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Issues:
Computation and taxation of capital gains, application of sections 52, 49(iii)(b), and 50 of the IT Act, determination of cost basis for the asset, classification of capital gains as short-term or long-term, charging of interest under section 139(8). Analysis: The appeal pertains to the computation and taxation of capital gains for the assessment year 1975-76 by a Registered Firm upon selling land and buildings to a sister concern. The dispute primarily revolves around the cost basis of the asset, application of relevant sections of the IT Act, and the classification of capital gains. The Income Tax Officer (ITO) made adjustments to the cost and sale price of the asset, resulting in a significant amount being brought to tax as capital gains. Upon appeal, the Commissioner of Income Tax (Appeals) upheld the ITO's decision, emphasizing the close connection between the firm and the buyer, and the application of sections 52(2), 49(iii)(b) of the IT Act. The firm contended that the capital gains as declared should have been accepted, challenging the application of section 52(2) and asserting that the cost basis should be considered as claimed by the firm. The Tribunal delved into the history of the firm's constitution, asset acquisition, and dissolution, determining that the asset in question was not acquired through succession, inheritance, or devolution, thereby rendering sections 49 and 50 inapplicable. The Tribunal accepted the firm's claimed cost basis of Rs. 9,40,000 and classified the capital gains as short-term, contrary to the previous treatment as long-term capital gains. Regarding the interest charged under section 139(8), the issue was not addressed by the CIT (Appeals), prompting the Tribunal to remand the matter for a fresh decision. Consequently, the appeal was treated as allowed, reflecting the Tribunal's decision in favor of the assessee on the key issues of cost basis determination and capital gains classification.
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