in case goodwill was purchased, the cost shall be the price paid but in case it was not purchased the cost is taken as NIL.
The Finance Act 1994 has amended the above provision in following manner
(a) In case the capital asset is goodwill, tenancy rights, stage carriage permits or loom hours the cost of acquisition will be
(i) purchase price, if such asset was purchased and
(ii) NIL in all other cases except those covered u/s 49 (1) (1) to (iv).
(aa) In case a person is holding shares or other securities and assessee becomes entitled to subscribe to an additional financial asset, the cost of such additional asset shall be :
(i) Cost of original asset shall be its purchase price paid.
(ii) Incase such right to subscribe is renounced in favour of some other person, the cost of such renounced right is taken as NIL.
(iii) In case assessee subscribes to such additional asset, the amount actually paid shall be its cost.
(iv) In case asset is acquired by renouncee the cost shall be price paid by him to renouncee and amount paid to the company or institution for such renounced asset.
(v) With effect from assessment year 1998-99 the above mentioned provisions relating to cost of goodwill have been made applicable to a right to manufacture, produce or process any article or thing.
Adoption of Fair Market Value [Section 55(2)(b) and (c)]
(i) Where the asset became the property of the assessee before 1st April 1981, it will mean the cost of acquisition of the asset to the assessee or the fair market value of the asset on 1st April 1981, at the option of the assessee. Assesse should adopt whichever of the two is higher.
(ii) Where the capital asset becomes the property of the assessee under any of the modes given in section 49, the assessee is given the option to adopt, either the cost of the asset to the previous owner or its fair market value as on 1-4-1981, whichever is higher.