1. The assessee was plying two route buses on the routes Kangeyanalloor to Krisharasampattu and Minnal Railway Station to Tiruttani. He had also a spare bus. On June 1, 1966, he sold these buses along with the route permits. The sale itself is evidenced by a document, and it is not in dispute that in the said document, separate sale considerations for the buses and the value of the rights to ply in the respective routes were given. The value of the route permits in respect of the route, Kangeyanalloor to Krisharasampattu was Rs. 5,000 and Minnal Railway Station to Tiruttani was Rs. 17,500, thus making a total of Rs. 22,500. This amount of Rs. 22,500 was sought to be brought to tax as capital gain in respect of the assessment year 1967-68. The contention of the assessee was that the route permit is not property and in any case since there was no cost of acquisition, the amount realised by the sale of it could not be subjected to tax as capital gains. Both these contentions were rejected by the ITO as well as the AAC and the Tribunal. At the instance of the assessee, the following question has been referred ;
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the amount of Rs. 22,500 was taxable as capital gains for the assessment year 1967-68 under the provisions of the Income-tax Act, 1961 ?'
2. The learned counsel for the assessee contended that the right to ply buses or vehicles on public roads is a fundamental right of every citizen and the requirement of taking a permit was only a regulation of such right and that, therefore, the permit granted would not amount to a capital asset. He also sought to support this contention with reference to the provisions of the Motor Vehicles Act. But we are afraid that it is too late for the assessee to contend that such a right was not property. This court has been taking a consistent view that the route permits have value and that it is property and it can be the subject-matter of transfers for consideration or gifts. In fact in A. Vimalan v. CGT : 94ITR21(Mad) and the decision in T.C. No. 148 of 1971 (Ramaswami Udayar v. CIT/GT : 116ITR493(Mad) , it has been held that the transfer without consideration of these route permits would amount to a gift and be subjected to tax. The G.T. Act defines 'gift' as meaning a transfer by one person to another of any existing movable or immovable property. Apart from these, in this case, as already noted, the sale deed specifically referred to the sale of the route permits and also separately gave the sale consideration. In these circumstances, we could not accept the contention of the learned counsel for the assessee that the route permit was not property.
3. The Tribunal rejected the contention of the assessee that there was no cost of acquisition of the permits and that, therefore, the amount realised by the sale of it would not be subjected to tax as capital gains. The Tribunal observed that this is not a self-generating asset, and that, though the cost incurred by the assessee in securing it may be negligible, nevertheless some cost must have been incurred in the process of acquiring the property. In the absence of any material to show as to what was the cost of acquisition, the Tribunal held that the entirety of Rs. 22,500 would be liable to tax as capital gains. The learned counsel for the assessee contended, relying on the decision in CIT v. K. Rathnam Nadar : 71ITR433(Mad) , that unless there is some cost of acquisition, the amount realised could not be subjected to tax as capital gains. In a similar case in T.C. No. 113 of 1975, a Division Bench of this court held that the decision in CIT v. K. Rathnam Nadar : 71ITR433(Mad) , would equally apply to a case of route permit and the ratio of that judgment could not be restricted to cases where it is a self generating asset only. In fact, we have also applied the ratio of the decision in CIT v. K. Rathnam Nadar : 71ITR433(Mad) to a case of import entitlement where there was no cost for acquisition of that import entitlement. Certainly, therefore, even in the case of route permit, if there was no cost of acquisition, the ratio of the judgment in CIT v. K. Rathnam Nadar : 71ITR433(Mad) , would be applicable. But the Tribunal had not given any finding as to whether there was any cost of acquisition and if so what was the cost of acquisition. The Tribunal only stated that certain prescribed fee has to be paid for applying for the permit and eventually the permit is allotted, and that the cost incurred, by the assessee may be negligible, but nevertheless some cost must have been incurred in the process of acquiring the property. But on the basis that there is no evidence to show as to the amount of cost incurred, the entirety of the amount of Rs. 22,500 had been held to be liable to tax as capital gains. This approach of the Tribunal, we are afraid, is not correct. The Tribunal ought to have given a finding as to what was the cost of acquisition on the basis of the evidence available. Only if it comes to the conclusion that there was some cost incurred for the acquisition, the question of capital gains could arise at all. In the absence of such a finding we are unable to answer this reference. But we direct the Tribunal to go into the question as to whether there was any cost for the acquisition at all, and if so, what was the amount that was spent for the acquisition of this asset. If there was no cost of acquisition, the principle of Rathnam Nadar's case : 71ITR433(Mad) would have to be applied. With these observations, the question referred to us is returned unanswered and the Tribunal is directed to go into this question afresh in proceedings under Section 260 of the I.T. Act. There will be no order as to costs.
4. A copy of this judgment under the signature of the Registrar and the seal of this court will be sent to the Tribunal, Madras Bench.