The seller was assessed under s.50CA on one figure and I was assessed under s.56(2)(x) on another. What cost of acquisition do I get?
The one taxed in your own hands. Section 49(4) measures the step-up by the value taken into account for the purposes of s.56(2)(x), so it follows the buyer's assessment and not the seller's s.50CA figure; if the two officers land on different numbers, the divergence does not travel. The seller gets no offset at all — the double incidence is the design and the statute provides no relief for it.
Section 49(4), on the current text carried by two commentary sites reproducing the Act, reads: "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) or clause (x) 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) or clause (x)."
Read the two limbs of that sentence. The condition is that the value of the property "has been subject to income-tax" under, so far as a share purchase is concerned, clause (x). The measure is "the value which has been taken into account for the purposes of the said clause". Both limbs point at the buyer's own assessment. Nothing in the sub-section refers to s.50CA, to the seller, or to the full value of consideration deemed in the seller's hands. So where the officer assessing the seller substitutes one figure under s.50CA and the officer assessing the buyer takes a different figure under s.56(2)(x)(c) — which happens whenever the two assessments are run separately, or where one of them is reduced on appeal and the other is not — the buyer's step-up is the figure taxed on the buyer. The seller's number, higher or lower, does not enter the buyer's computation.
That also settles what happens if the buyer's addition is deleted. The step-up is conditioned on the value having been subject to tax under clause (x). If the addition goes, so does the step-up, and the buyer's cost reverts to what was actually paid. A buyer who succeeds on the charge should expect that and should not carry a stepped-up cost forward on a deleted addition.
On the seller's side there is nothing. Section 48 computes the gain on the deemed full value of consideration; there is no provision reducing the seller's charge because the same gap has been taxed on the buyer, and none reducing the buyer's because the seller has been assessed. The library's existing entry on the two provisions records that the double incidence has been criticised since they were introduced together and that the statute contains no relief for it. Nothing found here changes that. The offset the statute does give is the buyer's step-up, and it is an offset in time rather than in amount: it stops the same value being taxed a second time when the buyer eventually sells, and it does nothing about the same gap being taxed once on each side today.
The practical consequences are about record-keeping and about running the two files together. The step-up will be claimed years later, by which time the assessment order that produced it may be difficult to locate, so the buyer needs the assessment order, the computation sheet showing the amount brought to tax under s.56(2)(x)(c), and the appellate order if the figure moved, kept with the share certificates. And because the two charges run on the same certificate, a concession on the seller's file is evidence on the buyer's file whether or not anyone intends it — but the buyer's step-up will still be measured by the buyer's own assessed figure, so a seller who settles at a higher number does not thereby improve the buyer's cost.
One threshold point that is easy to get backwards on the buyer's side. For property other than immovable property there is no percentage band at all; the only threshold is that the excess of fair market value over consideration must exceed Rs 50,000. That figure is a gate that lets the charge in, not a deduction from the amount charged — once the excess is over it, the whole excess is taxable, exactly as the library treats the immovable-property band.
Two officers assessing one transaction routinely reach different numbers, and practitioners assume the buyer's cost follows whatever is finally sustained on the seller. It does not, and a step-up claimed on the seller's figure is a claim the buyer cannot support from the words of s.49(4). The point also decides how a settlement is structured: relief obtained on the seller's assessment does not repair the buyer's cost, so the buyer's own appeal has to be fought on its own footing.
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