Law:

Section:

Section 45, read with section 48 of the Income-tax Act, 1961 - Capital gains - Chargeable as - Assessment year 1974-75 - During relevant previous year, assessee-company, a transport operator sold certain buses along with pucca permits - Whether as no cost of acquisition could be predicted for route permits obtained for first time and it was akin to a transfer of 'goodwills' no capital gain was leviable in respect of transfer of such route permits - Held, yes FACTS During the previous year, relevant to the assessment year 1974-75, the assessee-company, a transport operator, sold 12 buses along with pucca route permits. The assessee claimed that out of the total consideration received for the sale of buses, Rs. 2.5 lakhs was the value of the route permits, and this was analogous to goodwill, and as there was no cost of acquisition with regard to the route permits, it was a self-generated asset and so no capital gains accrued or arose for the levy of tax. The ITO held that the entire sale proceeds represented the value of buses and he, therefore, did not exclude any amount from the capital gains. On appeal, the Commissioner (Appeals) estimated the value of the route permits at Rs. 45,000 to be excluded as cost of acquisition. On second appeal, the Tribunal held that no capital gains tax could be levied in relation to transfer of route permits which the assessee had acquired from other parties at a cost and capital gains could not be levied in the case of the route permits which were acquired by the assessee for the first time. The Tribunal, therefore, referred the matter back to the ITO for determination. On reference: HELD Before any capital gains tax can be levied, the asset sold must be such, as is capable of having a cost of acquisition as contemplated under section 48. An asset to which section 48 cannot be applied, could not be brought to tax under section 45, since the asset must possess the inherent quality of being available on the expenditure of money to a person seeking to acquire it before it can be subjected to capital gains. In the instant case the permits could not be considered as assets which were capable of acquisition initially for a price. When…

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