Cost of acquisition of shares

My friend is holding shares of some blue chip companies.

These shares were mainly acquired in the 1970-1990's by his grandfather/father.

These were transferred in his name when his father expired

In many case the cost of acquisition is not known as these were acquired way back He wants to sell these now

Long term capital gains is not taxable now but when the Direct Tax code comes into effect it will be taxable

Questions/clarifications

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1.What will be the cost of acquisition considered in computing capital gains in the above case

2. If the cost of acquisition is not ascertainable what is taken as the cost of acquisition

3. Do the same concepts (for answers in 1 and 2) apply to immovable property

Thanks
Ninad

Dear friend Ninad,

1. The cost of acquisition for the shares acquired before 1st april 1981, would be cost of acquisition or fair market value as on 1st april 1981 at the option of the assessee. Thus whichever is higher may be accepted.

2. If the cost is not ascertainable, than in my opinion nothing would be allowed to be deducted. This means COA would be NIL. Anyways since the cost is not ascertainable, the assessee cannot prove it anyway and it is liable to be disallowed.

3. In respect of Immovable property Section 50C applies. In such case the full value of sale consideration shall be deemed to be stamp duty value of such property if the same is higher than the actual sale price of the immovable property. Section 50C affects only the sale consideration and not the cost of acquisition.

Regards

Chintan