Section 55 - Meaning of adjusted, cost of improvement and cost of acquisition

Cost of acquisition and improvement: statutory rules for intangibles, share reorganisations and financial-asset allotments.

Section 55 establishes that cost of improvement is nil for goodwill and specified intangibles and otherwise comprises capital expenditure on additions or alterations by the assessee or previous owner, excluding deductible expenditure. Cost of acquisition for specified intangibles is the purchase price if bought and nil otherwise (with adjustment for depreciation in certain cases). Special rules govern financial-asset allotments, free allotments, renounced rights, share reorganisation events, distribution on liquidation, and an elective fair market value option where assets or prior owner interests pre-date the statutory base.