Case Name: Narendra I. Bhuva v. Assistant Commissioner of Income Tax
Case Number: Income Tax Appeal No. 681 of 2003
Date of Judgment: 14 August 2025
Quorum: Hon’ble Chief Justice Alok Aradhe and Hon’ble Justice Sandeep V. Marne
Facts
Narendra I. Bhuva, an employee of Indu Nishan Oxo-Chemical Industries Ltd, filed his return of income for the Assessment Year 1992-93. The case related to the purchase and subsequent sale of a vintage car, a 1931 Ford Tourer. Bhuva purchased the car in 1983 for Rs. 20,000 and sold it in 1992 for Rs. 21,00,000. The Income Tax Officer however, treated the Rs. 20,80,000 as income from business. The intimation stated that the sale could not be regarded as a sale of personal effects, but of a capital asset. The Commissioner of Income Tax (Appeals) partially allowed Bhuva’s appeal, holding that the car was a personal effect, but the Income Tax Appellate Tribunal (ITAT) reversed that decision and concluded that the vintage car was not shown to have been used as personal effects, and restored the assessment of capital gains.
Issues
Whether the Tribunal was justified in law in holding that the vintage car owned by the appellant was not his personal effects.
Whether the gain on the sale of the vintage car was liable to tax under the head ‘Capital Gains’.
Legal Provisions Involved
Section 2(14) of the Income Tax Act, 1961: “A ‘capital asset’ is defined in the Act and does not include ‘personal effects. Personal Effects’ must be movable property that the assessee or dependants use personally, but not jewelry, artifacts, drawings, paintings, sculptures or other works of art.
Section 260-A of the Income Tax Act, 1961: There is a substantive appeal to the High Court on substantial questions of law arising out of an order of the ITAT.
Arguments
Petitioners’ Arguments:
The vintage car was revealed as a personal asset in wealth tax returns and, therefore, exempt.
The car had not been depreciated in the income tax return highlights its personal asset treatment.
The car’s upkeep was recorded in the personal withdrawal portion of the returns which supports the personal asset treatment.
The reliance on Supreme Court and High Court authority regarding ‘personal effects’ and ‘assets’ which were occasionally used was highlighted and included references:
Commissioner of Income-tax v. Smt. Sitadevi N. Poddar, (1984) 17 Taxman 345 (Bombay).
Jayantilal A. Shah v. K.N. Anantharama, (1985) 156 ITR 448 (Bombay).
The Commissioner of Income-tax v. Benarashilal Kataruka, (1990) 185 ITR 493 (Calcutta).
More cases were cited where ‘personal effects’ were found to include items of occasional use.
Respondents’ Arguments:
Upheld ITAT’s conclusion that there was no credible evidence that the car was used personally by the assessee.
Referenced H.H. Maharaja Rana Hemant Singhji v. Commissioner of Income-Tax, Rajasthan (1976) 103 ITR 61 SC, that emphasized personal effects must require ‘intimate connection’ and to actually have been, personally used.
Evidence could not be produced that established mere capability for personal use or pride of possession meant the asset was a personal effect.
Analysis
The Court extensively discussed the definition and interpretation of ‘personal effects’ under Section 2(14) of the Income Tax Act, using a number of judicial precedents to inform its conclusion. Their chief consideration was whether the vintage car was ‘intimately and commonly used’ by the assessee, rather than merely being owned, as a pride of possession or for ornamental reasons.
The core finding of the ITAT was that the assessee did not lead evidence to prove personal use of the car, as he could not prove even occasional use, he did not park the car at his residence, and he did not substantiate expenditure on the use or maintenance of the car. The wealth treatment tax and not claiming depreciation may be relevant in separate contexts, but did not assist in proving personal use. The court distinguished the prior cases referred to by the appellant, because all dealt with substantive proof of personal or occasional use such as with silverware and jewelry, and that too, used on occasional religious festivals, and earlier utilization brought to account in his benefit. In this instance, there was no proof of an occasional use (for protests or personal commute), nor was the car attached to daily personal life.
Accordingly, the Tribunal’s order was recognized to reflect the proper application of law and fact, while also dismissing CIT(A)’s reliance on peripheral elements.
Judgment
The Bombay High Court said that the answer to the substantial question of law had to be answered against the assessee. The vintage car had not been proved to belong to him, that is to say, as a personal effect, that it was therefore a capital asset, and hence the gain from the sale of it was taxable under ‘Capital Gains’. The court dismissed the appeal, affirming ITAT’s conclusions that the required evidentiary burden of proof had not been met.
Conclusion
This ruling confirms the proposition that, to exclude an asset as a ‘personal effect’ for the purposes of Section 2(14) of the Income Tax Act, the use must be genuine, intimate and ordinary personal use shown by evidence. Ownership, pride of purpose or entries in wealth tax returns or accounting records alone does not satisfy the requirement. The Court’s approach demonstrates the need for sufficient evidence to determine an exception to a capital asset, and establishes an evidentiary standard for ‘personal effect’ in describing assets such as vintage cars for income tax purposes.
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WRITTEN BY __ Kondala Phani Priya
