2004 (12) TMI 639 - AT - Income Tax

Summary

Issues:
Estimation of fair market value of property for calculating long-term capital gain; Denial of exemption under section 54 of the Income-tax Act, 1961.

Estimation of Fair Market Value:
The case involved the estimation of fair market value of a property sold by the assessee for calculating long-term capital gain. The Assessing Officer estimated the cost of acquisition lower than the value declared by the assessee, leading to a dispute. The revenue contended that reliance on the sale instance quoted by the assessee was unjustified, and the fair market value was based on the Inspector's report. However, the CIT(A) found the Assessing Officer's estimate lacking specific factual basis and expertise, suggesting a reference to a Valuation Officer. The Tribunal agreed, stating that the Assessing Officer's estimate lacked substantiation, and upheld the value declared by the assessee as the cost of acquisition.

Denial of Exemption under Section 54:
Regarding the denial of exemption under section 54 of the Act, the revenue argued against granting the exemption, claiming the assessee acquired flats by purchase, not construction. However, the assessee argued that the Assessing Officer's estimates were conjectural, and provided instances to support the declared cost of acquisition. The Tribunal noted that the assessee had fulfilled the conditions under section 54 by constructing residential apartments within three years, as per the joint development agreement with the developer. Thus, the Tribunal allowed the benefit of section 54 to the assessee, dismissing the revenue's appeal.

In conclusion, the Tribunal dismissed the revenue's appeal, upholding the fair market value declared by the assessee for calculating long-term capital gain and granting the exemption under section 54 of the Income-tax Act, 1961 based on the fulfillment of conditions by the assessee.