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2002 (8) TMI 28 - MADRAS HIGH COURTComputation Of Capital Gains - "Whether, having regard to the Explanation to section 49(1) of the Income-tax Act, 1961, and the fact that the asset became the property of Shri Sourirajulu on the distribution of assets on the dissolution of the firm within the meaning of sub-section (1)(iii)(b) thereof, the Appellate Tribunal is correct in law in coming to the conclusion that the sum of Rs. 1 lakh paid by the said Sri Sourirajulu at the time of taking over the business as proprietary business would form part of the cost of acquisition for the purpose of computing the capital gains in this case?" - It is evident from the Explanation that where the previous owner of an asset which was sold had himself acquired it by any of the modes set out in section 49(1) in its sub-clauses (i) to (iv) it is the cost incurred by the owner who had owned the asset prior to the previous owner that is required to be taken into account and not the cost incurred by the previous owner at the time he received the asset in any of the modes set out in sub-clauses (i) to (iv) of section 49(1). In this case, Sourirajulu paid a sum of Rs. 1 lakh to the retiring partner in 1972 at the time the firm was dissolved. The cost of the acquisition, therefore, is not to be computed by taking that one lakh rupees into account but by only looking to the cost of the acquisition to the firm which was dissolved. The Tribunal was clearly in error in holding otherwise. The question referred to us is, therefore, answered in favour of the Revenue and against the assessee.
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