Section 40 — Special provision for computation of cost of acquisition of certain assets

(1) For the purposes of computation of income under the head “Profits and
gains of business or profession”, cost of acquisition of an asset which becomes
property of—
( a) an amalgamated company under a scheme of amalgamation; or
( b) an assessee, under a gift, or will, or an irrevocable trust, or on total or
partial partition of a Hindu undivided family,
when sold as stock-in-trade shall be the sum of—
( i) cost of acquisition of the said asset in the hands of the amalgamating
company in case of clause (a), or the transferor or donor in case of clause
(b);
( ii) any cost of improvement made;
( iii) any expenditure incurred by the amalgamating company or transferor
or donor, as the case may be, wholly and exclusively in connection with
such transfer.
(2) This section shall not apply to an asset referred to in section 67(6).