TMI Blog2012 (10) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Appellant. Rajesh Katoch for the Respondent. ORDER Ajay Kumar Mittal, J . - This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short, "the Act") against the order dated 10.5.2005, Annexure A.5 passed by the Income Tax Appellate Tribunal, Amritsar (for brevity, "the ITAT") in ITA No. 395 of 2000. It was admitted on 13.11.2006 for determining following substantial questions of law:- "( i ) Whether in the facts and circumstances of the case, the Tribunal was right in denying the appellant the benefit of Section 54 of the Income Tax Act on the ground that the residential house of the petitioner was not residential in nature due to lack of amenities when the rental incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption under section 54(1) of the Act on the ground that there was only one room, kitchen and dry latrine. The CIT(A) did not accept the plea of the assessee that the said house was a residential house within the meaning of Section 54 of the Act and dismissed the appeal. Feeling aggrieved, the assessee filed an appeal before the ITAT, which was dismissed vide order dated 10.5.2005, Annexure A.5. Hence the instant appeal by the assessee. 3. Learned counsel for the appellant submitted that the property which was purchased by the assessee was a residential house as the assessee had built a room which was let at the rate of Rs.250/-per month, though to a labourer. According to the counsel, once it was habitable, it would fall within the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or ( ii ) If the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and ( ii ) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid." 7. A perusal of the aforesaid provision shows that the exemption under Section 54 of the Act is available on transfer of a long term capital asset in respect of residential house and land or building appurtenant thereto to an assessee who is either individual or Hindu undivided family. It is also essential that the income of the same is chargeable under the head 'Income from house property'. Further requirement under this provision is that the assessee within a period of one year before or two years af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 54(1) of the Income Tax Act for claiming exemption of capital gains is that the assessee has within a period of three years from the date of transfer of the property constructed a residential house. The assessee in this case is stated to have constructed one room, kitchen and latrine in the property in question. According to the AO and the material available on record, it was found that only one room has been built up with bricks and mud. This room was also not having any boundary wall, no toilet, no electricity and no sewerage connection. The area of the plot is measuring 237.08 sq. yds which was purchased for Rs.4,32,500/-. Therefore, by any stretch of imagination, it cannot be presumed to be a residential house, it is not fit for habit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idential house in the plot, in question. It appears to be afterthought deliberate arrangement to raise muddy room so that the assessee could take plea before the authorities below that the residential house is constructed in the plot, in question. The AO also specifically observed that no source of investment is also proved. The tenant Shri Ram Kishan, who was examined by the AO clearly proves that he was labourer and was earning Rs. 70/- to Rs. 80/- per day and he has denied to have any latrine in the property which the assessee claimed to have raised in the property. He was also not aware of the name of the landlord. These facts would clearly prove that the assessee has not constructed any residential house. We may also mention that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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