Vintage car sale is subject to capital gains tax if there’s no proof of its personal use: Bombay High Court
Narendra I. Bhuva v. Assistant Commissioner of Income Tax (Bombay High Court, ITXA No. 681 of 2003
Case Background
1. Assessee: Narendra I. Bhuva (later represented by legal heirs).
2. Issue: Whether gain on sale of a vintage car (“Ford Tourer 1931 Model”) purchased in 1983 for ₹20,000 and sold in 1992 for ₹21,00,000 was taxable as Capital Gains or exempt as personal effects.
3. Legal basis: Section 2(14), IT Act – “Capital asset” excludes personal effects (movable property held for personal use).
Proceedings
1. AO (1994):
Treated ₹20.8 lakh as business income from sale of motor car.
2. CIT(A) (1994):
Held that vintage car is a personal asset since:
It was shown as personal asset in wealth-tax returns,
no depreciation was claimed,
high maintenance costs, parts locally fabricated.
Deleted addition.
3. ITAT (2003):
Reversed CIT(A).
Held vintage car was not personal effect because:
No evidence of personal use,
Not used even occasionally,
Not parked at assessee’s residence,
Treated only as “pride of possession.”
Hon Bombay HC held as below:
1. One of the plea taken by the assessee that assessee had purchased the car as a pride of possession. It may have been kept as a matter of pride but it is difficult to understand how such user can be characterized as a ‘personal use’. The ‘personal use’ which is contemplated by the exemption is not a pride of possession.
2. For treating a movable property as personal effects, an intimate connection between the effects and the person of the Assessee must be shown….Thus capability of a car for personal use would not ipso facto lead to automatic presumption that every car would be personal effects for being excluded from capital assets of the Assessee.
3. So the appeal by assessee is dismissed.
The copy of the order is as under:
