Law:

Section:

Section 45 of the Income-tax Act, 1961 - Capital gains - Chargeable as - Assessment year 1964-65 - During assessment year in question, assessee-Hindu undivided family sold its two buses inclusive of their route permits - Income-tax Officer while determining net profits, also determined capital gains arising from sale of route permits - Tribunal, however, held that route permits did not come with in meaning of 'capital asset' and that transfer of route permits did not produce any profit or gain exigible to capital gains tax - Whether, though route permits might be regarded as capital assets, since no amount was paid by assessee for purpose of acquiring them, at time of sale, value of said permits could not be taken into account for computation of capital gains - Held, yes FACTS The assessee-Hindu undivided family plied two buses for a portion of previous year ending on 31-3-1964, relevant to assessment year 1964-65, and, thereafter sold said buses inclusive of their route permits. Income-tax Officer assessed the net income and also determined the capital gains arising from sale of route permits. On second appeal, the Tribunal held that the route permits did not come within the meaning of 'capital asset' and that the transfer of route permits did not produce any profit or gain exigible to capital gains tax. On reference : HELD In view of decision of the Supreme Court in Saghir Ahmed v. State of U.P. AIR 1954 SC 728, it must be held that the route permits are property and if the sale price realised at the time of transfer of route permits exceeded the cost of acquisition, the difference between the sale price and the cost of acquisition would represent capital gains for the purpose of section 45. It is obvious that, at the time when a route permit is granted, no amount is paid by the operator, for the purpose of acquiring it and it is only over a number of years that, because of various factors, viz., the development of the roads, the passenger traffic on the road, the frequency of the buses plying on the road, etc., that the route permit acquires some value. This case, therefore, is similar to the case of a transfer of goodwill, where goodwill as such has no cost…

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