Judgment :- 1. At the instance of the Revenue, the Income tax Appellate Tribunal has referred the following question of law for the decision of this Court: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that no tax on capital gains can be levied in respect of the transfer of route permits, which were acquired by the assessee for the first time?" 2. The respondent-assessee is a private limited company. It is a transport operator. We are concerned with the assessment year 1974-75 for which the previous year ended on 30-6-1973. During the relevant accounting period, the assessee sold 12 buses along with pucca route permits. As on 1-7-1972 the written down value of the 9 buses was only Rs.1,52,021/-. That assessee claimed that out of the consideration received for the sale of 9 buses, Rs.2,50,000/- was the value of the route permits, that this was analogous to good will, that there was no cost of acquisition with regard to the route permits, that it is a self-generated asset and so no capital gains accrued or arose for the levy of tax. The Income Tax Officer held that the entire sale proceeds represented the value of buses. According to him, the route permits can be transferred only with the permission of the Regional Transport Authority and the assessee had no power to transfer the route permits. Therefore, no value could be attached to the route. He did not, therefore, exclude any portion of the consideration (Rs.2,50,000/-) from the capital gains. In appeal, the Commissioner of Income tax (Appeals) held that the sale price of the vehicles did include certain route value. He rejected the plea of the assessee that the route value is a self-generated asset. According to him, the assessee incurred expenditure to obtain the permits and the expenses incurred constituted the cost of acquisition. He estimated the value of the route permit per bus at a flat rate of Rs.5000/-. The Income Tax Officer was directed to assess a sum of Rs.45,000/- being the route value of 9 buses after deducting the cost of acquisition. The matter was taken in appeal by the assessee before the Appellate Tribunal. The Appellate Tribunal, after placing reliance on the decision of the Andhra Pradesh High Court in Addl. The Income Tax Officer was directed to assess a sum of Rs.45,000/- being the route value of 9 buses after deducting the cost of acquisition. The matter was taken in appeal by the assessee before the Appellate Tribunal. The Appellate Tribunal, after placing reliance on the decision of the Andhra Pradesh High Court in Addl. C.I.T. v. Ganapathiraju Jegi Sanyasi Raju (119 I.T.R. 715) held that tax on capital gains can be assessed in relation to transfer of route permits which the assessee had acquired from other parties at a cost and capital gains is not exigible in the case of to transfer of route permits which were acquired by the assessee for the first time, as no cost of acquisition can be envisaged with regard to such permits. Since details were lacking in this behalf, the Appellate Tribunal remitted the matter to the Income Tax Officer for fresh decision, in the light of the above finding. On motion made by the Revenue, the Income Tax Appellate Tribunal has referred the question of law, formulated herein above, for the decision of this Court. 3. We heard counsel for the Revenue, Mr.P.K.R.Menon, as also counsel for the assessee, Mr Jose Joseph. Counsel for the Revenue contended that the Appellate Tribunal was in error in drawing a dichotomy between the transfer of route permits by the assessee, acquired from other, parties at a cost, and transfer of route permits by the assessee which were obtained by him for the first time. It was also argued that the route permits cannot be considered to be analogous to good will to say that there will be no cost of acquisition or that it is a self-generated asset and since when no cost at all can be conceived for the acquisition of the assets, it is not possible to compute the capital gains as per the provisions of the Income tax Act. Counsel for the Revenue mainly placed reliance on the decision of the Madras High Court in K.Balasubramonia Nair v. C.I.T. (119 I.T.R. 504) and C.I.T. v. Shri Venkateswara Bus Union (119 I.T.R.507) to contend that the cases of transfer of route permits cannot be treated as analogous to the sale of a good will; nor can it be called as a self-generating asset and so the profit obtained by transfer of route permits is exigible to capital gains. 4. 4. On the other hand, counsel for the assessee submitted that this is not a case where the assessee acquired route permits from other parties at a cost, that the route permits were acquired by the assessee for the first time, that it is a self generating asset and analogous to a good will, that it is not possible to compute the capital gains in the case of transfer of good will as per the provisions of the Act as also in the case of transfer of route permits which were acquired by the assessee for the first time, that this is not a case where the transfer disclosed a separate value fixed for buses and route permits and so in the case of transfer of route permits which were acquired by the assessee for the first time, no capital gains tax is exigible. Counsel further pleaded that the obtaining of the route permit is analogous to an acquisition of an import licence by a person, that notwithstanding that some initial fee will, have to be remitted and some nominal expenditure.may have to be incurred for obtaining the route permit or import licence, it cannot be stated that the asset possessed, the inherent quality of being available on payment of a price and so the principles applicable in the case of good will should apply in the case of transfer of a route permit which was obtained by the assessee for the first time. The reasoning and conclusion of the Appellate Tribunal was sought to be supported on the above reasonings. Counsel for the assessee also placed reliance on the decisions in S. Vaidyanathaswami v. C.I.T. (119 I.T.R.369-Madras); Addl. C.I.T. v. Ganapathi Raju Jegi, Sanyasi Raju (119 I.T.R. 715 at p.721- AP); Addl. C.I.T. v. K.S. Sheik Mohideen (115 I.T.R. 243 - Madras -F.B.) and C.I. T. v. Modiram Laxmandas (P) Ltd. (142 I.T.R. 702 at p. 705 - Bombay). Both sides also read relevant passages from the decision of the Supreme Court in C.I.T. v. B.C. Srinivasa Setty (128 I.T.R. 294). 5. On hearing the rival contentions, the following facts are clear. The buses sold by the assessee were not new. Consideration was not separately shown as relating to the route permit in any deed of transfer. According to the assessee, the vehicles were sold for a consideration of Rs. 5. On hearing the rival contentions, the following facts are clear. The buses sold by the assessee were not new. Consideration was not separately shown as relating to the route permit in any deed of transfer. According to the assessee, the vehicles were sold for a consideration of Rs. 10,39,493/- while the written down value of the vehicles was only Rs.1,52,021/-. It was stated that the above facts will show that a portion of the consideration related to route permits. The Tribunal accepted the plea of the assessee that M/s. Balaji Motor, to whom six buses were sold by the assessee, for Rs.9 lakhs, was allowed depreciation only on the amount of Rs.6,80,000/- and the department allocated Rs.2,20,000/- as consideration of the cost of route permits. The Appellate Tribunal held that the Commissioner of Income tax (Appeals) has in the present case accepted the position that a portion of the consideration related to the route permits and had made a rough allocation for the same. In the light of the above, the Tribunal concluded that a portion of the consideration will represent consideration for the route permits. On the basis of the above finding, the Appellate Tribunal took the view that the transfer of route permits, which were acquired by the assessee for the first time, is akin to a transfer of good will and is a self generated asset. It will be governed by the principles laid down by the Supreme Court in Srinivasa Setty's case (128 I.T.R. 294). The Appellate Tribunal concluded that tax on capital gains can be levied only with regard to route permits which were acquired by the assessee at a cost and in such cases a reasonable allocation of the consideration between the bus and the route permit should be done. In the case of transfer of permits obtained by the assessee for the first time, no capital gains tax is exigible. 6.The decision of the Madras High Court in Vaidyanathaswami's case (119 I.T.R. 369) and of the Andhra Pradesh High Court in Ganapathi Raju Jegi's case (119 I.T.R. 715) are pointers to hold that in cases where a person obtains the route permit for the first time and it is transferred, it is akin to a transfer of "good will", a self generated asset. It will have no cost of acquisition. It will have no cost of acquisition. Since no cost of acquisition can be predicated for the route permit obtained for the first time by a person, in the light of the decision in Srinivasa Setty's case (128 I.T.R. 294 - S.C.); Vaidyanathaswami's case (119 I.T.R. 369 - Madras); Modiram Laxmandas (P) Ltd. case (142 I.T.R. 702 at p.705 - Bombay) and Sheik Mohideen's case (115 I.T.R. 243 - Madras (FB)), we hold that no tax on capital gains can be levied in respect of the transfer of such route permits. We are of the view that before any capital gains tax can be levied, the asset sold must be such, as is capable of having a cost of acquisition as contemplated under S.48 of the Act. An asset to which S.48 cannot be applied cannot be brought to tax under S.45, since the asset must possess the inherent quality of being available on the expenditure of money to a person seeking to acquire it before it can be subject to capital gains. The permits cannot be considered as assets which are capable of acquisition initially for a price. When such assets are transferred, there can be no question of capital gains. 7. We answer the question referred to us in the affirmative - against the Revenue and in favour of the assessee. A copy of this judgment under the seal of this Court and the signature of the Registrar shall be forwarded to the Income tax Appellate Tribunal, Cochin Bench.