Case: H. H. Maharaj Rana Hemant Singhji, Dholpur Vs. Commissloner Of Income-Tax, Rajasthan

This appeal by special leave is directed against the judgment dated December 2, 1 1969 of the High Court ofstated 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 seal ed 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 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 individuals 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 ([1960] 39 I.T.R. 123, 131). 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,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.

Reasoning: In S. Poddar v. The Commissioner of Wealth Tax, Bombay City-II(I.L.R. [1965] Bom.1062.) where the assessee at the time of his appointment in the year 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) ofthe 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 thatare, 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.