Car used for personal purpose will be personal effect and not treated as capital asset as per definition in section 2 (14). Therefore, the profit on its sale or transfer will not be subjected to income tax. However, no depreciation is admissible on personal effects.

Further, the word “effect” in the context of asset ordinarily means article, commodity or goods and not the shares, securities and deposit receipts which are instruments only. The Supreme Court has held that an intimate connection between the effect and the person of the assessee must be shown to exist so that they are treated as “personal effect” of the assessee. Further, it was also held those articles which are intimately and commonly used by the assessee are called personal effects. Accordingly fixed deposits or cash certificates etc, do not fall in the category of personal effects”