N. Krishnamurthy, J.M:— These appeals by the assessee are directed against the orders of the CIT(A) relating to the asst. yr. 1982–83. Since these appeals involve identical questions, the same are considered together and disposed of by this common order.
2. Each of these assessees is an HUF by status and owns ⅓rd share in the house property known as “Lawrels” situated at Ootacamund. This property alongwith the movable assets like furniture, cutlary, potted plants etc. were sold by the assessee's to the trustees of L & T Educational and Welfare Trust, Bombay, on 22nd March, 1982 for a total consideration of Rs. 11 lakhs. The share of each asssesee-HUF comes to Rs. 3,66,667. Out of this, a consideration of Rs. 1 lakh was received by these assessees towards the sale price of the items of furniture, cutlary, potted, plants etc. The assessees in their. Income tax returns for the asst. yr. 1982–83 claimed exemption of the sale price of these movable assets from capital gains-tax on the ground that they are the “personal effects” of the assessee-HUFs and are, therefore, not capital assets within the meaning of s. 2(14) of the IT Act. The ITO rejected this claim of the assessees and subjected this amount to capital gains-tax. The reason given by the ITO was that the exclusion of the value of personal effects would be applicable only to an assessee in the status of an Individual and that the same would not be available to an HUF which is an artificial juridical person. Aggrieved by this, the assessee's preferred appeals to the CIT(A). Before the CIT(A) it was contended that though the assessees are HUFs by status, yet, all these items of property, i.e furniture, cutlery etc. are the personal effects of the assessees and, therefore, their value has to be deducted while arriving at the value of the capital asset of the assessees under s. 2(14) of the Act. However, this claim of the assessee's was rejected by the CIT(A) on the ground that the provisions of s. 2(14)(ii) of the Act would be applicable only to individual human beings and not to an HUF Which is a juridical person. For reaching this conclusion, the CIT(A) has placed reliance on the decision of the Madhya Pradesh High Court in the case of Shri Gopal Rameshwardas v. Addl. CIT, (1978) CTR (MP) 293 : (1979) 119 ITR 980 (MP).
3. The present appeals before us are against the aforementioned orders of the CIT(A). The learned counsel for the assessees submitted that the movable properties which were sold are the personal effects of the HUFs which consisted of several individuals members of the family that an HUF can have personal effects and that therefore, the value of these personal effects has to be deducted while arriving at the value of the assets under s. 2(14) of the Act. It is further submitted that the Madhya Pradesh High Court's judgment in Shri Gopal Rameshwardass's case (supra) which, was relied on by the Commissioner deals, with the interpretation of the provisions contained in s. 54 of the Act whereas the assessee's case concerns with, the interpretation of s. 2(14)(ii) of the Act.- In support of the fact that the HUF can have personal effects as contemplated in s. 2(14)(ii) of the Act, the assessee's counsel has placed reliance on the decision of the Madras High Court in the case of Ramanathan Chettiar, R. v. CIT reported in (1985) 152 ITR 493 (Mad). In view of the above, it is submitted that the order of the Commissioner (A) holding that the movable properties of the assessees are not their personal effects and hence they form part of the capital asset of the assessees is liable to be set aside. Against this, the learned Departmental Representative submitted that according to the decision of the Supreme Court in H.H Maharaja Rana Hemant Singhji, Dholpur v. Cit, Rajasthan reported in (1976) CTR (SC) 188 : (1976) 103 ITR 61 (SC), an intimate connection between the effects and the person of the assessee must exist to render movable property—the personal effects of the assessee. Such an intimate connection between the effects and the person of the assessee would be possible only in the case of living person and that since the assessees are artificial or juridical persons, such an intimate connection between the effects and the person of the assessee would not be possible and consequently the benefit of s. 2(14)(ii) would not be available to the assessee—HUFs. In support of the stand that an HUF cannot have personal effects, reliance was placed on the decisions of the M:P. High Court in the cases of Shri Gopal Rameshwardass (supra), Kaniahlal v. CIT, (1984) 149 ITR 157 (MP); CIT v. Abhoji Rao Phalke, (1984) 42 CTR (MP) 68 : (1985) 156 ITR 604 (MP) and the decision of the Karnataka High Court in the case of CIT v. C. Chandraseknar, (1984) 38 CTR (Kar) 246 : (1984) 145 ITR 429 (Kar).
4. We have considered the respective contentions of the parties. The assessees in these cases are HUF's by status. The question, therefore, that arises for consideration is whether such HUF can claim the benefit of “personal effects” contemplated in s. 2(14)(ii) of the IT Act.
5. In Shri Gopal Rameshwardass's case (supra), the Madhya Pradesh High Court, while interpreting the provisions of s. 54 of the Act, has taken the view that the word ‘assessee’ should normally refer to living persons and not to an artificial juridical person or a fictional person. While so doing it denied the benefit of exemption to the assessee HUF under s. 54 since it is not a living person. The same view was affirmed by the Madhya Pradesh High Court in Kaniahla's case cited supra. Similar is the view expressed by the Karnataka High Court in the case of C. Chandrasekhar (supra) while dealing with the scope of s. 54 of the Act. However, we may state that the language used in s. 54 is not pari materia with the language of s. 2(14)(ii) and as such, the decisions in those cases may not be applicable to the present case while interpreting the provisions of s. 2(14). Therefore, this matter requires to be considered in the light of the provisions contained in s. 2(14)(ii) alone. This section runs as under:
“2(14) “capital asset” means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include:
(i) xx xx xx xx
(ii) personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him.”
6. A reading of the above provision gives an impression that the expression assessee occuring therein means only a living person because of the use of the words “any member of his family dependent him. However, s. 13 of the General Clauses Act says that unless there is anything repugnant in the subject of context, the words used in singular shall include plural and vice-versa. We are concerned with the question as to whether an HUF can have personal effects like furniture, movable etc. Though an HUF is a legal entity for the purposes of taxation, it is nothing but a group of individuals consisting of coparceners and their families. Shortly, an HUF is a group of individuals. When an HUF owns movable assets, it means all the members of the HUF own them. In-fact, the learned author Mullah on Hindu Law (15th Ed. at page 314, while dealing with the rights of coparceners, has stated that no coparcener is entitled to any special interest in the coparcener property nor is he entitled to exclusive possession of any part of the property. It is further stated that each coparcener is entitled to joint possession and enjoyment of the family property and if any coparcener is excluded from joint possession or enjoyment, he is entitled to enforce his right by a suit. In view of the above, it is clear that all the members of an HUF are entitled to the joint possession and enjoyment of the movable property and no coparcener could say that the movable assets belonged to him only. Thus, construed in the context of an HUF, there would be nothing repugnant to the subject or context when it is stated that the movable assets of the HUF belonged to all the members constituting it. Hence, if the assessees were to include a group of individual like coparceners in an HUF, the referene to any member of ‘his family would mean any members of their’ families. There is nothing in this expression to limit the meaning of the word ‘assessee’ to a singular person.
7. Apart from the above, the Supreme Court in CIT v. Sodra Devi, (1957) 32 ITR 615 (SC) has observed that the word individual has not been defined in the Indian IT Act, 1922 and there is authority for the proposition that the word ‘Individual does not mean only a human being but is wide enough to include a group of persons forming a natural unit. Again, the Supreme Court in WTO v. C.K Mamnied Kayi, (1981) 21 CTR (SC) 345 : (1981) 129 ITR 307 (SC) rejected the argument that because there are reference to ‘wife’, ‘daughter’ and ‘child of an individual in s. 4 of the WT Act, the word individual in s. 3 shall be construed as referable to a single individual. Finally, the Court held in that case that a individual includes a group of individuals. Following the ratio of these decisions, it would be reasonable to construe the expression ‘assessee’ occuring in s. 2(14) to be a group of individuals in the case of HUF.
8. Again, the object of s. 2(14) is to give relief to the assessee with regard to the personal effects while computing the assessee's capital asset. One of the fundamental cannons of construction of Statutes is that an interpretation which would further the object; rather than that which defeats it shall be preferred. Here, the assessee is an HUF which is a group of individuals. Sec. 2(14)(ii) provides that the personal effects of the assessee are to be excluded while computing the capital assets of the assessee. If the interpretation as advanced by the revenue, namely, that the assessee means an individual and does not include an HUF which is nothing but a group of individuals is accepted; it would defeat the object of s. 2(14)(ii). Apart from that, the Madras High Court in the case of Ramanathan Chettiar v. CIT, (1985) 152 ITR 493 (Mad) had an occasion to consider the provisions of s. 2(14) of the Act. In that case, the assessee-HUF sold 845 items of Silver articles and vessels and claimed that the capital gains arising on such sale would be exempt from tax as the articles in question which were sold were for the personal use of the assessee and hence were not capital assets as defined in s. 2(14) of the Act. The ITO treated only some of these articles as the personal effects of the assessee-HUF and rejected its claim for the rest of the articles. The CIT(A) and the Tribunal confirmed the order of ITO. On a reference made at the instance of the assessee, the Madras High Court confirmed the orders of the lower authorities. But it has observed as under:
“Admittedly, in this case, the various items of silver articles sold will fall within the definition of ‘capital asset’ though they will stand excluded if it is found that the articles have been kept by the assessee for personal use.”
Following the decision of the Supreme Court in the case of H.H Maharaja Rana Hemant Singhji, Dholpur v. Cit, Rajasthan , (1976) CTR (SC) 188 : (1976) 103 ITR 61 (SC) the High Court further observed that it was only those articles commonly and ordinarily intended for personal or household use which would qualify as personal effects. Since such a large number of silver articles cannot be taken to have been held by the assessee for personal use, the High Court came to the conclusion that all these Silver articles cannot, therefore, be treated as the ‘personal effects’ of the assessee within the meaning of s. 2(14)(ii) of the Act.
9. From the above decision, it is seen that though the Madras High Court has dismissed the” Reference Application of the assessee, the High Court has clearly recognised the position that an HUF can have personal effects. Following the decision of the Madras High Court, we are inclined to take the view that the assessee-HUF can also have personal effects as contemplated in s. 2(14)(ii) of the Act.
10. The next point that arises is whether all the items shown in the lists appended to the Paper Book constitute the personal effects of the assessee. According to the decision of the Supreme Court in Maharaja Rana Hemant Singh's case (supra), there should be intimate connection between the effects and the person of the assessee in order to constitute personal effects. Commensurate with the status the assessee enjoys in the Society it is stated that all the articles euumerated in the list appended to the Paper Book are being regularly and commonly being used as households by the members of the HUF. Therefore, these articles answer the description of personal effects as enunciated by the Supreme Court in the aforementioned case. We have also perused the lists of these articles and are satisfied that they constitute the personal effects of the members of the HUF which means the personal effects of the HUF. Therefore, the value of these personal effects has necessarily to be deleted while computing the capital asset of the assessee under s. 2(14) of the Act. In this view of the matter, we reverse the orders of the CIT(A) and hold that the assessee-HUF can have personal effects.
11. In the result, these appeals succeed and are allowed.