R. M. ARUNACHALAM vs COMMISSIONER OF INCOME TAX,MADRAS

The Supreme Court addressed the issue of whether estate duty paid under the Estate Duty Act, 1953 can be considered as 'cost of acquisition' or 'cost of improvement' for capital gains computation under the Income Tax Act, 1961. The Court held that the estate duty is not deductible in computing capital gains, as the previous owner must be considered as Ramanathan Chettiar, and thus the cost of acquisition should be based on the value as of January 1, 1954, per Explanation to Section 49(1) of the Income Tax Act. The appeals were dismissed, affirming the lower authorities' decisions.