1972 (12) TMI 24 - HC - Income Tax

Gift Tax Act, 1958 - One Appavoo Pillai made a gift of three buses to his son, Vimalan, the assessee, under a registered settlement deed - Under that deed the value, shown for the three buses was Rs. 20,000. The Gift-tax Officer found that the written down value of the buses on the date of the transfer was Rs. 31,688. He, therefore, estimated the value of the buses at Rs. 31,688. In addition he also estimated the value of the route permits on which the buses were plying at the time of the transfer at Rs. 75,000 and computed the gift-tax payable on that basis - Gift-tax Officer was justified in estimating the value of the route permits and adding them to the value of the buses

Summary

Issues:
1. Valuation of gift for gift-tax purposes including buses and route permits.
2. Transferability and valuation of route permits.
3. Determination of the value of buses and route permits for gift-tax assessment.

Analysis:
The case involved a gift of three buses along with route permits by Appavoo Pillai to his son, the assessee, under a registered settlement deed. The Gift-tax Officer valued the buses at Rs. 31,688 and estimated the value of the route permits at Rs. 75,000 for computing gift-tax. The Appellate Assistant Commissioner upheld this valuation, stating that the routes had been transferred to the assessee as evidenced by their joint application to the Regional Transport Authority.

The matter was appealed to the Tribunal, where the assessee argued that the valuation of the route permits was excessive. The Tribunal held that route permits have a definite monetary value based on earning capacity, citing precedent. The Tribunal also noted that the Wealth-tax Act's definition of "asset" did not apply to gift-tax proceedings, and the assessee failed to provide evidence to dispute the Gift-tax Officer's estimate.

The High Court addressed whether the route permits were transferred and had value. The gift deed clearly indicated the transfer of buses and route permits, and the Motor Vehicles Act allowed for permit transfer with authority permission. The court emphasized that buses have little value without permits for specific routes, supporting the inclusion of route permits in the gift valuation.

The court rejected the argument that the Gift-tax Officer should have valued the buses and route permits separately, citing previous judgments on valuing properties with income potential. The court upheld the Gift-tax Officer's composite valuation of Rs. 1,06,390 for the three buses with route permits, as no evidence was presented to challenge this valuation.

In conclusion, the court affirmed the inclusion of route permits in the gift valuation and upheld the Gift-tax Officer's composite valuation. The reference was answered in favor of the revenue, with costs awarded to the revenue.