Appeal partly allowed for fair market value re-examination & builder charges disallowance.

The appeal was partly allowed for statistical purposes. The Tribunal directed the Assessing Officer to re-examine the determination of fair market value for tenancy rights and the claim for expenses incurred on the new flat. The Tribunal confirmed the disallowance of builder charges in the cost of acquisition of the new flat.

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Issues:
1. Rejection of claim for deduction of cost of improvement of inherited residential premises against long term capital gain.
2. Disallowance of deduction u/s 54 for expenses on improvement of new residential house and society formation charges.

Analysis:
1. The appellant contested the rejection of the claim for deduction of the cost of improvement of the residential premises inherited against long term capital gain. The Assessing Officer (A.O.) disallowed the claim as per section 55(2)(a)(ii) of the Income Tax Act, stating that the cost of acquisition of tenancy right should be considered as NIL. The appellant argued for the application of section 55(2)(b)(ii) based on inheriting tenancy rights. The Tribunal referred to a similar case and held that fair market value as of 1-4-1981 should be considered as the cost of acquisition, but directed the A.O. to determine the fair market value as it was not previously ascertained.

2. Regarding the deduction claimed u/s 54 for expenses on the new house, the A.O. disallowed expenses on society formation charges and improvement charges. The appellant argued that expenses on construction should be allowed as deduction u/s 54. The Tribunal agreed that fair market value as of 1-4-1981 should be considered as the cost of acquisition of tenancy rights. However, the Tribunal found no evidence of the fair market value being determined and directed the A.O. to re-examine the issue. Furthermore, the Tribunal directed the A.O. to re-examine the claim for expenses incurred on the new flat in light of a previous Tribunal decision.

3. The A.O. disallowed the inclusion of builder charges in the cost of acquisition of the new flat. The Tribunal upheld this decision, stating that these charges were for peaceful enjoyment of the property and not for acquisition. Therefore, the Tribunal confirmed the disallowance of these charges in the cost of acquisition.

In conclusion, the appeal was partly allowed for statistical purposes, with the Tribunal directing the A.O. to re-examine the determination of fair market value for tenancy rights and the claim for expenses incurred on the new flat.

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