1976 (8) TMI 40 - HC - Income Tax

Summary

Issues:
Whether the sum of Rs. 20,000 received by the assessee in consideration of the transfer of route permit in the sale of the truck was liable to tax under the Income-tax Act, 1961, as revenue receipt?

Analysis:
The petitioner, an assessee, sold a truck along with a route permit for Rs. 20,000. The Income-tax Officer treated this amount as a revenue receipt and assessed it for income tax. The petitioner contended that the amount was not taxable as it was a casual payment and not part of his business activity. The Assistant Commissioner and the Income-tax Appellate Tribunal upheld the tax assessment. The petitioner argued that the transaction was not part of his business and was a windfall. The High Court examined the case law and found that the amount earned from the route permit sale was a profit earned in the course of business. The court cited a similar case where the transfer of permits was considered a business activity. Therefore, the court held that the amount of Rs. 20,000 was a revenue receipt and liable to tax under the Income-tax Act, not as capital gains.

The court rejected the petitioner's argument that the transaction was not part of his business. It noted that the petitioner earned profits by using the route permit to operate his vehicle on specified routes. Selling the route permit for a definite sum was considered a profit earned in the course of business. The court cited a previous judgment where a similar transfer of permits was deemed a business activity. The court emphasized that a substantial portion of the consideration for transferring a vehicle with a route permit represents the pecuniary gains derived from operating on the route. Therefore, the court concluded that the sum of Rs. 20,000 received by the petitioner in consideration of the route permit transfer was a revenue receipt and taxable under the Income-tax Act, 1961.

In conclusion, the High Court held that the amount of Rs. 20,000 received by the petitioner for the transfer of the route permit in the sale of the truck was liable to tax as a revenue receipt under the Income-tax Act, 1961. The court directed the judgment to be sent back to the Income-tax Appellate Tribunal for further necessary action. The second judge on the panel agreed with the decision.