2012 (2) TMI 542 - AT - Income Tax

Summary

Issues involved: Determination of Capital gains on sale of land located at Ayyanthole, Thrissur for the assessment year 2005-06.

Capital gains calculation:
The assessee inherited 1/4th share of land and sold it for &8377; 44 lakhs, receiving &8377; 11 lakhs. Claimed market value as on 1.4.1981 at &8377; 10,000. Claimed compound wall construction cost of &8377; 3,50,000 as 'Cost of improvement'. Invested &8377; 11 lakhs for purchase of another land at Koothattukulam. Deducted this investment u/s 54F against long term capital gain.

Assessing officer's restrictions:
AO restricted cost of improvement to &8377; 50,000 due to lack of evidence. Restricted exemption u/s 54F to &8377; 1.00 lakh based on purchase deed values. Rejected alternative claim of exemption u/s 54B as agricultural land status not proven.

CIT(A) decision:
Enhanced cost of improvement to &8377; 1.00 lakh. Confirmed AO's view on other issues. Assessee appealed.

Exemption u/s 54B:
Assessee claimed exemption u/s 54B post-return filing. Evidence provided included photographs, water cess receipt, and certificates. CIT(A) dismissed claim due to insufficient evidence of agricultural use. Tribunal upheld decision, emphasizing land use over nature for sec.54B eligibility.

Deduction u/s 54F:
AO and CIT(A) restricted deduction to &8377; 1 lakh based on purchase deed values. Assessee argued farm house also constitutes residential house. Tribunal agreed, estimating plot and land value at &8377; 2 lakh for deduction u/s 54F in addition to super structure value.

Conclusion:
Tribunal partly allowed the appeal, directing AO to allow &8377; 2 lakh deduction u/s 54F. Pronounced on 17-02-2012.