Rajasthan H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the value of paintings was not includible in the wealth of the assessee ?

Counsel Appeared

B. R. Arora, for the Revenue : R. Balia, for the Assessee

MILAP CHANDRA, J.:

This is a reference under s. 27(1) of WT Act, 1957 (hereinafter to be called as “the Act”), made by the Tribunal, Jaipur Bench, Jaipur, at the instance of the CWT, Rajasthan-I, Jaipur, to answer the following question of law, namely :

“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the value of paintings was not includible in the wealth of the assessee ?”

It relates to the asst. yrs. 1964-65 and 1965-66. The facts of the case giving rise to it may be summarised thus. The assessee, the late Shri Moti Chand Khajanchi, was the Karta of his HUF. Besides holding movable and immovable properties, he held paintings, manuscripts and other art objects. In the wealth-tax returns for the asst. yrs. 1964-65 and 1965-66, he made a note in them to the effect that drawings, paintings, manuscripts, etc., being not intended for sale were exempt under s. 5(1)(xii) of the Act and hence not declared in the return of wealth-tax. During the assessment proceedings, he asserted that these objects were acquired and held by him in pursuit of his hobby and were not intended for sale. The WTO did not accept his contentions, valued them at Rs. 3,84,000 and included this amount in his net wealth. The assessee preferred appeals before the learned AAC. They were dismissed. Thereafter, he filed second appeals before the learned Tribunal. The Tribunal held that the assessee was holding the paintings to satisfy his hobby and not for the purpose of sale and both the appeals were allowed. On the request of the CWT, Rajasthan I, Jaipur, the said reference has been made by the learned Tribunal in respect of both the said assessment years. During the pendency of the reference, the assessee, Shri Moti Chand Khajanchi, died and his legal representatives were brought on record.

It has been contended by learned standing counsel for the Department that the assessee held the paintings and art objects for sale and not to satisfy his hobby, for, otherwise, he would not have sold them. He also contended that previously also, he sold the paintings to Vidyapeeth, Sangaria.

In reply, it has been contended by learned counsel for the assessee that the Tribunal, Delhi Bench, has held in I. T. No. 54 of 1971-72 relating to the asst. yr. 1964-65 that the assessee was not liable to income-tax on the sale of the disputed paintings as he was not carrying on business and it was not an adventure in the nature of trade. He further contended that these paintings were sold in the national interest on the great persuasion of the Director, National Museum, New Delhi, the previous sale to Vidyapeeth, Sangaria, was effected on account of the great insistence of Swami Keshavanandji in the year 1949-50 and all these paintings and art objects were purchased from his personal money except once. No account of their purchases was ever maintained and his collections were held in high esteem by various authors, curators and lovers of art. He lastly contended that he held the paintings and curios in pursuit of his hobby and he never intended to sell them.

The learned Tribunal has categorically observed in para. No. 7 of his order dt. 13th March, 1975, as follows : “We have found that the assessee was not holding the paintings for the purpose of sale. His object in holding these paintings, curios, etc., was to satisfy his hobby.”

The Department has not challenged it. It is also not its case that the Tribunal failed to take into account the relevant material on record in arriving at its finding or acted upon inadmissible evidence or misread the evidence or based its conclusion on conjectures and surmises. The provisions of s. 27(1) of the Act are similar to the provisions of s. 256(1) of the IT Act, 1961, and s. 66(l) of the Indian IT Act, 1922. It is not permissible for the Court in its reference jurisdiction to reappreciate the evidence and to interfere with the finding of fact recorded by the Tribunal. Reference to Anil Kumar Roy Chowdhury vs. CIT (1976) 102 ITR 12 (SC) may be made here.

It is also mentioned in the order of the learned Tribunal dt. 13th March, 1975, that in the wealth-tax assessment relating to the assessment years 1960-61 and 1961-62, the value of the paintings was not included in the net wealth of the assessee and the second appeals against the levy of income-tax on the sales of paintings relating to the asst. yrs. 1964-65 and 1965-66 were allowed as the assessee was not carrying on any business and it was a casual and non-recurring receipt not liable to income-tax.

It may be mentioned here that at the instance of the learned Commissioner, Income-tax, Rajasthan II, Jaipur, reference was made by theTribunal relating to the said asst. yrs. 1964-65 and 1965-66 and it has been rejected by this Court by its detailed order passed today in IT Ref. No. 10 of 1976, CIT vs. Moti Chand Khajanchi-(1988) 171 ITR 280.

The Tribunal has correctly applied the law to the admitted or proved facts and has correctly held that the disputed paintings were not intended for sale. The learned Tribunal rightly held them exempt from wealth-tax. As such, the aforesaid question deserves to be answered in the affirmative.

In the result, the aforesaid question is answered in the affirmative, against the Department and in favour of the assessee.

[Citation : 171 ITR 289]