Personal effects exclusion: vintage car not shown to be for actual personal use, so sale proceeds were taxed as capital gains.

Section 2(14) excludes movable property held for personal use from the definition of "capital asset" only where the article has an intimate, commonly used connection with the assessee and is actually used for personal purposes. Applying that test, the Bombay HC noted the absence of evidence of even occasional personal use of the vintage car, as well as the lack of proof of maintenance or running expenses; the surrounding circumstances suggested it was kept as an article of pride rather than a personal effect. On that basis, the Tribunal's treatment of the car as outside the exclusion was upheld, and the sale proceeds were taxed as capital gains.

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Issues: Whether the gain arising from sale of the vintage car was taxable as capital gains, or whether the car was excluded from "capital asset" as a personal effect held for personal use.

Analysis: Section 2(14) of the Income Tax Act, 1961 excludes from "capital asset" movable property held for personal use by the assessee or a dependent family member. The expression "personal effects" requires an intimate connection between the article and the person of the assessee, and the article must be normally or commonly used for personal use. Applying that test, the assessee had to show actual personal use of the car. The record showed no evidence of even occasional personal use, no proof of maintenance or running expenses, and other circumstances indicated that the car was kept as an article of pride rather than as a personal effect. The Tribunal was therefore justified in treating the car as not falling within the exclusion.

Conclusion: The sale proceeds were rightly taxed under the head capital gains, and the assessee's contention that the vintage car was a personal effect was rejected.

Ratio Decidendi: For exclusion from "capital asset" under the personal effects carve-out, the assessee must prove actual personal use and an intimate, commonly used connection with the movable property; mere capability of personal use or pride of possession is insufficient.

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