Gift of buses with route rights can be valued as composite property, reflecting earning capacity and permit-linked use.

Where buses are gifted together with the right to operate them on specified routes, the route rights and permits can form part of the transferred property if the gift deed and subsequent regulatory permission support that transfer. The note explains that permits under the Motor Vehicles Act are not absolutely inalienable; transfer may be regularised with transport authority approval, and the donee's actual use of the buses and enjoyment of route income are relevant. It also states that valuation may properly be made on a composite earning-capacity basis, because buses without route rights have limited standalone value. The practical worth of the gift, rather than written down vehicle value alone, is the relevant basis.

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Issues: (i) whether the gift of buses included the route rights and permits attached to them so as to constitute property liable to gift-tax; and (ii) whether the value of the buses and route rights could be assessed on a composite basis.

Issue (i): whether the gift of buses included the route rights and permits attached to them so as to constitute property liable to gift-tax.

Analysis: The gift deed described the buses by reference to the routes on which they were operated and stated that the donee would own and enjoy the buses with absolute rights, run them on the routes operated by them, and enjoy the income derived therefrom. The transfer of permits was not absolutely prohibited by the Motor Vehicles Act; it was only subject to permission of the transport authority. Permission had in fact been obtained on a joint application, and the donee was running the buses and enjoying the income from the routes.

Conclusion: The gift included the buses together with the route rights and permits, and the subject-matter was property liable to gift-tax.

Issue (ii): whether the value of the buses and route rights could be assessed on a composite basis.

Analysis: The buses had little value without the routes on which they could ply, and the practical value of the gift lay in the earning capacity of the buses on those routes. The assessment therefore could not be confined to the written down value of the buses alone. In the absence of material from the assessee showing a lower capitalized value, the estimate made by the Gift-tax Officer on a composite basis was accepted.

Conclusion: The composite valuation adopted by the Gift-tax Officer was upheld.

Final Conclusion: The reference was answered in favour of the Revenue and against the assessee, with the inclusion of the route rights in the gift and the composite valuation sustained.

Ratio Decidendi: Where buses are gifted along with the right to ply them on specified routes, and the statutory permit transfer is subsequently regularised by the transport authority, the route rights form part of the gifted property and may be valued together with the vehicles on a composite earning-capacity basis.

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