Section 55

Section 55 — the law in short

What the courts have decided on section 55, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Paville Projects Pvt Ltd Supreme CourtHelps departmentValidity unconfirmed
  The Assessing Officer allowed a deduction. Does the fact that a view was taken protect the assessment from section 263?
  Only if the view taken is one of two views genuinely open on the law. Where the Supreme Court is satisfied the assessment is both erroneous and prejudicial, the Commissioner's revision stands and the Tribunal and High Court orders setting it aside go.
• T R Balasubramanium v ACIT High CourtHelps taxpayerValidity unconfirmed
  I received a flat when my company was wound up, paid capital gains tax then, and sold it in the same year. What is my cost?
  The fair market value of the asset on the date of distribution. A liquidation produces two transfers, not one — the extinguishment of the shareholder's rights in exchange for the asset, and then the shareholder's own sale of that asset — and where the shareholder has been assessed to capital gains on the first, s.55(2)(b)(iii) gives him the distribution-date value as his cost for the second.
• Nirma Ltd v DCIT — depreciation on goodwill from amalgamation, and the date the Finance Act 2021 closed it ITATHelps taxpayerSuperseded by amendment
  The Assessing Officer has disallowed depreciation on goodwill that arose when a company amalgamated into mine. Which years can I still claim it for?
  Only assessment years up to AY 2020-21. The Finance Act 2021 removed goodwill of a business or profession from the definition of block of assets in s.2(11) and from s.32, excluded it from Explanation 3(b) to s.32(1), and amended s.43(6)(c)(ii) to require the written down value of goodwill to be reduced from the opening WDV where goodwill already formed part of a block; those amendments apply prospectively from AY 2021-22. For earlier years the Tribunal here allowed the claim on Smifs Securities, and the amendment gives the Assessing Officer no ground to disturb it.
• Rajesh Saluja v DCIT ITATHelps departmentValidity unconfirmed
  I am selling the house. Can I add the home loan interest to the cost of acquisition under s.48, with indexation, on top of whatever I claimed under s.24(b)?
  This Tribunal said no. Following the Supreme Court in CIT v. Tata Iron and Steel Co. Ltd., it held that the cost of an asset and the cost of raising money to buy the asset are two different and independent transactions, so interest on borrowed capital has no direct nexus with the property and cannot enlarge the cost of acquisition. The disallowance of Rs 1,16,43,521 claimed as indexed cost referable to interest of Rs 94,17,082 was upheld.

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.