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Section 48 of the Income-tax Act, 1961 - Capital gains - Computation of What is relevant for computing capital gains tax is 'cost of acquisition' and not cost on date on which asset was treated as capital asset The assessee acquired certain shares in the year 1977. On the original holding they received bonus shares in the financial year 1981-82 and additional bonus shares in the financial year 1989-90. All the shares were held as stock-in-trade till 6-11-1987. On the sale of the shares, while working out capital gain, assessee computed fair market price as on 1-4-1981. The Assessing Officer held that since the assessee was holding the shares as stock-in-trade upto 2-11-1987 and as the said shares were not capital assets as on 1-4-1981, the option adopted as fair market price as on 1-4-1981 was not available to the assessee. Held that it was held in Keshavji Karsondas v. CIT [1994] 120 CTR (Bom.) 109/[1994] 207 ITR 737 (Bom.) that what is relevant for computing the capital gains tax is the 'cost of acquisition' and not the cost on date on which the asset was treated as capital asset. The amendment of 1993 does not in any way nullify or dilute the ratio as laid down in the case ofKeshavji Karsondas. The cost of acquisition can only be the cost on the date of the actual acquisition. In the present case there was no acquisition of the shares on 6-11-1987 when the same were converted from stock-in-trade to a capital asset. Thus, the assessee was entitled to opt for the fair market value of certain shares as on the statutory date i.e. 1-1-1981, even though the said shares were held as stock-in-trade as on that date. Vinod Gupta for the Appellant. S. N. Inamdar and A K. Jasani for the Respondent. JUDGMENT R. S. Mohite, J.-Heard both sides. According to the Revenue, the questions of law at Sr. Nos. 1, 2, 3 and 4 arise from the basic question as to whether the assessee was entitled to opt for the fair market value of certain shares as on the statutory date, i.e., April 1, 1981, even though the said shares were held as stock-in-trade as on that date. The brief facts relevant for the decision of this question are that the 3 respondents acquired certain shares of M/s.…

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