Judgment :- THANIKKACHALAM J. In compliance with the directions given by this court under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the Tribunal referred the following questions for our opinion "1. Whether, on the facts and in the circumstances of the case, there is liability to capital gains tax by reason of the transfer of the buses to the managing director, Mr. Sathar Singh, during the relevant previous year? 2. Whether, in the absence of any proof of actual receipt of consideration in excess of what is shown in the transaction between the parties the provision of section 52(2) of the Income-tax Act could be applied ? 3. Whether the value of Rs. 1, 10, 000 estimated by the Appellate Assistant Commissioner for routes transfer is proper and legal ? 4. Whether the Appellate Tribunal was right in holding that the motor vehicle tax paid by the assessee which did not relate to the year should be allowed as deduction in computing the total income of the assessee ?" The assessee is a private limited company carrying on the business of passenger transport. The assessee-company during the year of account relevant to the assessment year 1966-67 sold 22 out of 23 buses along with the corresponding route permits to its managing director. The transfer of buses is said to have been effected at the written down value or near about the written down value according to the account maintained, viz., Rs. 4, 02, 887. According to the income-tax records, the written down value is Rs. 3, 94, 680. However, when the buses were transferred by the company to its managing director nothing has been charged for the route permits transferred with the buses. There were 19 routes subsequently transferred by the assessee-company to Sathar Singh, the managing director. The Income-tax Officer was of the view that the value of these routes was considerable and accordingly the provisions of section 52(2) of the Act were applicable. A few years earlier, the same managing director, Sathar Singh, who was the owner of these route permits had transferred these route permits to the company. The value of the route permits then wits fixed for levy of capital gains tax at Rs. 2, 16, 703. The value was confirmed on appeal by the Appellate Assistant Commissioner and the assessee did not file any appeal against that order. The value of the route permits then wits fixed for levy of capital gains tax at Rs. 2, 16, 703. The value was confirmed on appeal by the Appellate Assistant Commissioner and the assessee did not file any appeal against that order. The assessee had incurred a loss in the earlier assessment year 1955-56. For the two earlier assessment years 1964-65 and 1963-64, the profits earned by the assessee-company were substantial. After the transfer of the route permits by the assessee-company to its managing director, the particular routes yielded in income of Rs. 54, 287 and Rs. 42, 196, respectively, for the assessment years and 1968-69. In such circumstances, the Income-tax Officer felt that the assessee's claim that the route permits were not worth anything cannot be accepted and the Income-tax Officer was of the view that the route permits had considerable valueAccording to the Income-tax Officer, there is one piece of evidence on the basis of the amount which goes to show that the route permits had considerable value even in excess of the amount proposed to be added. The assessee-company was owing to the Indian Bank a sum of Rs. 3.5 lakhs, which was transferred to the managing director's account during this year. In the subsequent year, the amount lying to the credit of the managing director has been transferred to the capital reserve account. The shares of the company were transferred by the said Sathar Singh to Sri Sulaiman and others for a sum of Rs. 65, 000. The entire transaction of purchase of 22 buses with 19 route permits and the forgoing of the loan originally due from the company to the Indian Bank by transfer to B. Sathar Singh formed one integrated transaction. The transfer of buses had taken place after obtaining approval of the Regional Transport Authority. But for the assurance by Sathar Singh that he would not insist on claiming the loan due to him by way of undertaking the liability to the Indian Bank, the assessee-company would not have transferred the amount to capital reserve according to the Income-tax Officer. Further, the Income-tax Officer was of the view that but for the fact that the assets taken over, viz., the buses with route permits were worth so much, there was no reason why Sathar Singh should relinquish the claim. Further, the Income-tax Officer was of the view that but for the fact that the assets taken over, viz., the buses with route permits were worth so much, there was no reason why Sathar Singh should relinquish the claim. Therefore, the Income-tax Officer held that the argument that the assessee-company did not have any assets and hence Sathar Singh did not choose to claim the amount has no force. He pointed out that the company had at least one bus worth Rs. 50, 000 and one valuable route permit. Therefore, the Income- tax Officer was unable to accept that the relinquishment of the credit balance of Sathar Singh and the transfer of liability to capital reserve account till June 1966 are not part of the arrangement of sale of 22 buses and 19 route permits. Therefore, he held that the capital gains could be levied and the provisions of section 52(2) are attracted. The Income-tax Officer took the value of each route roughly at Rs. 10, 000 and the total value of the route permits was taken at Rs. 2, 20, 000. Accordingly, he completed the assessment. On appeal, the Appellate Assistant Commissioner has confirmed the assessee's liability to capital gains tax. The Appellate Assistant Commissioner agreed with the assessee that the motor vehicles tax paid by the assessee prior to the date of transfer of buses is admissible business expenditure from the total income of the assessee. On appeal, the Appellate Assistant Comml:ssioner reduced the route value to Rs. 1, 10, 000. Aggrieved the Department filed an appeal and the assessee filed a cross-objection before the Tribunal. The Tribunal held as under(1) On the facts found the assessee-company was not benefited by the transfer of the buses and routes to its managing director. There is, therefore, no liability to capital gains tax in respect of this transaction (2) The provisions of section 52(2) of the Act cannot, therefore, apply (3) The value of Rs. 1, 10, 000 estimated by the Appellate Assistant Commissioner for the routes transferred is reasonable and confirmed (4) The Appellate Assistant Commissioner was justified in allowing the motor vehicles tax on Rs. 34, 000 paid by the assessee as a deduction in computing the total income of the assessee. 1, 10, 000 estimated by the Appellate Assistant Commissioner for the routes transferred is reasonable and confirmed (4) The Appellate Assistant Commissioner was justified in allowing the motor vehicles tax on Rs. 34, 000 paid by the assessee as a deduction in computing the total income of the assessee. Accordingly, the departmental appeal was dismissed and the assessee's cross-objection was allowed In respect of the assessee-company's sale of its 22 buses to its managing director Sathar Singh, the question arose about the computation of capital gains. The Income-tax Officer was of the view that since nothing has been charged by the company from its managing director for the value of the permits transferred for the 19 route permits and the value of the routes being considerable, the provisions of section 52(2) are applicable in determining the capital gains. The Income-tax Officer found that a few years back, the same managing director was the owner of these routes and when they were transferred to this company, the route value for the purpose of capital gains was fixed at Rs, 2, 16, 703 which was confirmed by the Appellate Assistant Commissioner on appeal. This determination of value has become final. On going through the account books, the Income-tax Officer came to the conclusion that capital gains tax should be levied and the provision of section 52(2) of the Act are attracted. He estimated the value of the route permits. The reason for levying capital gains tax are contained in paragraph 7 of the order passed by the Income-tax Officer. The Tribunal agreed with the submission of the assessee that the company had not benefited from the transfer of the routes because its cost of acquisition of the routes was Rs. 2, 16, 703 whereas it is deemed to have transferred the routes now for a sum of Rs. 2, 20, 000, i.e., near about the same figure as found by the Income-tax Officer, Hence the Tribunal held that there is no scope for applying section 52(2) of the Act and there is no liability to capital gains. Regarding the route value, the Tribunal agreed with the value fixed by the Appellate Assistant Commissioner at Rs. 1, 10, 000. In the case of CIT (Addl.) v. Ganapathi Raju Jegi Sanyasi Raju, the Andhra Pradesh High Court held that the sale value of route permits is not liable to capital gains tax. Regarding the route value, the Tribunal agreed with the value fixed by the Appellate Assistant Commissioner at Rs. 1, 10, 000. In the case of CIT (Addl.) v. Ganapathi Raju Jegi Sanyasi Raju, the Andhra Pradesh High Court held that the sale value of route permits is not liable to capital gains tax. This decision of the Andhra Pradesh High Court was confirmed by the Supreme Court in CIT (Addl.) v. Ganapathi Raju Jogi. In view of the abovesaid decision of the Supreme-Court, the sale value of the route permits cannot be subjected to capital gains tax. But, in the present case, the capital gains tax was not levied because the cost of acquisition is more or less equal to the sale consideration. The Supreme Court in the abovesaid decision held that there is no cost of acquisition for acquiring the route permit. Therefore, in any event capital gains tax is not leviable in the case of the assessee herein Before the Tribunal it was contended by the Revenue that the Appellate Assistant Commissioner was not correct in allowing the motor vehicles tax of Rs. 34, 000 which was not incurred during the period for the assessee's business. On the ground that the benefit of quarterly taxes paid by the assessee has been transferred to the managing director without recovering the proportionate prepaid amount from him, the Income-tax Officer added back a sum of Rs. 34, 000 as amount spent but not relating to the company's business. rhe Appellate Assistant Commmissioner pointed cut that the assessee has paid the motor vehicles tax even long before the sale of the buses for the purpose of its own business and any sale of buses will not convert the tax that had been paid to the Government into non-business expenditure. In that view of the matter, the Appellate Assistant Commissioner did not sustain the addition. The Tribunal confirmed the order passed by the Appellate Assistant Commissioner on this point.The Tribunal pointed out that the later sale will not make the expenditure as not for the purpose of the business simply because the tax paid for the period after the transfer is made has not been recovered from the managing director. The reasons given by the Tribunal for accepting the order passed by the Appellate Assistant Commissioner on this point appear to be acceptableIn the result, questions Nos. The reasons given by the Tribunal for accepting the order passed by the Appellate Assistant Commissioner on this point appear to be acceptableIn the result, questions Nos. 1 to 5 are answered in the negative and against the Department. Question No. 4 is answered in the affirmative and against the Department. There will be no order as to costs. Counsel fee is fixed at Rs. 1,000.