the items allowable for deduction should be taken in the same proportion as the number of persons (i.e. assessee plus the said members of his family) bears to the total number 48.'