Section 55 - Cost of Acquisition (COA) of a capital asset

Section 55 prescribes the provisions regarding determination of cost of acquisition of a capital asset for the purpose of computing capital gains as per section 48.

1.  In the case of capital assets other than mentioned in point 2, 3 and 4 below, the following shall apply:

• Where the capital asset is acquired by the assessee or the previous owner before 01.04.2001, the cost of acquisition shall be higher of 
• cost of acquisition to the assessee or previous owner, 
• FMV as on 01.04.2001

• Where the capital asset is acquired by the assessee or the previous owner on or after 01.04.2001, the cost of acquisition shall be the actual cost of acquisition to the assessee or previous owner.

• In the case of immovable property being land or building or both, the FMV as on 01.04.2001 should be restricted to the SDV of such asset as on 01.04.2001, if available. 

2.    In the case of a capital asset being any of the following, cost of acquisition would be the amount of purchase price (if such asset has been acquired) and Nil (if such asset is self generated) : (Intangible Assets)

• Goodwill of a business or profession
• Trade mark or brand name
• Tenancy rights
• Stage carriage permit (Route permit)
• Loom hours
• Right to manufacture, produce or process any article or thing
• Right to carry on any business or profession

• In the case of above assets, the option to take cost of acquisition as FMV as on 01.04.2001 is not available even if such assets were acquired before 01.04.2001.

3.           3.  In the case of share/security:

• Being original shares/securities, the purchase price of such shares/securities.

• Being right shares/securities, price actually paid under the right issue.

• Being bonus shares/securities, cost shall be Nil.

• Where renouncement of right occurs, cost shall be Nil in the hands of person who renounces the right and the price paid to the renouncer + price paid to the company, in the hands of purchaser of right.

2.          4. On corporatization or demutualization of stock exchange,

• where the member is allotted shares of the company, then in such a case, the cost of acquisition of such shares shall be the cost of his original membership of the exchange.

• In case of trading or clearing rights of the recognized stock exchange acquired by a shareholder, the cost shall be Nil.

• However, in such cases, the option to take FMV as on 01.04.2001 in case of share acquired before 01.04.2001 is not available.