Vintage Car Not a ‘Personal Effect’: Bombay High Court Dismisses Assessee’s Tax Appeal.
14-August-2025
Income Tax >> Tax Laws
In Narendra I. Bhuva v/s Assistant Commissioner of Income Tax, Circle 13, (1), Mumbai, a Section 260-A income tax appeal brought by an assessee contesting the taxation of capital gains from the sale of a historic vehicle, a 1931 Ford Tourer, was dismissed by the Bombay High Court. The car was bought by the assessee, a salaried employee, for Rs. 20,000 in 1983 and sold for Rs. 21,00,000 in the 1992–1993 assessment year. The main question was whether, in accordance with Section 2(14) of the Income Tax Act of 1961, the car qualified as a "personal effect" and was therefore not considered a "capital asset."
The automobile was deemed a personal asset by the CIT (Appeals), which partially permitted the appeal after the Assessing Officer initially regarded the revenue as company income. The Income Tax Appellate Tribunal (ITAT), however, overturned the CIT(A)'s judgment, concluding that the car was not used for personal use and that the profits were therefore subject to capital gains tax.
The ITAT's ruling was confirmed by the High Court, which concluded that:
- Personal effects must demonstrate frequent and intimate personal usage in order to be eligible for exclusion.
- The assessee failed to provide any proof of personal usage of the vehicle.
- A number of factors contradicted the assessee's claim, including the car being parked far from the house, the absence of maintenance or usage records, and the use of a corporate vehicle for personal commuting.
- Personal usage does not include pride of possession or mere ownership.
- It was determined that references to earlier rulings concerning personal decorations and silver utensils were unimportant since, in each of those cases, some proof of personal usage was proven, unlike in this one.
The Supreme Court reiterated that the ability to use something for personal use alone is insufficient; actual utilization must be demonstrated, citing its ruling in H.H. Maharaja Rana Hemant Singhji. The Court determined that the antique car did not qualify as a personal effect and that the capital gains on its sale were taxed since the assessee was unable to prove this.
The appeal was denied after the substantial point of law was decided against the assessee.
Section 260A, Income Tax Act - 1961