1979 (1) TMI 58 - HC - Income Tax

Summary

Issues:
1. Allocation of sale price between buses and route rights
2. Computation of capital gains on route rights
3. Valuation of land sold and computation of capital gains

Analysis:

Issue 1: Allocation of sale price between buses and route rights
The Tribunal determined the sale price of the buses at Rs. 1,50,000 and the route rights at Rs. 2,70,000. The Tribunal considered various factors such as the age of the buses, their written down value, and subsequent sale prices. The Tribunal found the allocation made by the assessee to be fair and reasonable. The court upheld the Tribunal's decision, stating that there were valid materials to support the allocation. The value of the route permits was deemed to be Rs. 2,70,000. The assessment under section 41(2) was directed to be made in accordance with this allocation.

Issue 2: Computation of capital gains on route rights
The Tribunal held that there were no capital gains arising from the sale of route rights based on previous orders and a decision of the Andhra Pradesh High Court. However, the High Court disagreed with this view, citing previous decisions that established route rights as having value and being liable to capital gains assessment. The court directed the Tribunal to reconsider the computation of capital gains on route rights based on the actual cost of acquisition.

Issue 3: Valuation of land sold and computation of capital gains
The disagreement arose regarding the valuation of land sold to M/s. Pratap Talkies. The ITO computed the capital gains based on the fair market value of the property as on the date of conveyance. The Tribunal, however, determined that the market value as of the agreement date should be considered. Despite the assessee agreeing to a higher sale price, the Tribunal decided to take the value as per the agreement date. The court upheld the Tribunal's decision, stating that the agreed amount of Rs. 50,000 should be considered for computing capital gains.

In conclusion, the court upheld the Tribunal's decision on the allocation of sale price between buses and route rights, disagreed with the Tribunal's view on capital gains from route rights, and supported the Tribunal's valuation of the land sold for computing capital gains.