SMT. SHREE KUMARI MUNDRA VS COMMISSIONER OF INCOME-TAX
1999 P T D 2725
[228I T R 548]
[Calcutta High Court (India)]
Before Ajoy Nath Ray and Barin Ghosh, JJ
Smt. SHREE KUMARI MUNDRA
Versus
COMMISSIONER OF INCOME-TAX
Income-tax Reference No. 173 of 1992, decided on 16/07/1997.
(a) Income-tax---
----Appellate Tribunal---Is ultimate fact-finding authority---Not entitled to decide case on part of facts and evidence and keep another material part out of consideration---Sale of personal effects, namely, silver utensils ---Assessee producing full details including challans before Tribunal giving details of utensils sold---Tribunal considering sale bills only, without corresponding challans---Resulted in miscarriage of justice.
(b) Income-tax,
----Capital asset---Exemption---Silver utensils---Whether personal effects-- Some degree of connection between person of assessee and items is necessary ---Assessee need not necessarily wear them on his or her person-- Household items can also be personal effects although very expensive decorative pieces might not class as such---Distinction between personal effects and assets intended for use in business or profession---Glasses, plates and bowls weighing eleven kilograms not so valuable as to become capital assets---Silver utensils sold are personal effects---Entitled to exemption-- Indian Income Tax Act, 1961, S.2(14).
Though the Tribunal is the ultimate fact-finding authority, it is not entitled to decide the case on part of the facts and evidence, and keep another material part out of consideration.
For the assessment year 1981-82, the assessee claimed exemption in respect of the sale of her personal effects, namely, silver utensils, weighing 51.5 kgs. The assessee produced full details including challans before the Tribunal giving details of the utensils sold. According to the assessee, the Tribunal, without considering those comprehensive details, held that the evidence produced before the lower Authorities as well as before the Tribunal did not establish that the silver utensils sold by the assessee during the previous year were personal effects, that the items sold and their respective weight and which were reproduced in the Tribunal's order were fully substantiated by the documents which were before the Tribunal and that this was also borne out in the statement of case forwarded by the Tribunal to the High Court. Therefore, the assessee contended that although the Tribunal is the final fact-finding authority, yet it does not have the right to discard, keep out of consideration or fail unreasonably to consider material documents, which, if considered, could not but have materially affected the Tribunal's decision:
Held, reversing the decision of the Tribunal, that had all the details been considered, which contained particulars of the persons to whom the items were sold and also their addresses, the sale-of the utensils would have been a matter beyond dispute before any reasonable authority. No rejection of the assessee's case would, in that event, even be possible, because of any suspicion in the mind of the authority, that the weight of the silver being 51 kgs. it was not composed of utensils but was composed of some other items which were not personal effects. Suspicion and conjecture have no role to play in this regard and the utensils sold could not but have been held by the assessee as personal effects and this finding could not but have gone in favour of the assessee. Therefore, the Tribunal had misdirected itself in considering the sale bills only, without the corresponding challans and this resulted in miscarriage of justice to that had the corresponding challans been considered, the Tribunal could not but give its decision on the basis that the items sold were silver utensils and nothing other than silver utensils as specified by the assessee, being plates (thalia), glasses (kutori), cooking bowl (topni) and water container (kalash).
On the further question whether the utensils were personal effects within the meaning of section 2(14) of the Income Tax Act, 1961:
Held, reversing the decision of the Tribunal, that items, to be classified as personal effects, would have to be considered in the following light. Some degree of connection between the person of the assessee and the items is necessary. The assessee need not necessarily be able to wear the item on his or her person. Household items and utensils can also be personal effects although very expensive decorative piece might not be classified as such. A distinction is to be borne in mind as between personal effects and assets intended for use in business or profession. It is on an assessment of these and other attendant relevant factors that a decision has to be reached whether the items which were sold were personal effects within the meaning of section 2, clause (14), or not. The plates, glasses, etc., in question were none of them outsized. For example, 11 glasses, 6 plates and four bowls in all weighed 11 kgs. The glasses, bowls, etc. were not, on any reasonable view of the matter, items of drawing room decoration or such valuable items as to fan only the pride and self-importance of the assessee. The items were not also so valuable as to become capital assets or a saving or investment to be sold at the time of business needs. Therefore, the Tribunal was not right in law in holding that the silver utensils sold by the assessee were not personal effects as to bring them within the exemption granted by section 2, clause (14) of the Act.
Chandra Kumar Singh Kasliwal v. CWT (Addl.) (1980) 122 ITR 151 (MP); CIT v. Benarashilal Kataiuka (1990) 185 ITR 493 (Cal.); CIT v. Gujarat Travancore Agency (1976) 103 ITR 149 (Ker.); CIT v. Sitadevi N. Poddar (1984) 148 ITR 506 (Bom.); Jayantilal A. Shah v. Anantharam Aiyar (K.N.) CIT (1985) 156 ITR 448 (Bom.); Lalchand Bhagat Ambica Ram v.CIT (1959) 37 ITR 288 (SC); Omar Salay Mohamed Sait v. CIT (1959) 37 ITR 151 (SC); Poddar (G.S.) v. CWT (1965) 57 ITR 207 (Bom.); Ramanathan Chettiar (R.) v. CIT (1985) 152 ITR 493 (Mad.) and Rana Hamant Singhji (H. H. Maharaja) v. CIT (1976) 103 ITR 61 (SC) ref.
R. N. Bajoria, Senior Advocate with J. P. Khaitan and Dilip Roy Chowdhury for the Assessee.
R.C. Prasad for the Commissioner.
JUDGMENT
AJOY NATH RAY, J.---The two questions which have been referred to us by reason of our order passed under section 256(2) relate to the exemption which the lady assessee claimed in regard to the assessment year 1981-82 for sale of her personal effects.
It is not in dispute that the personal effects were all silver utensils.
It is also not in dispute that those utensils were sold by the assessee and that the total weight of those items came to about 51.5 kgs.
The full details including challans were produced by the assessee, not at the very first level of assessment, but only ultimately before the Tribunal. This again is not disputed. But that the challans were produced before the Tribunal is also not a point in dispute. In the statement of case forwarded to us by the Tribunal, they have included those challans showing the details of the items sold.
The questions were as follows:
(i) Whether, on the facts and in the circumstances of the case, the Tribunal has misdirected itself in considering the sale bills only without the corresponding letter/challans of the silver utensils sold wherein the details were mentioned resulting in the miscarriage of justice?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the silver utensils sold by the assessee during the previous year were not personal effects within the meaning of section 2(14) of the Income-tax Act. "
We propose to take the two questions serially. So far as the first one is concerned, Mr. Bajoria submitted that although the challans giving the details of the utensils sold were before the Tribunal, yet, without considering those comprehensive details, the Tribunal opined that the evidence produced before the lower authorities as well as before them did not establish that the silver utensils sold by the assessee during the previous year were personal effects. Mr. Bajoria submitted that the Tribunal recorded in no uncertain terms that the details were not furnished to the Tribunal whereas in fact those details were furnished.
To emphasize this point, Mr. Bajoria submitted that the chart which gives the items sold and their respective weight and which is reproduced in the Tribunal's order was fully substantiated by the documents which were before the Tribunal, although not before the lower authorities. In the statement of case forwarded to us we find that the chart of weight and items is borne out by the documents reproduced from pages 45 to 50 of the paper book. Thus, the submission on the part of the assessee was that, although the Tribunal is the final fact-finding authority, yet it does not, have the right to discard, keep out of consideration, or fail unreasonably to consider material documents which, if considered, could not but have materially affected the Tribunal's decision.
In support of this proposition, Mr. Bajoria first referred us to the three-member Bench decision of the Supreme Court in the case of Omar Salay Mohamed Sait v. CIT (1959) 37 ITR 151, AIR 1959 SC 1238. In paragraph 29 (at page 163 of 37 ITR), of the judgment, the Supreme Court opined that in that case their Lordships would have to determine whether the finding of fact reached by the Appellate Tribunal was vitiated inasmuch as it was unsupported by evidence or was unreasonable and perverse in nature having been arrived at by improper rejection of evidence available.
Again at paragraph 42 (at page 170 of 37 ITR), the Court opined that the conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and also that it should not act on no evidence at all or on improper rejection of material and relevant evidence.
The second case relied on in this regard by Mr. Bajoria was the case of Lalchand Bhagat Ambica Ram v. CIT (1959) 37 ITR 288, AIR 1959 SC 1295, that is just a few pages after the earlier decision mentioned. There, on the left column at page 1299 (at page 295 of 3.7 ITR), Omar Salay Mohamed Sait v. CIT (1959) 37 ITR 151, is quoted. The very passage where the Supreme Court mentioned about the Tribunal's improper rejection of material is the passage under quotation.
It was emphasized on the part of the Department that neither the High Court nor the Supreme Court can or should enter into facts and that the Tribunal is the ultimate fact-finding authority. Written notes of arguments were given to us. With this proposition we have no dispute but it is at the same time equally true that the Tribunal in exercise of its ultimate fact-finding power and jurisdiction is not entitled to decide the case on part of the facts and evidence and keep another material part out of its consideration.
Even when the Tribunal was requested to make a reference on its own under section 256(1), the Tribunal merely passed over the issue and it did not face squarely the lacuna which had occurred because of its non- consideration of the relevant challans which would go to show, in exact details the nature of the items sold so as to total up to the weight of 51 kgs. of silver.
Had these details been considered, which contained all particulars of the persons to whom the items were sold and also their addresses, the sale of the utensils would have been a matter beyond dispute before any reasonable authority, No rejection of the assessee's case would, in that event, even by possible, because of any suspicion harboured in the mind of the authority, that the weight of the silver being 51 kgs., it was not composed of utensils but was composed of some other items which were not personal effects. Suspicion and conjecture have no role to play in this regard and that the utensils were sold could not but have been held by the Tribunal and this finding could not but have gone in favour of the assessee.
Therefore, so far as the first question is concerned we answer it in the affirmative and hold that the Tribunal had misdirected itself in considering the sale bills only without the corresponding challans and this resulted in the miscarriage of justice, in that, had tote corresponding challans been considered, the Tribunal could not but give its decision on the basis that the items sold were silver utensils and nothing other than silver utensils as specified by the assessee, being plates (thalia), glasses (kutori), cooking bowl (topni) and water container (kalash).
The second question relates to whether the utensils were personal effects within the meaning of section 2(14) of the Income-tax Act.
If those were personal effects entire exemption should have been given to the assessee in regard to the sale price obtained because the sale of personal effects would not be taxable at all.
The dispute was raised as to whether the above silver utensils could be classed as personal effects or not. Several authorities were relied on in this regard. The first case given by Mr. Bajoria is a Division Bench decision of our Court given in the case of CIT v. Benarashilal Kataruka (1990) 185 ITR 493. It was relied upon for the proposition that it is mainly on the nature of articles that the question whether the articles are personal effects or not is to be determined. That case also concerned silver utensils. Mr. Bajoria submitted that here also the items are none other than silver utensils.
The next case is a judgment of an Hon'ble Single Judge of the Bombay High Court (now in the Hon'ble Supreme Court) given in the case of Jayantilal A. Shah v. Anantharam Aiyar (K.N.) CIT (1985) 156 ITR 448. It was said there with regard to personal effects that those need not be used daily. It was said that to use daily use as a test would be an incorrect test. It was opined that so long as the effects are meant for personal use these will have to be considered as personal effects. The judgment went even so far as to say that the very fact that furniture is also included in personal effect would show that the articles need not have an intimate connection with the person of the assessee.
The next case is the case of CIT v. Sitadevi N. Poddar (1984) 148 ITR 506 (Bom.), a Division Bench judgment of the Bombay High Court in (1984) 148 ITR 506. From this decision it is clear that the view taken was that personal effects do not have to be those items, which can be worn on the person of the assessee. It was said that personal effects should be clearly, commonly and ordinarily intended for personal or household use. Those were not to be confined to articles, which could be worn on the person of the assessee.
Mr. Bajoria distinguished the case referred to by the Tribunal in its order which is a Madhya Pradesh High Court decision given in the case of Chandra Kumar Singh Kasliwal v. CWT (Addl.) (1980) 122 ITR 151. Mr. Bajoria said that there the assessees were all minors. The ladies jewellery were claimed as the personal effects of those minors. If the claim is made in such an unnatural way so that the personal effects cannot be the personal effects, of the assessees then and in that event the claim might be rejected but there was nothing unnatural in the lady assessee in the instant case having silver utensils as her own personal effects.
The last case given by Mr. Bajoria is a Full Bench decision of the Kerala High Court given in the case of CIT v. Gujarat Travancore Agency (1976) 103 ITR 149. The Madhya Pradesh case was considered here.
The first decision relied on, on the side of the Department is a Madras High Court decision given by a Division Bench in the case of R. Ramanathan Chettiar (R.) v. CIT (1985) 152 ITR 493. It was said on the basis of this case that if the articles are too numerous they might not class as personal effects. In the Madras case, the assessee's petition was dismissed and the claims referred to a large number of items of silver articles as having been held for personal use. The silver articles sold during the year in question were 845 in number. The Court opined that it was not possible to treat all those items as having been kept by the assessee for personal use. The Assessing Authority would have to find out as to what are the articles, which could reasonably be held to have been kept by the assessee for personal use.
The next case of the Department was H. H. Maharaja Rana Hemant's case (1976) 103 ITR 61 (SC). The Supreme Court emphasised the connection, which the effects must have with the person. It is there that the Supreme Court first said that the effects should normally, commonly or ordinarily be intended for personal or household use.
In that case the Supreme Court considered another case being that of G. S. Poddar v. CWT (1965) 57 ITR 207 (Bom.), where gold caskets, gold trays, gold glasses, gold cup, saucer and spoons were involved. The Supreme Court noted that the use as decoration in a drawing room calculated to give a pride of possession is not contemplated by the exemption, which attaches to personal effects. Such exemption might become applicable to furniture, household utensils, wearing apparel, etc.
From the above authorities, we find that items, to be classified as personal effects would have to be considered in the following light. Some degree of connection between the person of the assessee and the items is necessary. The assessee need not necessarily be able to wear the item on his or her person. Household items and utensils can also be personal effects although very expensive decorative pieces might not be classified as such. A distinction is to be borne in mind as between personal effects and assets intended for use in business or profession. It is on an assessment of these and other attendant relevant factors that a decision has to be reached whether the items which were sold were personal effects within the meaning of section 2, clause (14) or not.
We do not have the benefit of the Tribunal's decision on whether the silver utensils were considered by the Tribunal to be personal effects or not, it not having been first persuaded that the items sold were silver utensils as claimed. Since it shut out relevant material on the proof of the utensils to be such, it created a self-imposed bar in not properly considering whether the silver utensils were personal effects or not.
We might mention that whether these items were personal effects or not were matters of discussion before the lower authorities and the assessee did not get a favourable result. The Tribunal found that justified.
In giving our opinion on this aspect of the matter, we first note that the plates, glasses, etc., were none of them outsized. For example, 11 glasses, 6 plates and four bowls in all weighed 11 kgs. The glasses, bowls, etc., are not, on any reasonable view of the matter, items of drawing room decoration or such valuable items as to fan only the pride and self importance of the assessee. The items were not also so valuable as to become a capital asset or a saving or investment to be sold in the time of business need; these were not even matters of argument, before us, but we consider these, as these throw light on the innate nature of the items, which are claimed to be personal effects.
Therefore, the second question is answered in the negative and the Tribunal was incorrect in law in holding that the silver utensils sold by the assessee were not personal effects so as to bring in the exemption granted by section 2, clause (14) of the Income-tax Act.
The questions as answered shall be transmitted to the Tribunal which will pass its appropriate order thereon granting exemption to the assessee in respect of the silver utensils sold which are the subject-matter of the present reference.
The oral application made under section 261 for leave to appeal to the Supreme Court under the Income Tax Act, 1961, is refused as the matter, in our opinion, is quite clear and the money stakes are not so high that we should give leave to the Department to go up to the Supreme Court.
The written note submitted by Mr. Prasad, learned Advocate on behalf of the Department, be kept on record counter-signed by the Court officer.
BARIN GHOSH, J.---I agree.
M.B.A./3017/FC Reference answered