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Issues involved: Interpretation of provisions of s. 49 of the IT Act regarding the cost of acquisition of shares obtained through a family settlement.
Summary: The case involved the daughters of a settlor who received shares through a family settlement and later sold them, resulting in a capital gain. The dispute arose regarding the cost of acquisition of the shares for calculating the capital gains. The assessees argued that the value mentioned in the settlement deed should be considered as the cost of acquisition, while the assessing authority held that the cost to the previous owner should be taken into account as per s. 49 of the Act. The CIT(A) ruled in favor of the assessees, but the Tribunal upheld the assessing authority's decision, considering the shares as obtained for a consideration related to marriage expenses. Section 9 of the Act specifies the cost of acquisition in certain modes, including the cost for which the previous owner acquired the asset. Section 49(1) covers various scenarios of asset distribution, such as on partition, gift, succession, or dissolution of entities. The Tribunal emphasized that in a family settlement, akin to a partition, the consideration is the relinquishment of rights over joint family properties, not the value mentioned in the settlement deed. Ultimately, the High Court answered the question in favor of the Revenue, stating that the cost of acquisition of shares obtained through a family settlement should be based on the cost to the previous owner, not the value in the settlement deed.
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