Vintage Cars, Taxation & Compliance: Lessons from Narendra I. Bhuva v. ACIT (Bombay HC, 2025)

By CA Surekha 

Cars are more than vehicles — they’re lifestyle assets, investments, and sometimes even objects of pride. But for tax purposes, the law draws a sharp distinction between personal effects, capital assets, and business-use vehicles. Recent judicial rulings highlight that misclassification can lead to costly mistakes.

A landmark decision by the Bombay High Court in Narendra I. Bhuva v. ACIT [2025] 177 taxmann.com 540 clarifies how vintage cars are treated under Indian tax law, and the conditions under which they qualify as personal effects.

The Case: Narendra I. Bhuva v. ACIT

• The assessee, a salaried employee with income from house property and dividends, purchased a vintage car for ₹20,000 and later sold it for ₹21 lakhs.

• He claimed the car as a personal effect, exempt from capital gains tax.

• The AO disagreed and taxed the gain as business income.

• CIT(A) sided with the assessee, treating the car as personal.

• ITAT reversed, and the matter reached the Bombay High Court.

High Court’s Findings

• Under Section 2(14) of the Income-tax Act, “capital asset” excludes personal effects (movable property for personal use, excluding jewellery, etc.).

• Mere capability of personal use does not prove personal use.

• To qualify as personal effect, there must be intimate connection with personal life and actual usage evidence.

In this case, the assessee:

• Used his company’s car for commuting.

• Never parked the vintage car at his residence.

• Couldn’t show maintenance or running costs.

• Admitted the car was purchased out of pride, not for use.

Conclusion: Since no evidence of personal use was furnished, the vintage car was not a personal effect. The gain on sale was taxable under Capital Gains.

Broader Learnings for Car Owners

This ruling clarifies that:

1. Vintage or luxury cars are not automatically “personal assets.”

2. Evidence of actual personal use is critical — parking at residence, maintenance bills, insurance, or logbooks.

3. Lifestyle purchases made for pride, status, or investment are generally treated as capital assets, taxable on sale.

Regulatory Compliance Beyond Taxes

1. Fitness Certificates

   • Cars >15 years old require periodic renewal of fitness certificate unless registered as vintage.

2. Vintage Vehicle Policy, 2021

   • Cars >50 years old can be registered as vintage.

   • Permitted for rallies, exhibitions, leisure drives.

   • Not allowed for daily commuting or commercial use.

3. Insurance

   • Usage must align with insurance policy — a vintage car insured for leisure use cannot be used for regular travel.

Tax Planning: Smart vs. Risky

Legitimate Planning

• Claim depreciation & expenses only for business-registered cars with evidence of usage.

• For mixed-use vehicles, maintain logbooks and claim proportionate deductions.

• Register vintage cars correctly and restrict use as per policy.

• On sale, apply capital gains computation with indexation, not blanket exemptions.

Risky / Evasion-Prone Moves

• Claiming personal luxury/vintage cars as business assets.

• Treating investment cars as “personal effects” without evidence.

• Ignoring compliance under Motor Vehicles Act (fitness/vintage certification).

Compliance Checklist for Car Lovers & Professionals

• Renew fitness certificate for cars >15 years old.

• If car is >50 years, register under Vintage Vehicle Policy, 2021.

• Maintain logbooks, bills, insurance records to establish usage.

• Treat personal-use cars separately — don’t mix with business accounts.

• Ensure correct perquisite reporting if employer provides a car.

• On sale, classify correctly under Capital Gains (personal asset) or Business Income (business asset).

The Narendra I. Bhuva (2025, Bombay HC) ruling underscores a vital principle: “ownership alone is not proof of personal use.” Vintage or luxury cars, unless backed by evidence of personal usage, are treated as capital assets, and gains on sale are taxable.

For car lovers and professionals, the lesson is clear:

• Enjoy your cars, but respect the law.

• Keep your tax planning clean, evidence-backed, and compliant.

• Avoid the trap of claiming exemptions where they don’t exist — what may seem like planning can quickly be viewed as tax evasion.

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Advisory on Form MGT-7 Certification under MCA V3 Portal

The Ministry of Corporate Affairs (MCA) has recently rolled out the updated annual filing forms on the MCA-21 V3 portal, bringing a significant change in the certification mechanism of Form MGT-7 (Annual Return).

Legal & Regulatory Background

• Section 92 of the Companies Act, 2013 mandates every company to prepare an annual return in Form MGT-7.

• Rule 20 of the Companies (Management and Administration) Rules, 2014, read with subsequent amendments, prescribes certification of the annual return in certain cases through Form MGT-8 by a practicing Company Secretary.

• Pursuant to the Companies (Management and Administration) Amendment Rules, 2025, the certification portion of Form MGT-8 has been integrated within Form MGT-7 on the MCA V3 portal. This integration means that certification is now captured as a static field within the e-form itself.

Key Procedural Update under MCA V3

• Earlier, Form MGT-8 was filed as a separate attachment. Now, the certification is embedded directly within Form MGT-7.

• Any qualifying remarks or disclosures can be inserted in the ‘Optional Attachment’ section of Form MGT-7, with specific reference to the embedded certification.

• While MCA has enabled this structural change, practical compliance requires additional care by professionals to safeguard credibility and due diligence.

Advisory for Professionals

Until MCA issues further clarification or amends the form structure, Company Secretaries in practice are advised to:

1. Continue to issue a full-fledged MGT-8 certification on their letterhead.

2. Ensure that the certifying PCS is from a peer-reviewed practice unit as per ICSI guidelines.

3. Generate a valid UDIN (Unique Document Identification Number) for the certification in accordance with ICSI requirements.

4. Attach the signed MGT-8 (with UDIN) as an optional attachment to Form MGT-7 while filing on the V3 portal.

5. Maintain complete documentation and working papers supporting the certification for audit trail and regulatory checks.

This dual practice—static certification within the e-form and separate certification as an attachment—ensures compliance, safeguards professional accountability, and avoids interpretational risks.

Practical Checklist for Form MGT-7 Certification

Professionals may follow this checklist before certifying:

•  Verify applicability of Form MGT-8 certification (public companies with paid-up share capital ≥ ₹10 crore or turnover ≥ ₹50 crore, or as otherwise prescribed).

•  Confirm accuracy of particulars relating to shareholding, directors, key managerial personnel, indebtedness, and meetings.

•  Ensure compliance with provisions of:

  • Section 88 (Registers of Members, Debenture holders, etc.)

  • Section 92 (Annual Return)

  • Section 129 & 137 (Financial Statements and Filing)

  • Section 186 (Loans & Investments)

  • Section 188 (Related Party Transactions)

  • Other applicable provisions under the Act and allied laws.

•  Cross-verify filings made under other forms (e.g., PAS-3, DIR-12, MGT-14) for consistency.

•  Record specific qualifications in case of non-compliance, both in the embedded certification and in the attached MGT-8.

•  Generate UDIN immediately upon signing to validate authenticity.

Compliance Takeaway

The integration of Form MGT-8 certification into Form MGT-7 marks a progressive step under MCA’s V3 reforms. However, until detailed clarifications are notified, professionals should adopt a cautious, dual-compliance approach:

• Use the embedded certification within MGT-7, and

• Attach a peer-reviewed, UDIN-backed, signed MGT-8 as an additional attachment.