The Hindu Business Line : Salaried are no maharajas

IS car a personal effect? A queer question to ask, but the Mumbai tax tribunal considered this issue when dealing with the Narendra I. Bhuva case not long ago.

Bhuva, a salaried employee, purchased a vintage Ford Tourer 1931 model in 1983 for Rs 20,000 from Jesraj Singh, an IAS officer, who was in urgent need of funds. About a decade later, he sold the car for Rs 21 lakh and claimed the profit derived on the sale as not taxable, saying the vehicle was after all his `personal effect.'

The taxman doesn't like stuff like this, so he enquired and found out that at no point of time did Bhuva used the car for his personal purpose. Nor any maintenance expense debited or depreciation claimed. "There was no intention of keeping the car in running condition and, therefore, the car amounted to a capital asset and not a personal asset," said the taxman, and computed "profit from the sale of car" as Rs 21 lakh minus Rs 20,000, that is Rs 20,80,000, to be brought into the tax net as long-term capital gain or profit from `adventure in the nature of business.'

The tribunal's ruling points out that Bhuva parked his car at a relative's house with a garage facility, because as a prudent businessman he would not think of "parking such a valuable article in open compound or on the road at his Matunga address." Also, that Bhuva had purchased the car "for treating foreign guests."

Much attention was then bestowed by the tribunal on looking at the `personal effect' angle in the case. To support their respective claims, counsels of Bhuva and the Department presented precedents, none of which was about antique car. They were, instead, about coins used for Mahalaxmi puja, ceremonial belt, paintings and so forth. So, the tribunal referred to dictionary meanings, such as: "Personal effects: privately owned articles consisting chiefly of clothing, toilet items and so on for intimate use by an individual; such tangible property as is worn or carried about the person."

Applying this test, the tribunal opined that the antique car in question could not be taken as personal effect of the assessee. There was no material to substantiate the stand of Bhuva that it was used for personal purposes. "The assessee has failed to produce any evidence that some expenditure was incurred on repair of the car or running of the car or having used occasionally like participating in any car rally organised by the government or by any other organisation." That should be sufficient clue for vintage car owners.

On parking, the tribunal had this to say: "The fact that the car was not even parked at the residence of the assessee also strengthens the case of the ITO that it was not used by the assessee." It could have been `a pride of possession,' conceded the tribunal, but `personal use' was different.

Before wrapping up, the tribunal said: "The element of pride of possession can be understood, to some extent, in the case of Maharaja or Maharani, but it is difficult to understand in the case of a salary employee like the assessee."

Ah, to know that pride of possessions are but distant dreams for the salaried does hurt one's pride. Also, let us stop imagining that in democracy everybody is king.

ExParte@TheHindu.co.in

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