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Issues involved:
The High Court of Karnataka addressed the following issues: 1. Whether the site purchased in 1976 and the building constructed thereafter should be considered as different assets for the purpose of capital gains when sold together in the assessment year 1981-82? 2. Whether the site and the building can be treated as separable assets for the purpose of capital gains, with profits from the sale of the site classified as long-term capital gain and profits from the sale of the building as short-term capital gain? Summary of the Judgment: The case involved an individual who purchased a site in 1976 and constructed a building in 1980, subsequently selling the building in the relevant assessment year. The individual treated the site and building as separate assets for capital gains, categorizing the site's gains as long-term and the building's gains as short-term. The Income-tax Officer initially disagreed with this treatment, but the Appellate Assistant Commissioner and the Tribunal supported the individual's approach. The High Court considered precedents such as CIT v. Vimal Chand Golecha and CIT v. Dr. D. L. Ramachandra Rao, which emphasized that land and buildings are distinct assets for capital gains purposes. The Court noted that even after construction, the land remains an identifiable capital asset. The Revenue argued that a previous case, CIT v. Dr. V. V. Mody, where property transfer was determined based on registration, should be applied. However, the Court found the facts of that case to be different, as property transfer only occurs upon registration. Given the clear guidance from previous decisions, the High Court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue department.
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