Cost of Acquisition of capital assets of entities in case of levy of tax on accreted income under section 115TD
The existing provisions of the section 49 of the Act provides for computation of cost with reference to certain modes of acquisition of capital asset.
It is proposed to amend said section so as to provide that where the capital gain arises from the transfer of an asset, being the asset held by a trust or an institution in respect of which accreted income has been computed, and the tax has been paid thereon in accordance with the provisions of Chapter XII-EB, the cost of acquisition of such asset shall be deemed to be the fair market value of the asset which has been taken into account for computation of accreted income as on the specified date referred to in sub-section (2) of section 115TD.
The proposed amendment is consequential in nature.
This amendment will take effect retrospectively from 1st June, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent years.
[Clause 25]
Extract of relevant clause from Finance Bill, 2017
Amendment of section 49.
25. In section 49 of the Income-tax Act,—
(a) in sub-section (1), in clause (iii), in sub-clause (e), after the word, brackets, figures and letter “clause (vib)”, the words, brackets, figures and letter “or clause (vic)” shall be inserted with effect from the 1st day of April, 2018;
(b) after sub-section (2AD), the following sub-section shall be inserted with effect from the 1st day of April, 2018, namely:–-
“(2AE) Where the capital asset, being equity share of a company, became the property of the assessee in consideration of a transfer referred to in clause (xb) of section 47, the cost of acquisition of the asset shall be deemed to be that part of the cost of the preference share in relation to which such asset is acquired by the assessee.”;
(c) after sub-section (2AE) as so inserted, the following sub-section shall be inserted, namely:—
“(2AF) Where the capital asset, being a unit or units in a consolidated plan of a mutual fund scheme, became the property of the assessee in consideration of a transfer referred to in clause (xix) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the unit or units in the consolidating plan of the scheme of the mutual fund.”;
(d) in sub-section (4), after the words, brackets, figures and letter “or clause (viia)” at both the places where they occur, the words, brackets and figure “or clause (x)” shall be inserted;
(e) after sub-section (5) [as inserted by section 30 of the Finance Act, 2016], the following sub-sections shall be inserted with effect from the 1st day of April, 2018, namely:—
‘(6) Where the capital gain arises from the transfer of a specified capital asset referred to in clause (c) of the Explanation to clause (37A) of section 10, which has been transferred after the expiry of two years from the end of the financial year in which the possession of such asset was handed over to the assessee, the cost of acquisition of such specified capital asset shall be deemed to be its stamp duty value as on the last day of the second financial year after the end of the financial year in which the possession of the said specified capital asset was handed over to the assessee.
Explanation.––For the purposes of this sub-section, “stamp duty value” means the value adopted or assessed or assessable by any authority of the State Government for the purpose of payment of stamp duty in respect of an immovable property.
(7) Where the capital gain arises from the transfer of a capital asset, being share in the project, in the form of land or building or both, referred to in sub-section (5A) of section 45, not being the capital asset referred to in the proviso to the said sub-section, the cost of acquisition of such asset, shall be the amount which is deemed as full value of consideration in that sub-section.’;
(f) after sub-section (7) as so inserted, the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of June, 2016, namely:–
“(8) Where the capital gain arises from the transfer of an asset, being the asset held by a trust or an institution in respect of which accreted income has been computed and the tax has been paid thereon in accordance with the provisions of Chapter XII-EB, the cost of acquisition of such asset shall be deemed to be the fair market value of the asset which has been taken into account for computation of accreted income as on the specified date referred to in sub-section (2) of section 115TD.”.
