Section 49(4)

Section 49(4) — the law in short

What the courts have decided on section 49(4), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Ravi Ramakrishnan v ITO (International Taxation) — the section 56(2)(vii)(b) addition must be added back as cost under section 49(4), even though it was never claimed in the return ITATHelps taxpayerNo later treatment found
  The DRP has refused my client's alternative plea for the section 49(4) cost step-up because it was not made in the return, citing Goetze. Is that the end of it?
  No. The Tribunal directed the Assessing Officer to recompute the capital gain in accordance with section 49(4), notwithstanding that the DRP had rejected the same plea on the footing that additional cost of acquisition could only be claimed through the return of income. Where the officer has taken a particular value into account for the section 56(2)(vii)(b) addition, that value is the deemed cost of acquisition and the capital gain must be recomputed on it.
• Vishnubhai Mafatbhai Desai v ITO — section 49(4) is the Revenue's answer to the double-taxation objection against section 56(2)(vii)(b), and the clause applies to FY 2013-14 ITATHelps departmentNo later treatment found
  I am arguing that a section 56(2)(vii)(b) addition on land my client bought below circle rate produces double taxation. How is the department going to answer that?
  With section 49(4). The Ahmedabad Bench dismissed the assessee's appeal, holding that section 49(4) clearly provides that the benefit of the inflated cost of acquisition arising from the deeming provision in section 56(2)(vii)(b)(ii) will be available at the time of sale of the asset, so the capital gain will be reduced to that extent. The Bench also held that section 56(2)(vii)(b)(ii) applies from AY 2014-15 and therefore governs transactions of FY 2013-14.
• Statutory position — section 49(4): the amount charged under section 56(2)(x) becomes the cost of acquisition on a later sale CBDT Circulars & InstructionsCuts both ways
  The Assessing Officer has charged my client under section 56(2)(x) on the stamp-duty difference. When he sells the property, does he pay capital gains on that same amount all over again?
  No. Section 49(4) provides that where the capital gain arises from the transfer of a property the value of which has been subjected to income-tax under clause (vii), clause (viia) or clause (x) of section 56(2), the cost of acquisition of that property is deemed to be the value taken into account for the purposes of that clause. The amount already taxed as income from other sources therefore comes back as cost, and is not taxed a second time as capital gain.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.