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Section 55 of the income tax act

Padmanabh Mishra (2nd Year Article Trainee) (37 Points)

04 June 2013

Are patents included in the purview of section 55, Cost of Acquisition ie. is it included in "trade mark or brand name associated with business", so that when we calculate LTCG in case of self generated patents, is the COA taken to be NIL ?

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5 Replies

Yogesh Bhandari (CA FINAL Student) (429 Points)
Replied 04 June 2013

Yes, COA will be NIL

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Padmanabh Mishra (2nd Year Article Trainee) (37 Points)
Replied 04 June 2013

Hi Yogesh,

Thanks for the reply but I further want to know how reached the conclusion that COA will be NIL, Section 55 states that only trade marks and brand names of a business are eligible, so is it specifically mentioned somewhere in the law ?

Padmanabh Mishra (2nd Year Article Trainee) (37 Points)
Replied 04 June 2013

Originally posted by : Yogesh Bhandari
	Yes, COA will be NIL

Hi Yogesh, Thanks for the reply but I further want to know how reached the conclusion that COA will be NIL, Section 55 states that only trade marks and brand names of a business are eligible, so is it specifically mentioned somewhere in the law
?

Amber Jain (Article Assistant) (206 Points)
Replied 04 June 2013

Hello,

As per the amendment in Sec 55(2) of income tax act the cost of acquisition of certain assets is to be taken as NIL if there original cost cannot be determined or cost of acquisition of self generated assets are to be taken as NIL.The following are the some of mentioned assets:-

(i) Goodwill of a business.

(ii) Trademark or brand name associated with the business;

(iii) right to manufacture, produce or process any article or thing

(iv) right to carry on any business;

(v) tenancy rights;

(vi) route permits;

(vii) loom hours.

Your case falls in the category of clause iii as patents is nothing but the right to manufacture, produce or process any article or thing.

So Cost of acquisition in your case is to be taken as NIL .

Padmanabh Mishra (2nd Year Article Trainee) (37 Points)
Replied 04 June 2013

Originally posted by : Amber Jain
	Hello, As per the amendment in Sec 55(2) of income tax act the cost of acquisition of certain assets is to be taken as NIL if there original cost cannot be determined or cost of acquisition of self generated assets are to be taken as NIL.The following are the some of mentioned assets:- (i) Goodwill of a business. (ii) Trademark or brand name associated with the business; (iii) right to manufacture, produce or process any article or thing (iv) right to carry on any business; (v) tenancy rights; (vi) route permits; (vii) loom hours. Your case falls in the category of clause iii as patents is nothing but the right to manufacture, produce or process any article or thing. So Cost of acquisition in your case is to be taken as NIL .