G. Vijayaranga Mudaliar vs Commissioner of Income Tax, Madras

Jagadisan, J.—G. Vijayaranga Mudaliar, Proprietor, Lakshmi Saraswathi Bus Service, Vellore, is a transport operator owning a fleet of

buses. During the year ends March, 31, 1953, relevant to the assessment year 1953-54 under the Indian Income Tax Act, he purchased 10 buses

plying on the route. Vellore, to Guidyattam, from one Meer Mohammad Ali. In respect of this sale transaction embodies in a written agreement

dated April 29, 1952, he paid the consideration of Rs. 1,25,000. He took delivery and possession of the buses on April 30, 1952, and began to

operator them himself. In the Income Tax assessment proceedings for the year 1953-54 he claimed depreciated in respect of these buses on the

sum of Rs. 1,25,000 which according to him represented his original cost of acquisition of the vehicles. The Income Tax Officer, Vellore, noted the

fact that the buses were all of old model, 3 of the year 1942, 3 of the year 1946, 3 of the year 1947 and one of the year 1950. He was of opinion

that the sum of Rs. 1,25,000 could not represent the value of the vehicles alone, but that some part of that amount must represent the value of

plying the buses on the route in respect of which they had permits. He estimated the ""route value"" at Rs. 40,000 and the ""vehicle value"" at Rs.

85,000. Depreciation was accordingly granted on the sum of Rs. 85,000. The assessee preferred an appeal to the Appellate Assistant

Commissioner who in dismissing the appeal observed as follows : ""I can only say that in fixing the value of the buses at Rs. 85,000 the Income Tax

Officer has been very liberal and I, therefore, do not see any reasons to interfere with this allocation."" There was a further appeal by the assessee

to the Income Tax Appellate Tribunal The tribunal observed that there were no material for ascertainment of the ""route value"" of the buses, but

instead of dismissing the appeal disposed of it in the following manner : ""Having regard to the net income estimated per bus, we would estimate the

route value at Rs. 60,000. The Income Tax Officer is directed to modify the assessment on the above basis. The appeal is partly allowed.

On the face of it the order of the tribunal is clearly erroneous. The Tribunal had no jurisdiction to enhance the ""route value"" to Rs. 60,000 and

thereby decrease the depreciation allowance and enhance the tax burden on the assessee in the absence of any appeal by the department. It is

indeed surprising that the Tribunal should have passed such a manifestly wrong order.

The assessee field an application before the Tribunal for rectification of its order u/s 35 of the Indian Income Tax Act. The contention of the

assessee was that the figure of Rs. 60,000 mentioned in the order of the Tribunal as presenting the route value was mistake for Rs. 20,000. He

claimed that the original cost of the vehicles for the purpose of depreciation allowance should be fixed at Rs. 1,05,000. In dealing with this

application the Tribunal observed that it did not intend to increase the ""route value"" from Rs. 40,000 to Rs. 60,000, that it was not the object of the

Tribunal to give relief to the assessee diminishing the route value from Rs. 40,000 to a lower figure, but conceded that the order partly allowing the

appeal has caused confusion. the tribunal disposed of the application in these terms : ""With a view to clarify the impugned order to bring out above

purpose we direct rectification of the aforesaid order u/s 35 as follows : ""(a) Delete the latter portion of paragraph 4 commencing from the route

value depends to a great... the assessment on the above basis (b) For partly allowed in the last line of paragraph 4, read dismissed"".

The assessee field an application for reference u/s 66(2) of the Act in this court and the following question has been referred : ""Whether on the

facts and in the circumstance of the case the Appellate Tribunal was entitled to enhance the value of route rights from Rs. 40,000 to Rs. 60,000

and whether such an error in the assessment vitiated the entire order ?"" It is this question which has come up for consideration now before us.

The Appellate Tribunal had no jurisdiction to enhance the value of the route rights from Rs. 40,000 to Rs 60,000 in the absence of any

departmental appeal from the order of the Appellate Assistant Commissioner. But the question need not be answered as the Tribunal itself has

rectified it previous order by deleting the figure of figure of Rs. 60,000 and by dismissing the appeal before it.

The main contention of Mr. S. Swaminathan, learned counsel for the assessee, however, was that the entire consideration of Rs. 1,25,000

should be taken as the value of the vehicles and vehicles alone vehicles alone, as it is not permissible under the Motor Vehicles Act to transfer

permits for pecuniary consideration. We must observe that there is a fallacy in this argument. A permit is defines u/s 2(xx) of the Motor Vehicles

Act as a document issued by a State or Regional Transport Authorising the use of a transport vehicle as a contract carriage or as stage carriage.

Section 59 of the Act states that a permit shall not be transferable from one person to another except with the permission of the transport authority

which granted the permit and it also states that no person to whom the permit is transferred shall have any right to use the vehicle without such

permission. The procedure for transferring a permit is governed by the rules framed under the Motor Vehicles Act. The transferor and transferee

should make joint application for transfer and that application will be notified by the Regional Transport Authority calling for objection, if any, and

eventually the transfer prayed for may either be granted or refused. Neither the provisions of the statute nor the rules frame thereunder actually

prohibit the receipt of consideration for a transfer of a transfer of permit. It may be that the competent authorities under the Motor Vehicles Act

may not allow a permit to be transferred for value lest it should encourage trafficking in permits. Buses have little value shorn of their permits to ply

on particular routes. It is an open secret that when buses are transferred 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. But nevertheless to transferred

admits having received any consideration for transfer of the permits and the transfer also never acknowledges that he paid any amount for annexing

the routes along with the buses. We must observe that this pretense of non-payment of consideration for transfer of permits is nothing short of

sheer hypocrisy. 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 route. In the instant case we cannot say that the

department went wrong in allowing depreciation only on the amount of Rs. 85,000 as representing the value of the vehicles deducting Rs. 40,000

representing the ""route value"" from the total consideration of Rs. 1,25,000.

The answer to the question is as follows : The Tribunal acted erroneously in fixing the route value at Rs. 60,000 but the error has been rectified

and corrected. The decision of the Tribunal acted been rectified and corrected. The decision of the Tribunal affirming the decision of the

department fixing the route value at Rs. 40,000 cannot be said to be unsupported by the materials on record. There will be no order as to costs.

Order accordingly.