Law: Income Tax Act, 1961

Section: 41(2),55(2),48,45

Section 45 of the Income-tax Act, 1961 - Capital gains - Chargeable as - Assessment year 1974-75 - Whether route permits for plying buses, acquired for first time must be treated as self-generated asset, consideration for sale of which is not amenable to capital gains-tax - Held, yes FACTS The assessee-company was previously carrying on a business in plying passenger buses, but it discontinued doing so during the accounting period relevant to the assessment year in question having sold its buses along with route permits. This sale was made for a total consideration of Rs. 14,50,000. A sum of Rs. 2,88,475 was credited as profit from sale of vehicles while Rs. 5 lakhs was credited under the head 'goodwill' in the assessee's profit and loss account. The ITO held that there was no sale of 'goodwill' and that the entire price realised represented the sale price of the buses sold. The order of the ITO was upheld by the AAC. The Tribunal, however, held that the route permits were property which were acquired free of cost and hence no capital gain could be computed. It also held that the value of Rs. 5 lakhs placed upon them by the assessee was not unreasonable. On reference: HELD In view of the decision of the Kerala High Court in CIT v. P.S.N. Motors(P.) Ltd. [1989] 180 ITR 345 (Ker) and also in view of the of the Supreme Court in CIT v. B.C. Srinivasa Setty, [1981] 128 ITR 294, it was to be held in the instant case that the route permit acquired for the first time must be treated as a self-generated asset, the consideration for the sale of which is not amenable to capital gains tax. Note: The decision is in favour of the assessee. CASES REFERRED TO CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294 (SC), CIT v. P.S.N. Motors (P.) Ltd. [1989] 180 ITR 345 (Ker.) and Addl. CIT v. Ganapathi Raju Jesi, Sanyasi Raju [1979] 119 ITR 715 (AP), K. Balasubramania Nair v. CIT [1979] 119 ITR 504 (Mad.) and CIT v. Shri Venkateswara Bus Union [1979] 119 ITR 507 (Mad.). JUDGMENT S.S. Sodhi, J.- The controversy here, in the context of the levy of capital gains tax, is with regard to the value, if any, to be ascribed to route permits sold along with the buses. The matter here pertains to…

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