Cost of acquisition of assets to be at FMV, if shareholder is charged capital gains tax on receipt of such assets in case of liquidation – Madras High Court
In Brief
The Madras High Court, while deciding regarding the cost of acquisition of assets in the hands of the taxpayer (shareholder of the liquidating company) received on distribution upon liquidation of a company, has held that if the taxpayer has been charged to tax upon receipt of the asset under section 46(2) of the Income-tax Act, 1961 (the Act), then the fair market value (FMV) of such asset will be deemed to be the cost of the asset in the hands of the taxpayer in terms of sections 55(2)(b)(iii) and 49(1)(ii)(c) of the Act (cost to the previous owner) should not be applicable. However, if the taxpayer has not been taxed under section 46(2) of the Act, then the cost of the asset received by the taxpayer will be the same as the cost to the previous owner (i.e. the cost in the hands of the company).
Source
1. T.C.A.Nos. 438 of 2008, 34 of 2009 & 5 of 2010
Cost of acquisition of assets to be at FMV, if shareholder is charged capital gains tax on receipt of such assets in case of liquidation – Madras High Court
