Capital gains on route permits fail where no ascertainable cost of acquisition exists, and permit fees are not acquisition cost.

Route permits were treated as capital assets, but capital gains tax could arise on their transfer only if a cost of acquisition was ascertainable. Applying that principle, the Court held that where the asset has no identifiable cost of acquisition, the charging provision for capital gains cannot operate on the transfer consideration. The application fees and incidental expenses incurred to obtain the permits were not regarded as the permits' cost of acquisition. As a result, the transfer of the route permits did not attract taxable capital gains, and the claim to treat those expenses as acquisition cost failed.

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Issues: Whether the application fees and incidental expenses incurred to obtain route permits constituted the cost of acquisition of the permits so as to attract capital gains tax on their transfer.

Analysis: The route permits were treated as capital assets whose transfer could give rise to capital gains only if a cost of acquisition was ascertainable. The Court followed the principle that where an asset has no identifiable cost of acquisition, the charging provision for capital gains cannot be applied to the consideration received on transfer. On the facts, the fees and incidental expenses incurred for obtaining the permits were not treated as the cost of acquisition of the permits themselves.

Conclusion: The transfer of route permits did not give rise to taxable capital gains, and the expenditure claimed could not be taken as the cost of acquisition; the answer was against the Revenue and in favour of the assessee.

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