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How determine cost of Acquisition of Self Generated Assets

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B.C.Srinivasa Setty (SC)

The cost of acquisition of a self generated asset is not determinate, Therefore, capital gains not possible to be computed when a self generated asset is transferred.Hence ,no capital gains will arise on the sale of self generated asset.The amount received will be a capital receipt not chargeable to income tax.


In view of the amendment in section 55,the above judgement will not apply to the sale of

Good will of business

  • Tenancy right,
  • Stage carriage permits
  • Loom hours
  • The right to manufacture,produce and process any article or thing
  • A trade mark or brand name associated with a business,and
  • A right to carry on any business
  • Section 28 has been amended restrospectively to provide that the following shall be charged to tax under head P/G/B/P

(i)    Cash assistance against exports

(ii)   Any duty of customes or excise repaid or repayable as duty drawback against exports

(iii)  Profits on sale of licences granted under imports (control) order against exports

The judgement of supreme court in B.C. Srinivasa settee will till apply to self generated assets other than those mentioned in section has been held in the case of suman tea & plywood industries (P) Ltd.that the spontaneously grown trees can be said to be self generated assets and their cost of acquisition and cost of improvement is indeterminate.Therefore no capital gains shall arise on sale of such spontaneously grown trees

  • The amendment in section 55 does not cover goodwill of profession,Therefore ,if self generated goodwill of profession is sold,then no capital gains shall arise in view of supreme court judgement in B.C.Srinivasa settee,The amount received on sale of such goodwill is a capital receipt not taxable.Similarly,if goodwill of profession which was purchased is subsequently solf,then it can be argued that the cost of improvement of goodwill is indeterminate and hence no capital gains.

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