When your father sells his old property and gifts the sale proceeds to you, it is application of income. As his investment is not qualified for exemption u/s 54 or 54F, he will have to pay tax on the capital gains.
Instead, your father can explore the following three options:
1) Invest the capital gains in Capital Gains Bonds upto a sum of Rs. 50 Lakhs u/s 54EC of the Income Tax Act and after the lock in period of 3 years, the money is free to use for any purpose. He can however gift the balance sale proceeds to you without attracting any tax. For instance, the sale proceeds are say Rs. 120 Lakhs and the Long term capital gains after indexation is Rs. 45 Lakhs. He needs to invest Rs 45 Lakhs in Capital Gains Bonds u/s 54EC for the minimum lock in period of 3 years to save tax on the long term capital gain of Rs. 45 Lakhs. He can however gift you the sale proceeds net of the long term capital gains, i.e., Rs. 75 Lakhs (i.e., Rs 120 Lakhs, the sale consideration less the Long term capital gain of Rs. 45 Lakhs). The remaining Rs 45 Lakhs can be gifted to you after the lock in period of 3 years.
2) Invest entire sale proceeds in a residential house u/s 54F, if applicable, and you will be the second joint owner of the property. The property will be registered in the name of your father as the first Joint owner and you will be the second joint owner. He can then claim exemption u/s 54 or 54F as applicable.
3) Invest the capital gains component in a residential house u/s 54 as the first joint owner, while you will be the second joint owner.