2017 (6) TMI 687 - HC - Wealth-tax

Royal Buggy - art work - whether the Royal Buggy in question was not exempted under section 5 (1) (xii) of the Wealth Tax Act, 1957, because, it was covered under the first proviso to clause (viii) of sub-section (1) of Section 5 of the said Act? - Held that - Since incidental overlapping is unavoidable, the attempt on the part of the Court in such case would be to ascertain in which clause the article would more appropriately be covered. Clause (xii), as noted, provides for exemption in case of works of art of archeology, scientific or art collection, books or manuscripts, not intended for sale. If any work of art can be incidentally also be put to personal use, it would not destroy its very essence or basic character of being an art work. By very nature of things its use may be rare or on special occasions. The element of such an article being one of personal use would be wholly incidental. In the present case itself, the assessee has been pointing out that the Baggi was not meant for ordinary or daily use. Though functional, it would be used on rare ceremonial occasions. That fact that it can be put to such a use was wholly incidental to the article being a work of art . The Tribunal, in our opinion, therefore committed an error in holding that even if the article was one of work of art , since it is possible to be put to personal use, it would get ejected from Clause (xii) and would fall only under Clause (viii) of Sub-section (1) of Section 5 of the Act. The question framed is answered in favour of the assessee. Tax Appeals are allowed. Judgment of the Tribunal is set aside and that of Commissioner (Appeals) is restored.

Summary

Issues Involved:
1. Whether the Royal Buggy qualifies as a "work of art" under Section 5(1)(xii) of the Wealth Tax Act, 1957.
2. Whether the Royal Buggy, being an article for personal use, falls under Clause (viii) of Sub-section (1) of Section 5 and is excluded from Clause (xii).

Issue-wise Detailed Analysis:

1. Qualification as a "Work of Art":
The appellant-assessee, a member of the erstwhile royal family of Vadodara, owned a horse chariot (Baggi) with substantial gold content, claiming it as a "work of art" exempt under Section 5(1)(xii) of the Wealth Tax Act, 1957. The Baggi was used on ceremonial occasions and contained exquisite engravings and embossings on gold panels depicting animals like elephants and horses. The Commissioner (Appeals), after a personal inspection, found the Baggi to be a "work of art" due to its exquisite and breathtaking beauty. The Tribunal, however, did not dispute these findings but concluded that the Baggi, being for personal use, falls under Clause (viii) and not Clause (xii).

The court referred to previous judgments to interpret "work of art." In the case of SB. Zainab Noorul Sayeeda and Others (262 ITR 306), the Andhra Pradesh High Court defined "work of art" as a painting, sculpture, or other fine arts production of high quality, constructed with manifest skill. The Madras High Court in M.A. Chidambaram (239 ITR 371) emphasized that a "work of art" must involve human skill and present rare aesthetic beauty. The court concluded that the Baggi, with its exquisite engravings, qualifies as a "work of art."

2. Applicability of Clause (viii) and Exclusion from Clause (xii):
Clause (viii) of Sub-section (1) of Section 5 includes furniture, household utensils, wearing apparel, and other articles for personal or household use, excluding those made wholly or partly of gold, silver, platinum, or other precious metals. Clause (xii) exempts works of art, archaeological, scientific or art collections, books, or manuscripts not intended for sale.

The Tribunal held that even if the Baggi is a "work of art," it falls under Clause (viii) due to its personal use and is excluded from Clause (xii). The court disagreed, stating that merely because an article can be put to personal use does not destroy its essence as a "work of art." The court emphasized that the intention of the legislation is to provide exemptions for works of art, and incidental personal use does not negate this.

The court concluded that the Baggi, being a "work of art," falls under Clause (xii) and is exempt from wealth tax, despite its potential personal use. The Tribunal's judgment was set aside, and the Commissioner (Appeals)'s decision was restored.

Conclusion:
The High Court ruled in favor of the assessee, holding that the Royal Buggy qualifies as a "work of art" under Section 5(1)(xii) of the Wealth Tax Act, 1957, and is exempt from wealth tax. The court emphasized that incidental personal use does not exclude an article from being considered a "work of art."