Computation of actual cost

The actual cost of an asset used for the purposes of the business or profession shall be the actual cost to the assessee as, reduced by the following amounts:—

The payment or aggregate of payments exceeding ten thousand rupees in a day for acquisition of an asset, made to a person in a mode otherwise than by specified banking or online mode, shall be excluded from the actual cost of the asset.

In a case where the subsidy, grant or reimbursement referred to in sub-section (1)(d) is not directly relatable to the asset acquired, the amount of reduction under sub-section (1)(d) shall be determined as under: (𝐵 𝐴× 𝐶) Where,— A = total amount of subsidy, grant or reimbursement not directly relatable to the asset; B = cost of the asset acquired for which actual cost is to be determined; C = cost of all the assets in respect of or in reference to which the subsidy or grant or reimbursement is so received.

In circumstances specified under column B of the Table below, the actual cost of the capital asset shall be as specified in column C thereof. Table Sl. No. Specified circumstances Determination of actual cost A B C 1. Where capital asset is transferred Actual cost to amalgamated by an amalgamating company to an company shall be the same as it amalgamated company being an would have been if the Indian company in a scheme of amalgamating company had amalgamation. continued to hold such capital asset for the purpose of its own business. 2. Where capital asset is transferred Actual cost to resulting company by a demerged company to a resulting shall be the same as it would have company being an Indian company in been, if the demerged company had a demerger. continued to hold such asset for the purpose of its own business, which shall not exceed the written down value of such capital asset in the hands of demerged company. A B C 3. Where inventory is converted Fair Market Value as on date of into capital asset. conversion, as determined in the manner as prescribed. 4. Where capital asset is acquired Actual cost to previous owner by the assessee by way of gift or as reduced by the depreciation inheritance. allowable up to the immediately preceding tax year, as if such asset was the only asset in the relevant block of asset. 5. Where a building, being the Actual cost of the building as property of the assessee, is put to use reduced by the depreciation— for the purpose of business or (a) that would have been profession during the tax year. allowable had the building been used for the purpose of business from the date of acquisition; and (b) calculated at the rate in force on the date on which such asset was put to use for business. 6. Where capital asset is transferred Actual cost to the transferee- by— company shall be the same as it would have been, if the transferor (a) a holding company to its company had continued to hold subsidiary company; or such asset for the purpose of its (b) a subsidiary company to its own business. holding company, and the conditions of section 70section 70(1)(c) 30 and (d) are satisfied. 7. Where a capital asset, which (a) Actual cost of the asset in previously belonged to the assessee, the hands of assessee, when it was is reacquired by the assessee. first acquired, as reduced by the depreciation allowable up to the immediately preceding tax year, as if such asset was the only asset in the relevant block of asset; or (b) actual price for which such asset is reacquired by the assesse, 40 whichever is lower. 8. Where the capital asset is Actual cost of asset to the acquired by the assessee from assessee shall be the written down previous owner and subsequently value of the asset in the hands of asset is given back to the previous the previous owner at the time of 45 owner by way of lease, hire or transfer by the previous owner. otherwise, and— (a) the asset was being used for the purpose of business by the previous owner; and (b) depreciation has been claimed by the previous owner. A B C Where the capital asset is used in Actual cost of asset as reduced 9. business after it ceases to be used for by deduction allowed for the scientific research related to that capital asset under section 45section 45(1)(a) business and a deduction is made or (c) or under any corresponding under section 33section 33(3). provision of the Income-tax Act, 1961(43 of 1961). 10. Where the assessee had acquired Actual cost of the asset as an asset outside India, as a non- reduced by the depreciation–– resident, and the asset is brought by (a) that would have been him to India and put to use in allowable had the asset been business or profession in India. used for the purpose of business or profession in India since the date of its acquisition; and (b) calculated at the rate in force. 11. Where capital asset is acquired Actual cost of the asset, as if under the scheme of corporatisation there was no corporatisation. of a recognised stock exchange approved by the Securities and Exchange Board of India. 12. (a) Where deduction under Actual cost shall be deemed to section 46section 46 was allowed or allowable be nil. in respect of the capital asset— (i) to the assessee; or (ii) to any person and the assessee acquires or receives such asset through special modes of acquisition from such person.

Irrespective of anything contained in sub-section (4), in a case where the asset is acquired by the assessee, its actual cost shall be determined by the Assessing Officer having regard to all circumstances of the case, subject to the following conditions:—

The determination of actual cost under sub-section (5) shall be made with the prior approval of the Joint Commissioner.

In this section, “special modes of acquisition” means acquisition—