IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment delivered on: 26.08.2014
W.P.(C) 5560/2013
RASHDA SIDDIQUI Petitioner
versus
COMMISSIONER OF INCOME TAX-VIII, NEW DELHI & ORS.
.....Respondents
Advocates who appeared in this case:
For the Petitioners : Mr Karthik Ashok.
For the Respondents : Mr Balbir Singh and Mr Abhishek Singh.
CORAM:
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SIDDHARTH MRIDUL
JUDGMENT
BADAR DURREZ AHMED, J (ORAL)
1. This writ petition is directed against the order dated 25.03.2013 passed
by the Commissioner of Income Tax under Section 264 of the Income Tax
Act, 1961 (herein after referred to as ,,the said Act).
WP(C) 5560/2013 Page 1 of 7
2. The only issue that is raised in this petition pertains to the Assessment
Year 2006-07 and is with regard to a painting which was sold by the
petitioner/assessee in the year ending 31.03.2006. The painting was sold by
the petitioner/assessee for a sum of Rs.34 lacs. The painting had been
acquired by the assessee prior to 01.04.1981 and, therefore, the value of the
painting as on 01.04.1981 was taken and indexed upto the date of the sale to
compute the indexed cost of acquisition at Rs.16,15,250/-. When the
petitioner/assessee filed her return of income, she included this computation
and disclosed long term capital gains of Rs.17,84,750/-, being the difference
between the sale price and the indexed cost of acquisition. On the said
amount, she paid tax of Rs.3,66,434/- and interest of Rs.75,852/- totalling to
Rs.4,42,286/- on account of tax and interest.
3. Subsequently, the petitioner is stated to have realised that Section 2
(14) of the said Act which defined ,,capital asset had been amended with
effect from 01.04.2008 whereby ,,paintings were specifically included in the
expression ,,capital asset. Prior to 01.04.2008 paintings were not so included
and were regarded as personal effects which were excluded from the purview
of ,,capital asset. Section 2(14) was amended with effect from 01.04.2008.
Paintings were taken out of the purview of the personal effects and were
WP(C) 5560/2013 Page 2 of 7
specifically brought within the ambit of capital assets. It was contended by
the petitioner that the mistake made by her by treating the painting as a
capital asset and not as a personal asset even for assessment year 2006-07
(i.e., prior to 01.04.2008) was realized subsequent to her filing of the return
and receipt of the intimation under Section 143 (1) of the said Act.
Thereupon, she moved an application seeking rectification of the mistake
and consequent refund of the said amount of Rs.4,42,286/-. That application
was rejected by the Assessing Officer on 23.01.2012. Being aggrieved
thereby, the petitioner/assessee filed a revision application under Section 264
which also has been rejected by the Commissioner by virtue of the impugned
order dated 25.03.2013.
4. For the assessment year 2006-07 (i.e., prior to 01.04.2008), Section
2(14), to the extent relevant for our purposes, read as under:-
"(14) "Capital asset" means property of any kind held
by an assessee, whether or not connected with
his business or profession, but does not include
(i) xxxx xxxx xxxx xxxx
(ii) personal effects, that is to say, movable
property (including wearing apparel and
furniture, but excluding jewellery) held
for personal use by the assessee or any
member of his family dependent on him.
Explanation. For the purposes of this sub-
clause, "jewellery" includes
WP(C) 5560/2013 Page 3 of 7
(a) ornaments made of gold, silver, platinum
or any other precious metal or any alloy
containing one or more of such previous
metals, whether or not containing any
precious or semi-precious stone, and
whether or not worked or sewn into any
wearing apparel;
(b) precious or semi-precious stones,
whether or not set in any furniture,
utensil or other article or worked or sewn
into any wearing apparel;"
xxxx xxxx xxxx xxxx xxxx"
By virtue of the Finance Act, 2007 sub-clause (ii) of section 2(14) of
the said Act was substituted, with effect from 01.04.2008, by the following:-
"(ii) personal effects, that is to say, movable property
(including wearing apparel and furniture) held for
personal use by the assessee or any member of his
family dependent on him, but excludes
(a) jewellery;
(b) archaeological collections;
(c) drawings;
(d) paintings;
(e) sculptures; or
(f) any work of art.
Explanation. For the purposes of this sub-clause,
"jewellery" includes
(a) ornaments made of gold, silver, platinum or any other
precious metal or any alloy containing one or more of
such precious metals, whether or not containing any
precious or semi-precious stone, and whether or not
worked or sewn into any wearing apparel;
WP(C) 5560/2013 Page 4 of 7
(b) precious or semi-precious stones, whether or not set in
any furniture, utensil or other article or worked or sewn
into any wearing apparel;"
5. The issue as to whether a painting could, at all, be a personal effect or
not, was considered by a Division Bench of this Court in Faiz Murtaza Ali v.
Commissioner of Income Tax: (2014) 360 ITR 200 (Delhi). This court, for
the period prior to 01.04.2008, clearly noted that paintings had been
considered to be personal effects. However, in the said decision, after
referring to the Supreme Court decision in HH Maharaja Rana Hemant
Singhji v. CIT (1976) 103 ITR 61 (SC), it was also noted that only those
articles were to be included in the definition of ,,personal effects which were
intimately and commonly used by the assessee. It was also concluded in
Faiz Murtaza Ali (supra) that the mode of acquisition of the articles was not
material and what had to be examined was whether, in fact, the articles in
question were in the personal use of the assessee.
6. Referring to the decision of the Gujarat High Court in Himatlal C.
Valia v. CIT: (2001) 248 ITR 262 (Guj.) as also to the decision of the
Supreme Court in CIT v. H H Maharani Usha Devi: (1998) 231 ITR 793
(SC), the Division Bench in Faiz Murtaza Ali (supra) observed that the
WP(C) 5560/2013 Page 5 of 7
frequency of use of an article was also not a relevant factor for determining
whether the article was a personal effect or not.
7. We also notice from the said decision in Faiz Murtaza Ali (supra) that
in that case there was evidence of the fact that the articles in question, which
included paintings, had been held by the assessee therein for personal use
and there was no material which had been brought out by the Assessing
Officer or the revenue to indicate anything to the contrary. On the basis of
the evidence on record, the Court found that the articles in question ought to
have been held to be ,,personal effects of the assessee. This is evident from
the following passage from the said decision:-
"11. Looking at the totality of circumstances we are of the
view that the assessee has been able to show that the
articles in question were inherited and/or received by him
by way of gift. Those articles were moveable properties.
They did not include any jewellery and they had been held
for personal use by the assessee and they were
subsequently sold by him to various buyers. The fact that
these articles were held by him for personal use has been
indicated in the affidavit filed by the assessee before the
assessing officer. No material has been brought out by the
assessing officer or the revenue to indicate that the affidavit
is false. Therefore, on the basis of evidence on record, the
articles in question ought to have been held to be "personal
effects" of the assessee."
WP(C) 5560/2013 Page 6 of 7
8. In the present case, we find that since the assessee herself in her return
had not claimed the painting as a personal effect, there is no evidence on
record on either side. The only thing that we can say with certainty is that
prior to 01.04.2008, a painting could be regarded as a ,,personal effect. But,
before a painting can be regarded as a ,,personal effect there must b e
evidence on record to show that it was intimately and commonly used by the
assessee. There is no such evidence on either side, and, therefore, we feel
that for this limited issue, the matter be taken up by the Assessing Officer to
determine the same on the basis of evidence and in view of the position in
law discussed above. For this limited aspect, the matter is remitted to the
Assessing Officer. The impugned orders are set aside.
9. The assessee is given liberty to file additional documents within two
weeks from today and that the Assessing Officer shall return a conclusive
finding on the above aspect within three months from today.
BADAR DURREZ AHMED, J
SIDDHARTH MRIDUL, J
AUGUST 26, 2014
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