Section 49(4) provides that where there is any gain arising out of transfer of a property, the cost of acquisition of such property will be taken as per S. 56(2)(vii) and 56(2)(viia).
Therefore it is important to understand S. 56(2)(vii) and 56(2)(viia).
Under the existing provisions of S. 56(2)(vii), it provides that, if an assessee being an individual or a Hindu undivided family receives any immovable property without consideration or for inadequate consideration, the value of the said property shall be treated as income in the hands of assessee and shall be liable to tax. Clause (vii) of sub-s. (2) of S. 56 would apply only if the immovable property is received without any consideration and to remove the stipulation as regards inadequate consideration.
S. 56(2)(viia) provides that,
where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010, any property, being shares of a company not being a company in which the public are substantially interested,—
(i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;
(ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration.
Reference:
As Per Section 49(4), of the Income Tax Act, 1961-
Cost with reference to certain modes of acquisition.
49(4). Where the capital gain arises from the transfer of a property, the value of which has been subject to income-tax under clause (vii) [or clause (viia)] of sub-section (2) of section 56, the cost of acquisition of such property shall be deemed to be the value which has been taken into account for the purposes of the said clause (vii) [or clause (viia)].
Amendment of section 49 as per Finance Bill, 2010-
In section 49 of the Income-tax Act,—
(b) in sub-section (4), after the word, brackets and figures “clause (vii)”, at both the places where they occur, the words, brackets, figures and letter “or clause (viia)” shall be inserted with effect from the 1st day of June, 2010.
From Notes on Clauses:
Under the existing provision contained in sub-section (4) of section 49, where the capital gain arises from the transfer of a property, the value of which has been subject to income-tax under clause (vii) of sub-section (2) of section 56, the cost of acquisition of such property shall be deemed to be the value which has been taken into account for the purposes of the said clause (vii).
Sub-clause (b) proposes to amend the aforesaid sub-section so as to provide that the cost of acquisition of such property shall be deemed to be the value which has been taken into account for the purpose of clause (viia) of sub-section (2) of section 56 also.
This amendment is consequential to the amendment made vide sub-clause (b) of clause 21 of the Bill and will take effect from 1st June, 2010 and will, accordingly, apply to the assessment year 2011-2012 and subsequent years.