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cost of acquisition?

Sourav Modi (Learner!) (306 Points)

15 January 2009

when a capital asset is being transferred on liquidation of a co. to a shareholder and the said asset is later being sold by the shareholder, what shall be the cost of acquisition of such asset? I mean whether it should be the market value at the time of transfer of the asset to the shareholder by the co. or cost to the previous owner(i.e company)

also assume: at the time of transfer, there was a deemed dividend amounting more than than the MV of the said capital asset.

sourav

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4 Replies

PiyushAgrawal (Chartered acooutant in practice) (575 Points)
Replied 15 January 2009

Originally posted by :Sourav Modi
"	when a capital asset is being transferred on liquidation of a co. to a shareholder and the said asset is later being sold by the shareholder, what shall be the cost of acquisition of such asset? I mean whether it should be the market value at the time of transfer of the asset to the shareholder by the co. or cost to the previous owner(i.e company) also assume: at the time of transfer, there was a deemed dividend amounting more than than the MV of the said capital asset. sourav	"

Hello sourav,

I think the answer is

when shareholder recives assets at time of liquidation section 2(22)c,49 & 46(2) applicable.

as per sec 46(2)---- Shareholder pays taxes for capitalgain for reciveing assets on behalf his holding.

market value of asstes rec. ------

+ any cash recived -----

- deemed dividend 2(22)c ----

_________________________________________

= Sales consideration for holding in co.

_________________________________________

as per sec 49 ---- cost of aquisition of the assets which he receives is Previous owner cost i.e. Co. & holding period is (his period+co. period).

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Pavan Jain S (Chartered Accountant) (1575 Points)
Replied 16 January 2009

As per section 46(2), if any asset is distributed as such on liquidation, the shareholder shall be liable to capital gain tax. The cost of such asset in the hands of shareholder shall be:

Situation 1: The assessee has been assessed to tax under the head capital gains at the time of such distribution, market value as at the date of distribution shall be the cost in the hands of assessee.

Situation 2: If the assessee has not been assessee to tax under the head capital gains [i.e., he has not been assessed on the basis of such market value u/s 46(2)], cost to previous owner shall be cost.

Any further clarifications are invited.