LexTHE COMMISSIONER OF INCOME TAX, MADHYA PRADESH, BHOPAL versus H.H. MAHARANI USHA DEVI
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THE COMMISSIONER OF INCOME TAX,
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MADHYA PRADESH, BHOPAL
v.
H.H. MAHARANI USHA DEVI
B
MAY 14, 1998
(SUJATA v: MANOHAR ANDS. RAJENDRA BABU, JJ.]
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Income Tax:
c
Income Tax Act, 1961-Sec.2(/4), Sec.45-Gainsfrom sale of heirloom
jewellery-Used in ceremonial occasions - Held, are personal effects-The
profits and gains arising from sale of the items are not taxable.
The assessee, an ex-Ruler of erstwhile Holkar State, sold two of her
D heirloom jewellery. She claimed that they were her personal effects and for
sale of these items capital gains tax. is not payable. Though the Tribunal
rejected the contention, it referred the matter to the High Court. The High
Court held in favour of the assessee. On appeal it was contended that because
the jewellery is meant for use on ceremonial occasions, it will not be a part
of the asseesee's personal effects.
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Dismissing the appeal, the Court
HELD : 1. The definition of "capital asset" in Section 2(14) of the
Income tax does not include personal effects including jewellery. On the
facts found by the Tribunal, the items of jewellery in question were the
F personal effects of the assessee held for personal use by assessee were
excluded from the definition of the term capital asset. As such, profits and
gains arising from the sale of these items was not taxable under the provisions
of Section 45. (462-F]
G
H.H. Maharaja Rana Hemant Singhji v. Commissioner of Income Tax,
Rajasthan, 103 ITR 61, distinguished.
Commissioner of Income Tax, Bombay City-VI!/ v. Sita Devi N. Poddar,
..
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148 ITR 506; Jayantilal A. Shah v. K.N. Anantharam Aiyar; Commissioner
of Income Tax and Ors., 156 ITR 448 and G.S. Poddar v. Commissioner of
H Wealth Tax. Bombay City-II; 57 ITR 207, referred to.
458
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C.I.T. v.H.H.MAHARANIUSHADEVI [SUJATA V. MANOHAR,J.]
459
Commissioner of Income Tax A.P. Hyderabad v. Trustees of H.E.H. The A
Nizam's Wedding Gifts Trusts, 154 ITR 573, approved.
2. The frequency of use of the Jewellery must necessarily depend on
its nature and merely because it can be used on ceremonial occasions only,
it does not follow that the property is not held by the assessee for personal
use.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 10004 of 1983.
From the Judgment and Order dated 21.2.81 of the Madhya Pradesh
High Court in M.C.C. No. 152of197.8.
Dr. V. Gouri Shanker, Tara Chand Sharma, B.K. Prasad, C. Radhakrishan
and S. Rajappa the Appellant.
Joseph Vellapally, Manoj Wad, Tarun Gulati and Ms. J.S. Wad for the
Respondent.
The Judgment of the Court was delivered by
MRS. SUJATA V. MANOHAR, J. The assessee is the ex-Ruler of the
erstwhile Holkar State. The assessee was assessed as an individual and the
assessment year involved is 1972-73.
In 1949, the Ministry of States, New Delhi had accepted certain heirloom
jewellery as private properties of His late Highness Maharaja Keshaw Rao
Holkar of Indore. These included a "Sirpech" and a Ceremonial belt. All the
listed jewellery and gold in the Huzur Jawahirkhana at Indore in 1949 and used
by the Ruler of Indore on ceremonial occasions as in the past, were exempt
under the provisions of Section 5(l)(xiv) of the Wealth-Tax Act.
During the accounting year relating to the assessment year 1972-73, the
assessee sold two items of heirloom jewellery for Rs. 13,80,001. The assessee
claimed before the Tribunal that the heirloom jewellery constituted personal
effects of the assessee within the meaning of Section 2(14) of the Income-Tax
Act, 1961, and, therefore, the sale of this jewellery did not give rise to any
taxable capital gains. This contention was negatived by the Tribunal. The
Tribunal, however, framed the following question for reference before the
High Court of Madhya Pradesh under Section 256(1) of the Income-Tax Act,
1961:
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460
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SUPREME COURT REPORTS
[1998] 3 S.C.R.
"Whether on the facts and in the circumstances of the case, the
heirloom jewellery constituted 'personal effects' within the meaning
of Section 2(14) of the Income-tax Act, 1961, therefore, the sale thereof
did not give rise to any taxable capital gains?"
The High Court has answered the question in favour of the assessee.
B Hence the present appeal.
Under Section 45 of the Income-tax Act any profits or gains arising from
the transfer of a capital asset effected in the previous year is chargeable to
Income-tax under the head 'Capital Gains'. Such profits oExcerpt shown. Read the full judgment & AI analysis in Lexace.