(1) Subject to the provisions of this Act, the capital gains of a person shall be the difference between the sale or transfer price of an asset in the open market and the cost of acquisition of that asset.

(2) For the purpose of this section,—

(a) open market sale or transfer price of an asset means the higher of “A” and “B”, where—

A = amount received or accrued from transfer of capital assets; and

B = fair market value of the capital asset on the date of transfer;

(b) “cost of acquisition of an asset” shall be—

(i) the sum of the following costs—

(1) any such expenses which are solely related to the transfer of ownership of said asset;

(2) the purchase price of the asset; and

(3) the cost of development of such asset, if any, other than the cost allowed under section 38, 42, 49, 50 or 64;

(ii) where the transferor has acquired the said asset as follows—

(1) under any gift, bequest or will;

(2) by succession, inheritance or devolution;

(3) under a transfer on a revocable or irrevocable trust;

(4) by any distribution of capital assets on the liquidation of a company; or

(5) by distribution of capital assets in case of partition of any firm or association of person or Hindu undivided family,

in that case, the fair market value on the date of ownership of the asset by the transferee shall be deemed to be the cost of acquisition.