Clause 40 - Special provision for computation of cost of acquisition of certain assets.

Cost of acquisition rules for transferred assets: transferor's cost plus improvements and transfer expenses govern stock in trade.

Where an asset acquired by an amalgamated company, or by way of gift, will, irrevocable trust, or on partition of an HUF, is sold as stock in trade, the cost of acquisition for the transferee is the sum of: the cost of acquisition in the hands of the amalgamating company or transferor/donor; any cost of improvement; and any expenditure incurred by the amalgamating company or transferor/donor wholly and exclusively in connection with the transfer.