Capital gains on sale of a vehicle and permit right turned on transfer of capital asset and referred questions

Capital gains under section 12B were said to arise only on transfer of a capital asset, and section 2(4A) treated a capital asset as property of any kind held by the assessee. The Tribunal found that the sale price attributable to the omnibus was separate from the amount referable to the right to ply under the permit, but also recorded that the right to ply was not property. The SC declined to decide whether that right could itself be a capital asset, because the referred question did not cover that issue and its jurisdiction was confined to the questions actually referred. No capital gain was brought to tax on the omnibus sale price alone.

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Issues: Whether the excess amount received on sale of an omnibus together with the right to ply it under a permit was liable to be taxed as capital gain when the Tribunal had held that the right to ply was not property and the referred question did not cover that issue.

Analysis: The Tribunal found that the sale consideration attributable to the omnibus was Rs. 6,000 and that the balance represented consideration for parting with the right to ply under the permit. The Court noted that capital gains under section 12B could arise only if there was a transfer of a capital asset, and that section 2(4A) treated a capital asset as property of any kind held by the assessee. Since the Tribunal had recorded that the right to ply was not property, the Court declined to pronounce on whether such a right could be a capital asset, because that question had not been referred. The Court also held that the referred question did not encompass an inquiry into that separate issue and that its jurisdiction in appeal over the High Court's reference was confined to the questions actually referred.

Conclusion: No capital gain could be brought to tax on the footing that the omnibus itself was sold for more than its original price, and the Court did not answer the unreferenced question about the right to ply as property. The revenue's appeal therefore failed.

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