Cost of asset

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Anu (Querist)
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23 August 2016 Assessee had received shares of an unlisted company for inadequate consideration in March 2014, on which tax of Rs.100,000- was paid taking it as income from other sources u/s 56(2)(vii)(b) and computing Fair Market Value of Rs.500,000/-

In July 2016, assessee sells it for Rs.600,000/- What is the cost of acquisition to be taken for computing capital gains? Is it Rs.500,000/- or tax paid of Rs.100,000/-

Ruchi

Ruchi (Expert)
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23 August 2016 Fair market value of Rs. 5 lakhs should be taken as cost of acquisition.

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Anu

Anu (Querist)
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23 August 2016 Thanks. Since outflow has not happened from the assessee, can it still be considered as cost? The doubt was because actual outflow happened was for Rs.100,000/- only.

Ruchi

Ruchi (Expert)
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23 August 2016 100000/- is the tax amount. The assessee has very well paid the tax on the fair market value. The idea is to tax on the gains and not to take away the entire gain. Hence, you pay a proportion of your gains as tax and not your entire gain . So you can take the FMV on which taxes are paid as your cost.

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