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Issues:
1. Taxation of capital gains on the sale of assets held for personal use. 2. Interpretation of the definition of "personal effects" under section 2(4A) of the Income-tax Act, 1922. Analysis: The judgment by the High Court of Rajasthan involved a dispute regarding the taxation of capital gains on the sale of assets held for personal use. The case revolved around the interpretation of the definition of "personal effects" under section 2(4A) of the Income-tax Act, 1922. The deceased Maharaja's movable property, including gold sovereigns, old silver rupee coins, and silver bars, were sold after his death, and the capital gains were computed by the Income-tax Officer. The assessee, recognized as the successor, objected to the taxation, claiming the assets were held for personal use. The Tribunal and lower authorities rejected the appeal, leading to the reference to the High Court. The main contention was whether the assets sold were considered capital assets chargeable to capital gains tax. The assessee argued that the articles were personal effects excluded from the definition of capital assets under section 2(4A) of the Act. The definition excluded movable property held for personal use by the assessee or family members. The assessee claimed the assets were used for religious purposes during specific ceremonies, forming part of personal use. The High Court analyzed the definition of personal effects under section 2(4A)(ii) and emphasized that personal effects must have an intimate relation with the possessor and be in personal use. The court highlighted that occasional use for religious ceremonies did not qualify as personal use. Referring to legal precedents, the court rejected the argument that a collection providing solace or pleasure could be deemed personal effects. The court concluded that merely placing the assets before Goddess Lakshmi during puja did not transform them into personal use items. Ultimately, the High Court upheld the Tribunal's decision, ruling in favor of the tax department. The court answered the reference in the affirmative, affirming that the assets sold were capital assets subject to capital gains tax. Additionally, the court directed the assessee to pay Rs. 200 as costs to the department. The judgment provided a detailed analysis of the definition of personal effects and the requirements for an item to qualify as such under the Income-tax Act, 1922.
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