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Issues Involved:
1. Cost of acquisition excluding the fair market value of the residential building. 2. Disallowance of exemption claimed under Section 54 on the sale of residential house. 3. Determination of indexed cost of acquisition. 4. Entitlement for exemption under Section 54F. 5. Computation of capital gain. Detailed Analysis: Issue 1: Cost of Acquisition Excluding the Fair Market Value of the Residential Building The appellant argued that the authorities erred in excluding the fair market value of the residential building from the cost of acquisition. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] concluded that the appellant sold the plot of land after dismantling the construction, hence only the land's cost was considered. The Tribunal noted that the AO and CIT(A) failed to consider the fair market value of the property as on 1st April 1981, which included the constructed property. The Tribunal directed the AO to recompute the capital gain by considering the indexed cost on Rs. 2,14,000, the fair market value of the constructed property including land appurtenant as on 1st April 1981. Issue 2: Disallowance of Exemption Claimed Under Section 54 on Sale of Residential House The appellant contended that the property sold was residential, not just land. The Tribunal found that the property was indeed a residential house used by the appellant and his father, supported by evidence such as municipal tax receipts and gas connections. Therefore, the appellant was entitled to exemption under Section 54 for the capital gain arising from the sale of land appurtenant to the property. The Tribunal directed the AO to allow this exemption. Issue 3: Determination of Indexed Cost of Acquisition The AO allowed indexation from the year 1999-2000, not from 1st April 1981. The Tribunal upheld the CIT(A)'s decision that indexation should be done from 1st April 1981, as the property was devolved to the appellant from his father before this date. The Tribunal directed the AO to take the fair market value of the constructed property including land appurtenant as on 1st April 1981 at Rs. 6,42,000, with the appellant's 1/3rd share being Rs. 2,14,000, and apply indexation accordingly. Issue 4: Entitlement for Exemption Under Section 54F The appellant also claimed exemption under Section 54F for the investment made in a new flat. The Tribunal found that the appellant had complied with the conditions of Section 54F, as he had purchased the new residential property within the stipulated time. The Tribunal directed the AO to allow the exemption under Section 54F in respect of the investment made in Flat No. 104, Friends Paradise, Agra. Issue 5: Computation of Capital Gain The Tribunal noted that the AO had not correctly computed the capital gain by excluding the cost of the residential building. The Tribunal directed the AO to recompute the capital gain by considering the fair market value of the constructed property including land appurtenant as on 1st April 1981. The indexed cost should be allocated between the two transactions (sale of land appurtenant and sale of land after dismantling the building) based on the area of the land involved in both transactions. The appellant should be allowed exemption under Section 54 for the sale of land appurtenant and under Section 54EC for the sale of land after dismantling the building. Conclusion: Both appeals were partly allowed. The Tribunal directed the AO to recompute the capital gain considering the fair market value of the constructed property as on 1st April 1981, allow exemptions under Sections 54 and 54EC, and ensure compliance with the provisions of Sections 54 and 54F.
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