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TMI Blog1991 (5) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... aving sold its fleet of buses along with 24 route permits to Messrs. Jolly Engineers Contractors Private Limited. This sale was made under an agreement dated January 10, 1973, for a total consideration of Rs. 14,50,000. A sum of Rs. 2,88,475 was credited by the assessee as profit from sale of its vehicles while Rs. 5,00,000 was credited under the head "goodwill" in its profit and loss account. The Income-tax Officer held that there was no sale of "goodwill" and that the entire price realised by the assessee represented the sale price of the buses sold. This order was later upheld in appeal by the Appellate Assistant Commissioner. The Tribunal, however, agreed with the assessee and held that the route permits were property which were acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the case, the Appellate Tribunal was right in holding that the route permits were capital assets acquired free of cost by the assessee-company and the price realised on their sale was not liable to capital gains ? It was the contention of Mr. Ajay Mittal, appearing for the Revenue, that the sale consideration of Rs. 14.5 lakhs constituted the sale consideration for buses and route permits transferred by the assessee and was thus profit within the purview of section 41(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and thus exigible to tax, the argument being that the value of the route permits was inherent in the value of the buses. In this behalf, it was further added that the cost of the route permits w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... la as also that of the Andhra Pradesh have taken a contrary view in CIT v. P. S. N. Motors (P) Ltd. [1989] 180 ITR 345 (Ker) and Addl. CIT v. Ganapathi Raju Jegi, Sanyasi Raju [1979], 119 ITR 715 (AP), respectively, it being held in P. S. N. Motors (P.) Ltd.'s case [1989] 180 ITR 345, 349 that where a person obtains route permit for the first time and then transfers it, such transfer is akin to the transfer of goodwill, a self-generated asset. It would have no cost of acquisition and since no cost of acquisition can be predicated for the route permit obtained for the first time, no tax on capital gains can be levied in respect of the transfer of such route permit, it being observed, "before any capital gains tax can be levied, the asset sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of section 45 and, therefore, its transfer was not subject to income-tax under the head "Capital gains". After giving the matter our most earnest consideration, we, with respect, prefer the view of the High Court of Kerala in P. S. N. Motors (P) Ltd.'s case [1989] 180 ITR 345 as being more in accord with the context of the provisions and the scheme of the Income-tax Act, 1961, and the judgment of the Supreme Court in B. C. Srinivasa Setty's case [1981] 128 ITR 294. We, consequently, hold that the route permit acquired for the first time must be treated as a self-generated asset, the consideration for the sale of which is not amenable to capital gains tax. We, accordingly, answer all the questions referred in the affirmative, in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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