Assessee wins appeal for exemption under Sections 54EC & 54F, Tribunal upholds valuation based on fair market value.

The Tribunal allowed the assessee's appeal for exemption under Section 54EC, citing an agreement to sell and considering earnest money as part of the sale consideration. The issue of exemption under Section 54F was sent back to the Assessing Officer for re-examination due to regularization under an amnesty scheme. The Tribunal upheld the assessee's valuation based on fair market value and the use of the cost inflation index from 1981-82, rejecting the Revenue's appeal.

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Issues Involved:
1. Exemption under Section 54EC.
2. Exemption under Section 54F.
3. Adoption of Fair Market Value as on 01-04-1981.
4. Adoption of Cost Inflation Index.

Detailed Analysis:

1. Exemption under Section 54EC:
The assessee claimed an exemption of Rs. 50 lakhs under Section 54EC by investing in Rural Electrification Corporation Ltd. bonds before the sale date. The Assessing Officer disallowed this claim, arguing that the investment was made prior to the sale date and thus did not qualify for exemption. The CIT(A) upheld this decision, stating there was no evidence of any prior agreement for sale. However, the Tribunal found that there was an agreement to sell dated 21-02-2006, and according to CBDT Circular No. 359 dated 10-05-1983, earnest money or advance is part of the sale consideration. Therefore, the Tribunal allowed the assessee's claim for exemption under Section 54EC, setting aside the CIT(A)'s order.

2. Exemption under Section 54F:
The assessee claimed an exemption of Rs. 1,84,07,779 under Section 54F for investing in a new residential property. The Assessing Officer disallowed this claim due to the lack of approval for the building plan, unverifiable expenses, and non-production of the architect. The CIT(A) upheld this disallowance. The Tribunal, considering the assessee's argument that the construction was regularized under an amnesty scheme and that the investment was made before the due date for filing the return, restored the issue to the Assessing Officer for re-examination. The assessee was directed to produce the architect and relevant details to substantiate the claim.

3. Adoption of Fair Market Value as on 01-04-1981:
The assessee valued the property at Rs. 71,18,920 as on 01-04-1981 based on a valuation report from a government-approved valuer, while the Assessing Officer adopted the value of Rs. 40,91,400 based on the Stamp Duty Registrar's valuation. The CIT(A) accepted the assessee's valuation, noting that the Stamp Duty valuation was based on circle rates which do not consider the specific features of the property. The Tribunal upheld the CIT(A)'s decision, agreeing that the valuation by the Stamp Authority was not correct and that the assessee's valuation was reasonable.

4. Adoption of Cost Inflation Index:
The Assessing Officer used the financial year 2003-04 for indexation purposes, while the assessee used 1981-82. The CIT(A) ruled in favor of the assessee, citing Section 49(1)(ii) and the Special Bench decision in DCIT Vs. Manjula J. Shah, which states that the indexation should be based on the date of acquisition by the previous owner. The Tribunal upheld the CIT(A)'s decision, confirming that the cost inflation index should be calculated from 1981-82, as the property was acquired by the previous owner before that date.

Conclusion:
The Tribunal allowed the assessee's appeal for exemption under Section 54EC and restored the issue of exemption under Section 54F to the Assessing Officer for re-examination. The Tribunal dismissed the Revenue's appeal regarding the adoption of Fair Market Value and Cost Inflation Index, upholding the CIT(A)'s decisions.

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