The cost of acquisition means the price which an assessee has paid to purchase, construct or acquire an asset. No problem arises in finding out the cost of acquisition in case of assessee purchasing, constructing or acquiring the asset himself. But in other cases there are different rules to determine the cost of acquisition. They are
1. In case of assets acquired without paying any price [49 (1)].
Where the asset has become e property of the assessee in any of the ways enumerated below, the cost of acquisition shall be deemed to be the cost at which previous owner had acquired the same plus cost of any improvement by the said previous owner and after deducing depreciation allowed by him. These cases are :
(i) any division of assets by H.U.F. among its members on its partial or total partition;
(ii) assets received under a gift or will;
(iii) (a) assets received under succession, inheritance or devolution; or
(b) any distribution of assets on the dissolution of firm, body of individuals or other association of persons where such dissolution has taken place before 1 -4-1987; or
(c) any distribution of assets on liquidation of a company; or
(d) a transfer to a revocable or irrevocable trust; or
(e) any such transfer from a parent company to its wholly owned subsidiary Indian Company or vice versa; or
(J) any transfer, in a scheme of amalgamation, by the amalgamated company from the amalgamating company subject to the conditions prescribed u/s 47(vi), (via), (viaa); or
(g) any transfer of a capital asset in a scheme of business reorganisation of a cooperative bank as per section 47 (vica), (vicb); or
(h) any transfer by a private company or unlisted public company to a limited liability partnership (LLP) as a result of conversion of the company into LLP in accordance with the provisions of section 56 or section 57 of the LLP Act 2008; or
(i) any transfer of capital asset or intangible asset by a firm to a company as a result of succession subject to conditions prescribed u/s 47(xiii); or
(j) any transfer of capital asset or intangible asset by a sole proprietory concern to a company as a result of succession subject to conditions prescribed u/s 47(xiv).
(iv) any transfer of asset by an individual into the common pool of H.U.F.—the cost to H.U.F. will be the cost borne by individual.
2. Shares in amalgamated company [49 (2)].
In case of amalgamation of a company into an Indian company the cost of acquisition of shares of amalgamated company shall be taken to be the cost of acquisition to him of the shares of the amalgamating company.
3. The cost of shares received on conversion of debentures, deposit certificates or debenture stock shall be the cost at which original asset was acquired [Section 49(2A)1
4. Cost of Acquisition of Specified Security or Sweat Equity Shares [Section 49(2AA)].
With effect from assessment year 2010-11, where the capital gain arises from the transfer of specified security or sweat equity shares referred to in Section 17(2)(vi), the cost of acquisition of such security or shares shall be the fair market value which has been taken into account for the purposes of Section 17(2)(vi).
5. Cost of shares of resulting company [Section 49(2C)].
The cost of acquisition of shares of resulting company as a result of merger shall be :