TMI Blog1990 (2) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the claim of the assessee that no tax on capital gains will be attracted to the sale of the route permits is not sustainable ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the claim of the assessee that the cost of improvement of the route permits is not ascertainable and that, consequently, no tax on capital gains is attracted will be sustainable only if it is found that the assessee had improved the route permits after they were acquired by the assessee?" The respondent is the Revenue. We are concerned with the assessment year 1974-75. The previous year ended on June 30, 1973. The assessee is registered firm. It is engaged in the business of motor transport. During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... route and the sale proceeds really represent the value of the buses. In appeal, the Commissioner of Income-tax (Appeals) held that regard being had to the fact that the assessee had sold away the buses within two years of their acquisition and that during these years the assessee incurred a loss, the routes have no value at all and the sale proceeds represented only the price of the vehicles and not of the route. On further appeal, the Income-tax Appellate Tribunal held that the materials adduced by the assessee itself showed that the sale consideration did not represent the value of the vehicles only. It was held that portion of the consideration must have been on account of the route value. The plea of the assessee was that the value of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the buses and the route permits should be made, the matter requires appraisal by the Income-tax Officer. In the above perspective, a remit was ordered. It is, thereafter, at the instance of the assessee, that the Appellate Tribunal has referred the above two questions of law for the decision of this court. We heard counsel for the assessee and also counsel for the Revenue. The Tribunal has not passed any final order. It has only ordered a remit. Whether, at this stage, the questions referred to us should be answered itself is doubtful. Our answer to the questions may turn out to be academic, depending upon further evidence and the findings of the statutory authorities. Be that as it may, on the facts of this case, we have no doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted new vehicles and operated the routes. In those cases, where an operator obtains a permit for the first time and goodwill accrued or was generated over a number of years in his hands, it could be said that the cost of acquisition of the asset is nil. The transfer of the permit by such an operator will be similar to the transfer of a goodwill. But, that is not the case here. The route permits were obtained by the assessee's transferor, P. S. N. Motors (P.) Ltd. They were operating the service for number of years. Thereafter, the assessee obtained the buses with route permits for consideration. This is not a case where the assessee obtained the permits for the first time. Permits obtained by the transferor continued to be operated. In suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, where route was obtained for the first time and there is profit on sale of such permit, it is similar to profit from sale of "goodwill", a self-generated asset. The said decision is totally inapplicable to the case on hand. Counsel for the assessee further argued that it is not possible to assess the cost of subsequent improvements of the permits and, in such a case also, no tax on capital gains is attracted. Emphasis was laid on the decision of the Bombay High Court in Evans Fraser and Co. Ltd. v. CIT [1982] 137 ITR 493. We are of the view that the question of valuation of improvements will arise only in cases where there could be a claim for the value of improvements and not where there could be no claim for the value of improvements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority, in the light of the remit ordered by the Appellate Tribunal. We fully concur with the approach and conclusion made by the Appellate Tribunal in the matter. In the light of our reasoning and conclusion, our answer to question No. 1 is in the affirmative, against the assessee and in favour of the Revenue. Our answer to question No. 2 is also in the affirmative, against the assessee and in favour of the Revenue. Both the questions referred to us are answered as above while upholding the order of remit made by the Appellate Tribunal with the observations contained in the appellate order. A copy of this judgment under the seal of this court and the signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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