Law:

Section:

Section 2(14) of the income-tax act, 1961-Capital asset-Whether loose diamonds could be said to be 'personal effects' held by the assessee so as not to attract capital gains tax on their sale-held, no Facts The ITO levied capital gains tax on the assessee in respect of some loose diamonds sold by her. The AAC confirmed the ITO's order, but the Tribunal set it aside, holding that loose diamonds held by the assessee were articles intended for personal use and were not liable to be included in the term capital assets as defined in section 2(14). On reference : Held The definition of 'capital asset' in section 2(14) opens with the words 'property of any kind', but some assets, e.g.,personal effects intended for personal use of the assessee, are excluded or excepted from the compass of capital assets in terms of sub-clause (ii). However, there is an exception upon exception in the case of jewellery, which is taken out of the exception and brought within the main part of the definition. Thus, whether it is intended for personal use or not, jewellery would stand out of the exception and fall within the main category of 'movable property', and its sale would be sale of a capital asset entailing capital gains tax. The Tribunal's decision to the contrary was, therefore, incorrect. Cases referred to CWT v. Arti Goenka [1980] 121 ITR 632 (Mad.) and CWT v. Arundhati Balkrishna [1970] 77 ITR 505 (SC). Judgment SETHURAMAN, J.- In this case arising under the Income-tax Act, 1961 ('the Act') the following question has been referred : "Whether, on the facts and in the circumstances of the case, the loose diamonds could be said to be 'personal effects' held by the assessee for her personal use and that, therefore, no capital gains tax can be levied on the sale thereof ?" 2. The relevant assessment year is 1972-73. The assessee had sold loose diamonds of the value of Rs. 40,000 held by her for her personal use from a period prior to 1954. In the absence of any information regarding the original cost or the fair market value as on 1-1-1954, the ITO had estimated the value and determined the capital gains at Rs. 28,000. The assessee had claimed before the ITO that no capital gains…

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