1980 (7) TMI 118 - AT - Income Tax

Summary

Issues:
- Whether the surplus on the sale of personal effects can be considered as capital gain.

Analysis:
The appeal was filed by the Revenue against the order of the AAC for the assessment year 1976-77, specifically challenging the deletion of an addition of Rs. 45,000 made by the ITO as capital gain. The Revenue contended that the items sold by the assessee were not personal effects but items of everyday use, and therefore, the profit from their sale should be assessed as capital gain. The AAC, after detailed examination, concluded that since the items were furniture and household items, the surplus could not be considered as capital gain, and allowed the appeal of the assessee.

The Revenue further argued before the Tribunal that the items sold could not be classified as furniture, citing Section 2(14) of the IT Act, 1961. The section excludes personal effects from the definition of capital assets, defining personal effects as movable property held for personal use by the assessee or their family members. Referring to a Supreme Court case, the Revenue contended that only items intimately or commonly used by the assessee should be considered personal effects. The assessee, on the other hand, relied on the AAC's order.

After careful consideration, the Tribunal determined that the nine items sold were indeed furniture commonly used by the assessee, falling under personal effects as defined in the IT Act. The Tribunal emphasized that personal effects include items held for personal use by the assessee, regardless of their rarity of use. The Tribunal agreed with the AAC's decision, stating that the surplus from the sale of personal effects cannot be treated as capital gain under the IT Act. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the AAC's order.