(1) For the purposes of sections 72 and 73, “cost of improvement”,— (a) in relation to a capital asset being goodwill or any intangible asset of a business, or a right to manufacture, produce or process any article or thing, or right to carry on any business or profession, or any other right, shall be taken to be nil; and (b) in relation to any other capital asset,— (i) if the capital asset became the property of the previous owner or the assessee before the 1st April, 2001, means all expenditure of a capital nature incurred on or after the said date in making any additions or alterations to the capital asset by the previous owner or the assessee; and (ii) in any other case, means all expenditure of a capital nature incurred in making any additions or alterations to the capital asset by the assessee after it became his property, and, where the capital asset became the property of the assessee by any of the modes specified in section 73 (Table: Sl. No. 1), by the previous owner. (2) For the purposes of sub-section (1)(b), the cost of improvement does not include any expenditure which is deductible in computing the income chargeable under the head “Income from house property”, “Profits and gains of business or profession” or “Income from other sources”.
CH. IV E.- CAPITAL GAINS [Sec 67-91] (3) For the purposes of sections 72 and 73, “cost of acquisition” of a capital asset (being goodwill of a business or profession, or a trade mark or brand name associated with a business or profession, or any other intangible asset, or a right to manufacture, produce or process any article or thing, or a right to carry on any business or profession, or tenancy rights, or stage carriage permits, or loom hours, or any other right) means— (a) the purchase price, if acquisition of such asset by the assessee is by purchase from the previous owner; and (b) the purchase price for the previous owner, in the case covered in section 73 (Table: Sl. No. 1), where such asset was acquired by purchase by the previous owner as defined in sub-section (2) of the said section; and (c) nil, in any other case. (4) For the purposes of sub-section (3)(a) or (b), if— (a) the capital asset is goodwill of a business or profession; and (b) the assessee has obtained a deduction on account of depreciation under section 32(1) of the Income-tax Act, 1961 in a tax year preceding the tax year commencing on the 1st April, 2020, then the total amount of depreciation obtained before the tax year commencing on the 1st April, 2020 shall be reduced from the amount of purchase price. (5) For the purposes of sections 72 and 73, and subject to the provisions of sub-sections (9)(a) and (b), “cost of acquisition” shall be as per sub-section (6), in a case where, by virtue of holding a capital asset, being a share or any other security, within the meaning of section 2(h) of the Securities Contracts (Regulation) Act, 1956 (herein referred to as the financial asset), the assessee— (a) becomes entitled to subscribe to any additional financial asset; or (b) is allotted any additional financial asset without any payment. (6) In a case referred to in sub-section (5), “cost of acquisition”, in relation to–– (a) the original financial asset, on the basis of which the assessee becomes entitled to any additional financial asset, means the amount actually paid for acquiring the original financial asset; (b) any right to renounce the said entitlement to subscribe to the financial asset, when such right is renounced by the assessee in favour of any person, shall be taken to be nil in the case of such assessee; (c) the financial asset, to which the assessee has subscribed on the basis of the said entitlement, means the amount actually paid by him for acquiring such asset; (d) the financial asset allotted to the assessee without any payment and on the basis of holding of any other financial asset, shall be taken to be nil; and (e) any financial asset purchased by any person in whose favour the right to subscribe to such asset has been renounced, means the total amount
of the purchase price paid by him to the person renouncing such right and the amount paid by him to the company or institution, for acquiring such financial asset. (7) For the purposes of sections 72 and 73, “cost of acquisition”, subject to sub-sections (9)(a) and (b), in relation to a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust referred to in section 198, acquired before the 1st February, 2018, shall be higher of— (a) the cost of acquisition of such asset; and (b) lower of— (i) the fair market value of such asset; and (ii) the full value of consideration received or accruing as a result of the transfer of the capital asset.