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Interpretation of section 54 of the Income-tax Act regarding relief for capital gains arising from the sale of property. Application of Urban Land Ceiling Legislation norms in determining appurtenant land for relief under section 54. Analysis: The case involved an appeal by the revenue against the order of the AAC granting relief under section 54 of the Income-tax Act. The assessee, an individual, sold a building on land and claimed relief under section 54 by setting off the capital gains against the price of a subsequently purchased residential flat. The ITO had limited the relief by considering only a portion of the land as appurtenant to the building based on Urban Land Ceiling Legislation norms. However, the AAC found that the entire land surrounding the building should be treated as appurtenant and allowed the set off of the entire capital gains under section 54. The main point pressed on behalf of the revenue in the appeal was the application of norms for appurtenant land as per the Land Ceiling Legislation to determine the relief under section 54. The Tribunal, in its analysis, highlighted that the Urban Land Ceiling Legislation was not in force at the time of the sale and the norms prescribed under it should not be applied unless any part of the land could be independently utilized. The Tribunal interpreted section 54 to include both building and land appurtenant thereto for granting relief, emphasizing that the land must be part of the building assessed under the head "Income from house property." The Tribunal concluded that the land formed one unit with the building and no part of the land surrounding the building had independent value, indicating it was all appurtenant to the house. In the final decision, the Tribunal upheld the order of the AAC, confirming the grant of relief under section 54 for the entire capital gains arising from the sale of the property treated as one unit. The appeal by the revenue was dismissed. In summary, the Tribunal's judgment clarified the interpretation of section 54 of the Income-tax Act, emphasizing that the entire land surrounding a building can be considered appurtenant for the purpose of granting relief under the section. The Tribunal rejected the application of Urban Land Ceiling Legislation norms in determining the appurtenant land, highlighting that the land must form a unit with the building to qualify for relief under section 54.
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