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TMI Blog1984 (2) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... onal transport authority who has the discretion in the matter and that the sale proceeds can, therefore, be considered only as the value of the buses and not as the value of the routes. 3. The Commissioner (Appeals) held that the route permits were acquired not by the assessee but by the predecessor in interest of the assessee, that the route value had been generated over a period of twenty years, that the assessee sold away the buses within two years of their acquisition by the assessee, that during these two years the buses were run at a loss, that the routes had, therefore, no value at all and that the sale proceeds, therefore, constituted the price of the vehicles and not of the route. He, therefore, dismissed the appeal filed by the assessee. 4. The grounds taken by the assessee are lengthy and argumentative. They are only to the effect that the Commissioner (Appeals) erred in holding that the route permits had no value and that the sale proceeds constituted the value of the buses only, that the value of the route permits is tantamount to the value of the goodwill, that in the present case the cost of acquisition of the route permits was nil, that the sale consideration fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, it is contended by the learned representative for the assessee that the route permit is a capital asset, that there was no cost of acquisition as far as the assessee is concerned, that the cost of improvement of the route value cannot also be ascertained as in the case of goodwill and that the capital gains arising from the transfer of the route permits cannot, therefore, be assessed to tax in the light of the rulings mentioned. With regard to the finding recorded by the Commissioner (Appeals) that the sale proceeds represented the value of buses only and not that of the routes, the learned representative for the assessee pointed out the following facts : The value of a new bus during the relevant accounting period was only Rs. 1,16,168. The buses sold by the assessee were three years and four years old. Even taking the value of the new bus at Rs. 1,16,168 and allowing the normal depreciation of 20 per cent, the value of the buses at the time of the sale would have been only between Rs. 16,168 and Rs. 23,234 each, but the value received by the assessee on transfer of the buses and the route varied from Rs. 1,30,000 to Rs. 34,000 each. Deducting the value of the buses, the balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration must have been on account of the route value. The position in the present case is similar to the position obtaining in the case of P.S.N. Motors (P.) Ltd. v. ITO [IT Appeal No. 414 (Coch.) of 1981] which was disposed of by the Tribunal on 30-11-1983. The assessee has furnished the value of new buses according to the quotations of T.V. Sundaram Iyengar Sons and this was the value during the accounting period. The buses were purchased three to four years earlier and the value would have been less. Even treating the value as given in the accounting year as the value of a new bus and reasonable depreciation is allowed, it will be clear from the computation set out in paragraph 7 supra that the consideration realised by the assessee cannot be for the vehicles alone which were three to four years old. The fact that the consideration varied between the routes will also show that the routes had their own value. Another important circumstance is that in the case of Murugan Bus Transport, who had purchased one of the buses from the assessee for Rs. 1,20,000, the department itself had allocated Rs. 70,000 as value of the bus and Rs. 50,000 as the route value for the purpose of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in toto because there can be contribution on the part of the owner of the route to the value of the route by putting good vehicles on the road and by running the services efficiently and promptly. Whatever it may be, the Tribunal has in its order dated 30-11-1983 in the case of P.S.N. Motors (P.) Ltd. referred to the conflict of decisions on the question as to whether the route permit is a self-generated asset and followed the decision of the Andhra Pradesh High Court in the case of Ganapathi Raju Jegi, Sanyasi Raju wherein it was held that it is only over a number of years because of various factors, namely, the development of roads, passenger traffic, the frequency of buses plying on the route, that the permit acquires some value, that when an operator obtains a permit for the first time, the cost of acquisition of the asset is nil and that the sale of the permit by such an operator will be similar to the sale of goodwill by an assessee and that the consideration in terms of money realised on the transfer of the capital asset cannot be brought to capital gains as there has been no cost of acquisition. It was also held by the Tribunal that in the light of the ruling of the Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o cost of acquisition could be envisaged with regard to route permits. It may be that the assessee actually did not pay any consideration for the route permit on account of the fact that some of the partners of the assessee-firm were shareholders in P.S.N. Motors (P.) Ltd. But it cannot be contended that no cost of acquisition could be envisaged in the case of the route permits when the assessee acquired the same from P.S.N. Motors (P.) Ltd. In Raman Krishnan's case it was held by this Tribunal that in B.C. Srinivasa Setty the Supreme Court was concerned with the asset of goodwill in respect of which no cost of acquisition in terms of money was conceivable and that the ratio of the decision would not apply to a case where the cost of acquisition can be envisaged with regard to a capital asset. The position is also well settled by the decision of the Kerala High Court in the case of E.C. Jacob which will be referred to later in some greater detail. From the mere fact that the assessee did not actually pay anything for the route permit and got the same free, it cannot be contended that no cost of acquisition can be envisaged with regard to the same. 13. The second contention advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a business or profession for a definite amount and without any further addition to its value by his own efforts later on sells it for a higher price and thereby secures a determinate profit or gain. In such a case, goodwill is hardly distinguishable from any other capital asset and there is nothing in section 45 or other relevant provisions of the Income-tax Act that excludes such profits or gains from liability to assessment.... " It is, therefore, clear that the Kerala High Court has not gone to the extent to which the Bombay High Court has gone in the case of Evans Fraser Co. Ltd. We would, therefore, hold that the assessee can escape the liability to tax on capital gains only if it is shown that the assessee has improved the value of the route permit after it was acquired by the assessee. It is not possible to assume the position in the present case because it has been pointed out by the Commissioner (Appeals) that, although the assessee put in new buses after the acquisition of the route, the business was running at a loss during the two assessment years during which the assessee operated the buses. But the matter has not been investigated from the angle indicated above. F ..... X X X X Extracts X X X X X X X X Extracts X X X X
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