Real nature test for transport permit transfers: consideration was revenue income, not a capital receipt, and was taxable.

The decisive test for the tax treatment of consideration received on transfer of transport permits is the real nature of the transaction, not its label. The permits were treated as non-marketable rights, not capital assets owned in the ordinary sense, and the assessee had no legal entitlement to demand them as property. The receipt was for parting with the right to ply vehicles and reflected a change in the mode of earning profits, without creating an enduring capital advantage or increasing capital. The transfer-of-loom-hours authority was distinguished because that case involved a transferable legal right. The amount was therefore revenue income, not a capital receipt, and was taxable.

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Issues: Whether the sum received on transfer of transport permits granted under the Motor Vehicles Act was a capital receipt or revenue income liable to tax under the Indian Income-tax Act, 1922.

Analysis: The decisive test was the real nature of the transaction, not its nomenclature. The permits were not marketable assets owned by the assessee in the ordinary sense, and the assessee had no legal right to demand them as property. What occurred was a transfer of the right to ply vehicles, with the assessee effectively changing the mode of earning profits and receiving consideration in lieu of carrying on the business itself. The payment did not increase the assessee's capital, did not represent the sale of a capital asset, and lacked the character of an enduring capital advantage. The case of transfer of loom hours was distinguished because there the assessee had a transferable legal right.

Conclusion: The amount was revenue income and not a capital receipt, and it was liable to tax.

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