1. The Income-tax Tribunal has made this reference to this court.
2. The following question of law has been referred for the opinion of the court:
' Whether, on the facts and in the circumstances of the case, the sum of Rs. 20,000 received by the assessee in consideration of the transfer of route permit in the sale of the truck was liable to tax under the Income-tax Act, 1961, as revenue receipt '
3. The facts leading to this reference are as follows :
4. The petitioner, Shri Ghulam Hassan, assessee, filed the returns for the accounting year 1969-70 before the Income-tax Officer. The year of assessment is 1970-71. According to the returns filed by him he was charged tax at Rs. 8,161. In the returns filed, the assessee had showed the value of the sale of the route permit at Rs. 20,000. This route permit along with the truck was sold by him on May 20, 1969, to Shri Janki Nath and Sardar Jaswant Singh, C/o Messrs. Bharat Transport Company, Jammu (Tawi). The truck originally, a private carrier, was purchased by the assessee for Rs. 40,000 in May, 1965. He thereafter securing the requisite route permit converted it into a public carrier and after some time sold it for Rs. 35,000 (Rs. 15,000 represents the value of the truck and Rs. 20,000, the consideration for the route permit). According to the assessee the receipt of the amount for the route permit was not taxable as according to him it did not constitute revenue receipt. It was only in the nature of casual payment which the assessee received by way of windfall. The argument did not, however, find favour with the Income-tax Officer. He treated this amount of Rs. 20,000 as revenue receipt and assessed it for the purpose of levy of income-tax. Against the judgment of the Income-tax Officer the petitioner went up in appeal before the Assistant Commissioner of Appeals. The Assistant Commissioner agreed with the view of the Income-tax Officer that the amount in question was revenue receipt and was taxable. A further appeal was taken before the Income-tax Appellate Tribunal at Amritsar. The Tribunal by its order dated January 17, 1974, dismissed the appeal and upheld the judgment of the lower appellate authority. Before the Appellate Tribunal the contention raised by the petitioner was that the consideration of Rs. 20,000 was not from any business activity. It was not stock-in-trade. The receipt was of casual and non-recurring nature and, therefore, not taxable. The learned Tribunal did not agree with the view propounded before it. It also discountenanced the proposition that the amount received was in the nature of a capital gain and not income from other sources. The assessee, thereafter, moved the Appellate Tribunal under Section 256(1) of the Income-tax Act for making a reference to the High Court for seeking its opinion on the proposition of law, whether the sum of Rs. 20,000 received in consideration of the route permit was revenue income and liable to tax. The Income-tax Appellate Tribunal acceded to the request of the assessee and has referred this question to this court. This is how the matter has come before us.
5. We have heard the learned counsel for the parties at length. Mr. R.N. Kaul appearing for the assessee has contended that the transaction of the sale of the route permit by the assessee was not in the line of the business of the assessee. It was not in the course of the business that he got the sum of Rs. 20,000. This was in the nature of a windfall or a mere casual payment which he got in consideration of the route permit. It lay heavily on the revenue to show that the amount in question was in the nature of revenue receipt and was taxable under the Income-tax Act. But the revenue has failed to discharge the onus. Therefore, according to him, such a consideration received by the assessee could not be characterised as a revenue receipt and was not chargeable to tax. To put it differently, the argument is that the transaction of the sale of the route permit was not in the course of normal business so as to have enabled the assessee to earn any profit out of such transaction. The transaction of sale of route permit did not constitute an adventure in the nature of business and was not, therefore, in the course of a profit making scheme. It is further submitted that if this view does not find favour with the court, then in the alternative it may be held that such a transaction could not be treated as yielding any revenue receipt but only a capital gain. In support of these arguments, reliance has been placed on Saroj Kumar Mazumdar v. Commissioner of Income-tax : 37ITR242(SC) , Janki Ram Bahadur Ram v. Commissioner of Income-tax : 57ITR21(SC) and P.M. Mohammad Meerakhan v. Commissioner of Income-tax : 73ITR735(SC) .
6. After a careful examination of the matter, we cannot persuade ourselves to accede to the contention of the assessee that the consideration received is not revenue receipt. It is admitted before us that the vehicle before it was converted into a public carrier was used as a private carrier. When the vehicle was made a public carrier, the assessee obtained route permit for plying it on specified routes and on the strength of this route permit he earned profits in his business. He conducted his business transaction by putting the public carrier into use. Had the petitioner-assessee not been able to secure the route permit for his vehicle, it is clear that he could not have plied the vehicle on the specified route and could not have carried on business on those routes. When, therefore, the petitioner later on sold the route permit for a definite sum of money and this amount he earned by transfer of the vehicle along with the route permit, the amount so earned on route permit could not be said to be a mere windfall or a casual earning. This was a profit which he earned in the course of business. In this view of mine, I am supported by the observations made in Ex-Soldiers Motor Transport Co. v. Commissioner of Income-tax : 47ITR913(All) . An identical question of law came up for consideration before their Lordships of the Allahabad High Court. The court observed :
' The circumstance that the permits were transferred did not operate to increase or diminish the capital of the assessee and that what was transferred was a right to ply the vehicle. In that view of the matter, the payment of Rs. 10,000 cannot be treated to be one of an enduring nature. It 'appears to us that the substance of the transactions between the assessee and the so-called purchasers was that the assessee changed the mode of his business and of earning profits. Instead of plying his own vehicles on the routes specified in the permits, he allowed third parties to do so and received Rs. 10,000 in lieu thereof. That being so, this sum of Rs. 10,000 was not capital receipt but the profit or the income which the assessee made in connection with the business.'
The judgment of the Allahabad High Court appears to be on all fours with the facts of the present case.
7. It is indeed a matter worthy of consideration that whenever a vehicle with a route permit is transferred to a third person, a substantial portion of the consideration represents the value attributable to the pecuniary gains derived by operating on the route.
8. For the foregoing reasons, we are of the view that the sum of Rs. 20,000 received by the petitioner-assessee in consideration of the transfer of route permit in the sale of truck is liable to tax under the provisions of the Income-tax Act, 1961, as a revenue receipt and not as capital gains. The question is, therefore, answered in the affirmative.
9. Let a copy of the judgment along with the opinion as also the relevant record be sent back to the Income-tax Appellate Tribunal for further necessary action.
Mufti Baha-U-Din Farooqi, J.
10. I agree.