Section 55 of the Income Tax Act
Income-tax Act, 2025: s.90
Section 55 of the Income-tax Act, 1961 corresponds to section 90 (Meaning of “adjusted”, “cost of improvement” and “cost of acquisition”) of the Income-tax Act, 2025.
Read section 90 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 55 is CIT v. Mythreyi Pai (152 ITR 247), cited in 44 of the 127 judgments on BharatTax that turn on this section.
Leading authorities on Section 55
Expenditure incurred towards the purchase of shares is a capital expenditure and therefore, interest expenditure incurred on such purchases is not eligible for deduction under Section 36(1)(iii) of the Income Tax Act.
Transferable Development Rights (TDR), generated by a change in zoning laws and transferred, do not result in capital gains as they lack an ascertainable cost of acquisition. Gains from the transfer of such rights are not taxable.
Deduction under sections 54 and 54F for investment in property can be claimed when two residential flats are treated as a single unit, even if they were purchased separately and converted into one duplex by the assessee, provided they were joined before the assessee became the owner.
The actual cost of an asset to the assessee includes all amounts expended or laid out to acquire it, as per the ordinary dictionary meaning of 'cost'.
Interest paid on loans taken for acquiring an asset is includible in the cost of acquisition for computing capital gains. This interest is also eligible for indexation benefit.