1990 (2) TMI 26 - HC - Income Tax

Summary

Issues:
1. Assessment of capital gains tax on the sale of route permits.
2. Determination of cost of acquisition and improvement of route permits for tax purposes.

Analysis:
1. Assessment of Capital Gains Tax on Sale of Route Permits:
The case involved the assessment of capital gains tax on the sale of route permits along with vehicles by an assessee engaged in the business of motor transport. The main contention was whether the route permits had a cost of acquisition and if the claim that no tax on capital gains should be attracted due to the lack of ascertainable improvement costs was sustainable. The Tribunal held that a portion of the sale proceeds was attributable to the route permits, necessitating a reasonable allocation between the buses and the route permits. The Tribunal's decision was based on the fact that the permits were obtained by the assessee through transfer and not self-generated, thus attracting tax on capital gains. The court concurred with the Tribunal's reasoning, emphasizing the need to envisage a cost of acquisition for the route permits acquired from a predecessor-in-interest.

2. Determination of Cost of Acquisition and Improvement of Route Permits:
The court addressed the issue of determining the cost of acquisition and improvement of route permits for tax purposes. The assessee argued that the cost of subsequent improvements of the permits was not ascertainable, thereby contending that no tax on capital gains should be levied. However, the court held that the question of valuing improvements arises only if there could be a claim for such improvements. The Full Bench decision cited by the court emphasized that it is the assessee's burden to show any value enhancements to the route permits post-acquisition. The court supported the Tribunal's decision to remit the matter to the assessing authority for further investigation into the value of improvements and the allocation of sale proceeds between the buses and route permits. The court upheld the Tribunal's approach and conclusion, affirming the need for a detailed assessment by the fact-finding authority.

In conclusion, the court answered both questions in favor of the Revenue, supporting the Tribunal's decision to remit the matter for a thorough investigation into the cost of acquisition and improvement of route permits. The judgment underscores the importance of determining the value and allocation of sale proceeds between assets for accurate tax assessment in cases involving the sale of permits acquired through transfer.