TMI Blog2007 (9) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer s act of adding a sum of Rs. 6,40,892 as long-term capital gain under section 45. When as per the order of Assessing Officer cost of acquisition being NIL , computation of capital gain under section 48 is not possible and hence charging section 45 cannot be applied as is held by Hon ble Supreme Court in CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294 (SC). 3. On the facts and circumstances of the case, the lower authorities have erred in making an addition of Rs. 6,40,892 as long-term capital gain under section 45. There being no ready market or price list for rare postal stamps and covers, same being very old and acquire as different point of time, on various occasions and from different sources much before 1980, hence their valuation can only be done on the basis of catalogue published by Stanley and Gibson (world s largest dealer of postal stamps and covers) as on 1-4-1981 and accretion in their value can be calculated accordingly." 3. Briefly stated facts are that the assessee is a senior advocate practising in the Hon ble Supreme Court of India. During the relevant year the assessee sold a collection of rare stamps through which he received a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emant Singhji 103 ITR 61 has considered this issue at length and has laid down a seminal test to address his question. It is worthwhile to quote from the decision at this point: I quote : We have given our earnest consideration to the submission of ld. counsel for the parties. For a proper decision of the point in question, it is necessary to refer to section 2(4A) of the Act, the relevant portion whereof runs thus: "2(4A) capital asset means property of any kind held by, an assessee, whether or not connected with his business, profession or vocation, but does not include ( ii )personal effects, that is to say, movable property (including wearing apparel, jewellery and furniture) held for personal use by the assessee or any member of his family dependent on him." The expression personal use occurring, in clause ( ii ) of the above quoted provisions is very significant. A close scrutiny of the context in which the expression occurs shows that only those effects can legitimately be said to be personal which pertain to the assessee s person. In other words, an intimate connection between the effects and the person of the assessee must be shown to exist to render them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ser can be characterized as personal use. The language of section 5(1)( viii ) of the Wealth-tax Act, 1957, which is in pari materia with the definition of the expression personal effects as given in section 4A( ii ) of the Act is also helpful in construing the latter provision. That provision runs as follows : "5. (1) Subject to the provisions, of sub-section (1A), wealth tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee ( viii )furniture, household utensils, wearing apparel, provisions and other articles intended for the personal or household use of the assessee but not including jewellery." In G.S. Poddar v. CWT, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the deceased was valued at over 5,800 pounds it was held that "Since the collection was made and kept by the testator as his only a principal hobby it could properly be described as an article of personal use notwithstanding that its value was such that it might be regarded as an investment for the two were not mutually inconsistent. In conclude that the prima facie meaning of the expression personal effect is such that it would include the stamp collection. This case clearly is not applicable in the present circumstances of the appellant. Firstly, the jurisprudence and a case for probate regarding a will is not applicable in a proceeding. The Mumbai Tribunal judgment in the case of paintings cited above is neither bounding nor exactly similar as the present case where stamps collected through the appellants lifetime and sold in an auction in London for a considerable sum of money. The action of the Assessing Officer is upheld. The appellant has raised a ground of appeal that since the cost of acquisition has been taken at nil , capital gains tax cannot be computed. The appellant contends that the amount on which tax is to be charged has to be computed according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to the person of possessor. The Apex Court in the case of H.H. Maharaja Rana Hemant Singhji v. CIT [1976] 103 ITR 61, has held that intimate connection between the effects and the persons of the assessee must be shown to exist to render them personal effects within the meaning of that expression used in clause ( ii ) of the exceptions in section 2(4A) of the Indian Income-tax Act, 1922. The Legislature intended only those articles to be included within the expression personal effects which are intimately and commonly used by the assessee. 7. In the present case the assessee has collected rare postal stamps and covers since last more than 50 years as his personal assets. The assessee was founder member of the Philatelic Congress of India (the apex organization of stamp collectors) and remained its Secretary General from 1975 to 1979 and President from 1980 to 1982. He was also member of International Philatelic Jury from 1980 to 2001 and participated in Philatelic Exhibitions, in and outside India from time to time. The assessee had sold some of his collection of rare stamps at the fag end of his life as his personal asset in an auction held in London, U.K. for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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