s.55(2)(a) — Cost of intangible rights, tenancy rights and any other right
The cost of goodwill, other intangibles, tenancy rights, permits, loom hours and, from assessment year 2024-25, "any other right" is the purchase price where it was bought, and nil in every other case.
The words "or any other intangible asset" and "or any other right" were inserted by the Finance Act, 2023 with effect from 1 April 2024, so they govern transfers from assessment year 2024-25. The counterpart in the Income-tax Act, 2025 is section 90(3).
Income-tax Act, 1961
s.55(2)(a)
Income-tax Act, 2025
s.90(3)
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 55(2)(a) of the Income-tax Act, 1961 defines, for sections 48 and 49, the cost of acquisition of a capital asset being goodwill of a business or profession, a trade mark or brand name associated with it, any other intangible asset, a right to manufacture, produce or process any article or thing, a right to carry on any business or profession, tenancy rights, stage carriage permits, loom hours or any other right. Where the assessee bought the asset from a previous owner, the cost is the purchase price; where it came to him by a mode in section 49(1)(i) to (iv) and the previous owner bought it, the cost is the previous owner's purchase price; in any other case the cost is nil. A proviso reduces the purchase price of goodwill by depreciation obtained before assessment year 2021-22. The words "or any other intangible asset" and "or any other right" were inserted by the Finance Act, 2023 with effect from 1 April 2024, here and in the matching nil cost of improvement rule in section 55(1)(b)(1). Tenancy rights have been in the clause far longer: the Supreme Court in D.P. Sandu Bros. Chembur (January 2005) described the nil cost for tenancy rights as introduced by the Finance Act, 1994 with effect from 1 April 1995, in answer to the decision in B.C. Srinivasa Setty, so that the cost became determinable but nil; that date rests on the judgment rather than on the amending Act. Every capital asset outside the clause, including a flat or other building, takes its cost under section 55(2)(b), with the option of fair market value on 1 April 2001, which for land or building is capped at the stamp duty value on that date from assessment year 2021-22. The counterpart in the Income-tax Act, 2025 is section 90(3), which carries the same list and makes the cost the purchase price from the previous owner, the previous owner's purchase price in a case under serial 1 of the Table in section 73(1), or nil in any other case.
What the provision does
Fixes the cost of self-generated rights at nil, so that their whole sale or surrender value is gain, while allowing the purchase price where the right was bought. It does not fix the cost of a flat or shop received in exchange for a surrendered tenancy, which is a building outside the clause, and it does not say whether pagdi paid to a landlord is a purchase price.
Threshold questions
- Is the asset one of the listed rights, or from assessment year 2024-25 "any other right" or "any other intangible asset", as opposed to land or a building
- Was the right bought from a previous owner, and for what price
- Was pagdi or a non-refundable deposit paid to the landlord when the tenancy was granted, and can the payment be proved
- Did it come by inheritance, gift, will, partition or another mode in section 49(1) from a previous owner who had bought it
- Is the transfer in assessment year 2024-25 or later, so that the words "any other right" apply
- Is the asset being valued the right surrendered or the flat received for it, which takes its own cost
In practice
The recurring disputes.
Pagdi paid to the landlord
A tenancy bought from an outgoing tenant is within clause (i) on its words; in Jigar Sevantilal Shah (April 2026) the Assessing Officer himself allowed the thirty lakh rupees paid to the previous occupant as cost. A pagdi paid to the landlord when the tenancy was first granted is harder. The tenant's argument is that the payment bought the tenancy and is its purchase price. The Revenue's argument is that the landlord created the right and did not sell an existing one, so nothing was purchased from a previous owner and the cost is nil under clause (iii). The Mumbai Tribunal decided it for the tenant in Ebrahim Noormohamed (ITA 5359/Mum/2024, January 2025), where a partnership firm had held a Dongri tenancy since 1954 on a non-refundable deposit and took a residential flat under consent terms: the deposit was held to be cost under clause (i) because it was an actual outflow, and the Tribunal also allowed the fair market value on 1 April 2001, which produced a loss. The order does not deal with the words "from a previous owner", and the 2001 option is textually confined by section 55(2)(b) to "any other capital asset", so the Revenue can contest both steps; but it is a decision for the tenant who can prove the payment. In Murtuza Kothari (January 2026) a claimed pagdi deposit made decades earlier failed before the first appellate authority for want of evidence, and the Tribunal decided the case on another ground.
Cost of the ownership flat received for a tenancy
The Revenue's case in Sarjit Ghanshyam Desai (May 2026) was that because the tenancy cost nothing, the shop received for it and later sold also had a nil cost. The Mumbai Tribunal held otherwise at paragraphs 4.10 and 4.11: the ownership premises were paid for with the surrendered tenancy, so the fair market value of the tenancy on surrender, or of the premises received, is their cost, and whether the later gain is short-term or long-term depends on the holding of the premises themselves. Murtuza Kothari (January 2026) is to the same effect. The Revenue's better answer is not a nil cost for the flat but a full gain on the surrender itself, computed with a nil cost for the tenancy in the year of surrender, subject to section 54F. The tenant's case is that the two legs, read together, fit the statute; his risk is a first-leg gain that was never offered.
Any other right and a society's additional FSI
Before assessment year 2024-25 the Mumbai Tribunal consistently held that additional FSI arising under the 1991 development control rules had no cost, so its transfer escaped tax under B.C. Srinivasa Setty: Land Breez CHS (September 2012), SBI Staff Chitralekha CHS (February 2020) and Colombia CHS (December 2025, for assessment year 2015-16). The Bombay High Court decision in Sambhaji Nagar CHS is known only as quoted in later orders, and appears to have upheld the Tribunal's conclusion as a possible view rather than to have laid down a rule. From assessment year 2024-25 the words "any other right" give such a right a nil cost and so a computable gain. The society's argument is that the residuary words take colour from the rights listed before them, which are rights to carry on a trade or occupy premises (goodwill, brand, a right to manufacture or carry on business, tenancy rights, stage carriage permits, loom hours), and that development potential inherent in land it owns is not of that kind; the Revenue's is that the words are deliberately wide and were enacted to end the no cost line. The breadth of that list weakens the society's reading, and the question is undecided.
A member's right to a new flat sold before completion
A member who assigns his entitlement under a permanent alternate accommodation agreement before the new flat exists transfers a right, which the Revenue will say is "any other right" with a nil cost unless purchased. The member's answer is that the entitlement is his existing interest in the building in a new form, a capital asset falling under section 55(2)(b) with its actual cost or its 1 April 2001 value, and that on the continuation view in Rajesh Shamji Furia (July 2026) the old flat's cost carries into it. Any price he paid for extra area is a purchase price on either view. No decision applies the 2023 words to a member's entitlement.