Shah, J. - (1.) In June, 1950 the respondents purchased an omnibus for Rs. 14,500 to ply it as a stage carriage. On March 5, 1958 they sole the omnibus together with the right to ply it for Rs. 23,000. Before the date of the sale the price paid by the respondents was recouped out of the depreciation allowed in proceedings for assessment of income-tax and the written down value of the omnibus in the record of the income- tax office was nil. In proceedings for assessment to income-tax for the assessment year 1959-60, the Income-tax Officer brought to tax Rs. 14,500 as deemed profit under section 10(2)(vii) of the Income Tax Act, 1922, and the balance of Rs. 8,500 as income arising from carrying on trade. In appeal to the Appellate Assistant Commissioner the order of the Income-tax Officer was substantially confirmed. The Appellate Assistant Commissioner however held that the excess over the original price of the omnibus represented not the trading profits but capital gains in respect of that omnibus. In appeal the Appellate Tribunal held that the price received by respondents for the sale of the omnibus was Rs. 6,000 and that amount was chargeable to income-tax under section 10(2) (vii). The Tribunal further held that the difference between the amount of Rs. 23,000 which was received by the respondents as consideration for the sale and the original price of Rs. 14,500 represented capital gain chargeable to income-tax under section 12B(2) of the Income Tax Act. The Tribunal then referred the following question at the instance of the Commissioner to the High Court of Andhra Pradesh :"Whether on the facts and in the circumstances of the case, the excess of Rs. 17,000 over the deemed profits of Rs. 6,000 held to be taxable under section 10(2) (vii) should wholly be treated as a capital gain liable to tax under section 12B of the Act -
(2.) The High Court held that the amount received as price for sale in excess over the original value of the omnibus could be treated as capital gain and could be taxed but not the balance. Against the order of the High Court, the Commissioner has appealed to this court.
(3.) The Income-tax Officer was apparently of the view that the respondent sold the omnibus for Rs. 23,000 and with that view the Appellate Assistant Commissioner agreed. But according to the Tribunal it was composite sale of the omnibus and of the right to ply the omnibus under the permit held by the omnibus was only Rs. 6,000 and the respondents had received consideration for parting with the right to ply the omnibus under the permit granted to them.;