Bombay High Court: Sale of Vintage Car Attracts Capital Gains Tax Without Proof of Personal Use

The Bombay High Court has ruled that the sale of a vintage car is liable for capital gains tax if there is no proof that it was used personally. The case involved a 1931 Ford Tourer, bought in 1983 for ₹20,000 and sold in 1992 for ₹21 lakh by Mumbai resident Narendra Bhuva.

Bhuva argued that the car was his personal belonging and hence exempt from tax. However, the Court disagreed, holding that personal effects must be shown to be regularly and intimately used by the assessee, not just owned or capable of use.

A Division Bench of Chief Justice Alok Aradhe and Justice Sandeep Marne clarified that merely having the ability to use a car for personal purposes does not make it a “personal effect” under income tax laws. The judges stressed that tax exemptions apply only when there is evidence of continuous personal use.

The Income Tax Appellate Tribunal had earlier found no proof of such use. The car was not parked at Bhuva’s residence, there were no records of repair or maintenance expenses, and he mostly used a company-provided vehicle. The tribunal also noted that the car was bought more as a matter of pride than for day-to-day personal use.

Agreeing with this reasoning, the High Court rejected Bhuva’s appeal and upheld the tax liability, stating that possession for pride or prestige cannot qualify as “personal use” under the law.