COMMISSIONER OF INCOME TAX Vs. T G RATHINASWAMY NADAR

JUDGEMENT

(1.) THE assessee, an individual, was plying three route buses with a spare bus between Akkur and Shiyali. THEse buses were acquired by the assessee in the years 1950, 1952 and 1957, for a cost of Rs. 1, 14, 086 and their written down value at the commencement of the previous year relevant to the assessment year 1958-59 was Rs. 51, 942. THE previous year concerned is the year ending with March 31, 1958. In March, 1958, the four buses were sold for a total consideration of Rs. 1, 40, 000. In the original assessment proceedings for the assessment year 1958-59, the Income-tax Officer considered that the sale consideration included the value of goodwill Accordingly, he broke up the sale consideration of Rs. 1, 40, 000, into consideration for sale of buses and value of goodwill and fixed the value of the goodwill at Rs. 84, 000 and the sale of buses at Rs. 56, 000. THE difference of Rs. 4, 058 between the sale value of the buses as thus apportioned and the written down value was assessed to tax as profit under section 10(2)(vii) of the Income-tax Act, 1922 (hereinafter called "the Act").

(2.) THE value, of goodwill of Rs. 84, 000 was assessed as capital gain under section 12B of the Act THE a filed an appeal and contended that the value of the goodwill as on January 1, 1954, was not less than Rs. 90, 000 and that therefore, there was no capital gain at all which could be assessed under section 12B. THE Appellate Assistant Commissioner rejected this contention and confirmed the assessmentOn a further appeal, by an order dated July 31, 1961, the Tribunal held that the sum of Rs. 84, 000 is not assessable as capital gain and this conclusion was arrived at on the following reasoning"...10. THEre are two ways of looking at the question. One is, having regard to the income estimated by the department from its very inception that the good-will had not undergone any change, it was the same both at the beginning and at the end. THErefore, the value of goodwill as on January 1, 1954, may be taken to be the same as the one fixed by the Income-tax Officer in which case there would not be any profit to be assessed as capital pins11. THE other is that there is no basis for evaluating the goodwill at Rs. 84, 000. We have referred to the circumstances in which the buses came to be sold.

(3.) THE learned counsel for the assessee pointed out that the bases were very old and in fact they were condemned in two or three years after the sale and that only because of the value of the route permit the same has realised so much as consideration. In this connection, he also referred to the decision of this court in Y. Vijayaranga Mudaliar v. Commissioner of Income-tax wherein this court had observed that the buses have little, value shorn of their permits to ply on particular routes and that in case of sale of buses, it is an open secret that the consideration paid by the purchaser of the vehicles is only commensurate with their earning capacity which is intimately connected with the routes on which they operate. THE learned judges also observed therein that we can almost take judicial notice of the fact that whenever a bus with a permit is transferred, a fair portion of the consideration would represent the value attributable to the pecuniary gain derived by operating on the routeIt might or might not be said that the portion of the sale consideration of Rs. 1, 40, 000 represented the value of the route permit. But we are concerned with the question whether on a reasonable interpretation of the Tribunal's order, the Income-tax Officer could be said to have any information, in his possession which will raise a reasonable belief that the income, profits or gains chargeable to income-tax have escaped assessment or have been under-assessed or assessed at too low a rate or have been made the subject of excessive relief under the Act. We are unable to hold that the interpretation placed by the Income-tax Officer on the order of the Tribunal was not reasonable or in any way perverse. Once we come to the conclusion that it is a reasonable interpretation, though ultimately the assessee might be able to convince the Income-tax Officer that the entire amount does not represent the fair market value of the buses themselves, the jurisdiction of the Income-tax Officer to reopen the assessment could not be questioned. We are, therefore, of opinion that the Tribunal was in error in holding that section 34(1)(b) was not applicable to the facts and circumstances of the case. We, accordingly, answer the reference in the negative and in favour of the revenue. As we have already pointed out, the Tribunal had not gone into the other grounds as regards the quantum of profits determinable under section 10(2)(vii) in view of its opinion that section 34(1)(b) was not applicable.