TaxTMI 
TaxTMI 
2013 (9) TMI 562
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....ce management expert in raising of finances, who has promoted many companies. In his individual capacity, he has a long history of being associated with new artists and the paintings made by them have been traded over the years. The Assessing Officer further observed that most of the trading in paintings done by the assessee is through his individual running account he maintains with Synergy Art Foundation Ltd., online auction houses and art galleries. The Assessing Officer further observed that there was a search and seizure action under section 132 of the Act taken by the Department on the business premises of Synergy Art Foundation on April 17, 2007 and certain incriminating documents were found and seized. On scrutiny of the seized material the Assessing Officer observed that the assessee in his individual capacity was also found to have indulged in the unaccounted purchases and sales of paintings. Accordingly, a notice under section 153C was issued to the assessee and in response, the assessee filed return declaring a taxable income of Rs. 30,25,536 as declared by him in the original return filed on January 9, 2007. The Assessing Officer after issuing a statutory notices under....
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....le of paintings and year of purchase with purchase prices in tabular form in these two years. It was the assessee's contention that the Commissioner of Income-tax (Appeals) without verification of facts and relying on the distorted facts stated in the assessment order has not considered the submissions while disposing of two appeals before him. The reasons stated by the Commissioner of Income-tax (Appeals) to dismiss the submissions are rebutted as under : (a) The assessee, though a promoter director of Synergy Art Foundation Ltd., is not a 82 per cent. shareholder thereof as alleged in the order. The assessee and his wife hold together only 0.37 per cent. shares in the company and another 65.94 per cent. is held by companies owned by him. Thus cumulative controlling interest in this company by the assessee is only 66.31 per cent. which does not enable him to take absolute control (76 per cent.) in this public limited company. Hence to allege controlling interest as a ruse to acquire paintings in an advantageous portion, is a mischievous attempt by both the Assessing Officer and the Commissioner of Income-tax (Appeals) to throw the assessee in poor light and thereby allege contum....
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.... that the allegation that the assessee is trading in paintings by frequent purchase and sale thereof is untrue and unsubstantiated. It was the contention of learned counsel that even though the assessee used online platform, it is not for maximizing the profits but only to get a better price for the investment made. He further submitted that frequency of operations taking risk does not indicate that the assessee is involved in trading but only happens to hold as investment because of his passion and interest in paintings. It was further submitted that the assessee furnished all the details to the Assessing Officer as well as the Commissioner of Income-tax, year of purchase to the extent the assessee is having details and so considering the nature of the paintings held by him these are to be considered as capital assets and as per the definition of section 2(14) of the Act available then, the paintings are personal effects which does not attract capital gain. Learned counsel placed his reliance on the order of the Income-tax Appellate Tribunal in the case of Asst. CIT v. Mrs. Dilnavaz S. Variava [2003] 87 ITD 113 (Mumbai) to submit that on similar facts it was held that paintings c....
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....gy Art Foundation is not tallying with the facts on record as there is evidence that the assessee has also purchased from other art centres like kalayatra, individual painters, etc. Coming to the same paragraph 5(e) it was submitted that only 15 paintings were sold to Synergy Art Foundation between 1998-99 to 2006-07, the details of which were not furnished either before the Assessing Officer or before the Commissioner of Income-tax (Appeals) nor before us so as to verify whether there is any gain or profit earned in selling these paintings to the Foundation in which he is having interest. Further, even though the assessee contends that he has purchased many paintings before 1996, except few paintings with reference to correspondence with kalayatra, nothing was placed on record to verify the price or date of purchase. Therefore, it is very difficult to ascertain whether the assessee has indulged in trading or investment in the absence of complete details that are within the knowledge of the assessee, but not placed on record. Coming to the contention that whether these paintings can be considered as personal effect, the assessee relied on the decision of the Incometax Appellate T....
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....tensils. It was further held that the use as a decoration in the drawing room, which is only calculated to get a pride of possession is not contemplated by the exemption. This decision was rendered in the context of the Wealth-tax Act. 10. In the present case we find that the assessee is a connoisseur of art. The object of art is not only the pride possession but it also satiates the aesthetic quench for the art of the connoisseur. It gives joy to the possessor which is different from the pride of possession. The expression 'personal effect' as per the Black's Law Dictionary means articles associated with person, as property having more or less intimate relation to person of possessor. In Re Collins Will Trusts v. Hewetson [1971] 1 WLR 37, valuable stamp collection was held to be personal effect. In the case of Lippincott's Estate 173 Pa. 368, 34 Atl. 58, furniture and pictures were held to be articles of personal effects. The apex court in the case of H. H. Maharaja Rana Hemant Singhji v. CIT [1976] 103 ITR 61 (SC) has said that an intimate connection between the effects and the person of the assessee must be shown to exist to render them 'personal effects' within the meaning of ....
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....bsp; 1994* Natraj Sharma March 2006 19,14,059 2 1-3-2006** 3,37,500 Anju Dodiya March 2006 47,86,653 44,49,153 Total 3,58,750 84,33,230 80,74,480 * Both paintings purchase in 1991 and 1994 respectively for aggregate value of Rs. 21,250 breakup not available, since purchased on running accounts. ** Purchase by Synergy Art Foundation Ltd. for Rs. 1,50,000. Assessment year 2007-08 S. No. Purchase year Purchase price (Rs.) Artist name Sale date Sale price (Rs.) Profit (Rs.) 1 December 1991 or there about 32,000 K. G. Subramanyan May 2006 13,71,130 13,39,130 2 Year 1989 or thereabout 15,000 Ganesh Pyne May 2006 2,69,019 2,54,019 Total 47,000 16,40,149 15,93,149 As can be seen from the above, it was the submission that the assessee purchased many of the paintings way back in 1991 to 1994 and the Assessing Officer accepted the cost even though there is n....
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....ot be co-related with certain purchases placed in the paper book. Therefore, in the interest of justice, without giving any finding on the issue, we restore the matter to the file of the Assessing Officer to examine the entire gamut of purchases of the assessee from inception, the details of purchase and sale therein year-wise and also to analyse with reference to the purchases from M/s. Synergy Art Foundation Ltd., the time gap of holding and the amounts its purchases and sale so as to examine whether the assessee is an investor or trader. Since complete details are required to be examined by the Assessing Officer, the issue whether the assessee is a trader or an investor is restored to the file of the Assessing Officer to examine complete details and analyse the facts correctly so as to come to a correct conclusion. We make it clear that these holdings of paintings cannot be considered as personal effects. It is also on record that the assessee was holding these paintings in a packed condition and is preserving them according to the norms required and is not displaying them at his house. These aspects were admitted in the course of arguments. Therefore, these paintings cannot be....