Tribunal corrects property cost calculation, directs consideration of improvements.

The Tribunal directed the AO to consider the cost of improvements mentioned in the valuation report for a property inherited in 2009. It corrected the calculation of the investment in a new property, determining it to be Rs. 3,57,50,000, in favor of the assessee. No specific arguments were presented for exemption under Section 54EC or charging of interest under Sections 234B and 234C. The appeal was allowed, instructing the AO to consider improvements' cost and accurately compute the new property cost under Section 54 of the Income Tax Act.

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Issues Involved:
1. Cost of improvement made to the building.
2. Computation of capital gain and deduction under Section 54 of the Income Tax Act.
3. Exemption under Section 54EC of the Income Tax Act.
4. Charging of interest under Sections 234B and 234C of the Income Tax Act.

Summary:

Issue 1 & 2: Cost of Improvement

The assessee argued that the valuation report for the fair market value of the construction was accepted by the AO, but the cost of improvements was not considered due to lack of supporting bills and vouchers. The Tribunal found it unreasonable to expect production of such old bills as the property was inherited in 2009. Therefore, the Tribunal directed the AO to consider the cost of improvements mentioned in the valuation report.

Issue 3: Computation of Capital Gain and Deduction under Section 54

The assessee contended that the AO erred in combining the shares of both brothers and proportionately calculating the share of the assessee. The Tribunal noted that the assessee received Rs. 96,25,000 in cash and the rest as investment in the constructed house, totaling Rs. 3,57,50,000. The AO's calculation of investment in the new property at Rs. 2,64,81,481 was incorrect. The Tribunal concluded that the cost of the new property should be Rs. 3,57,50,000, considering the entire basement, ground floor, and other areas received by the assessee. Thus, the Tribunal sustained the ground in favor of the assessee.

Issue 4: Exemption under Section 54EC

No specific arguments were presented for this ground. Hence, no separate ruling was provided.

Issue 5: Charging of Interest under Sections 234B and 234C

No specific arguments were presented for this ground. Hence, no separate ruling was provided.

Conclusion:

The appeal of the assessee was allowed with directions to the AO to consider the cost of improvements and correctly compute the cost of the new property for the purpose of Section 54.

Order pronounced in the open court on 3rd May, 2023.

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