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2024 (5) TMI 93 - AT - Income TaxLTCG - deduction u/s 54 denied - construction of the house was not completed on or before 25.09.2017 - AO concluded that assessee had confirmed that there was no electricity supply, water connection in the subject mentioned property for which deduction u/s 54 was claimed and even the approved map for construction of the house was not submitted - HELD THAT - No basic amenities are present on the subject mentioned property for which deduction u/s 54 of the Act is claimed by the assessee. Though the assessee might be intending to construct a full fledged residential house on the agricultural land purchased by him, the aforesaid facts clearly bring out that such residential house, having the basic amenities was not constructed by the assessee on or before 25.09.2017 (i.e. three years from the date of transfer i.e. 25.09.2014). Even as late as on 7.12.2017, the Inspector of Income-tax along with Office Superintendent attached to the office of the learned AO, together with the Authorized Representative of the assessee (who appeared before the learned AO), had physically visited the site and had confirmed the aforesaid facts that the alleged house did not even have the basic amenities listed herein above. When there is a physical inspection carried out as late as on 07.12.2017, wherein photographs were also taken of the subject mentioned property, the basic amenities were not available in the subject mentioned property. Thus the assessee had not constructed the residential house within the prescribed time and in fact had not constructed a residential house at all on or before 25.09.2017 which could be construed as a residential house, habitable for its dwelling. Accordingly, deduction u/s 54 of the act had been rightly denied by the learned AO in the instant case. Appeal of the Revenue is allowed.
Issues Involved:
1. Eligibility for deduction u/s 54 of the Income Tax Act, 1961. 2. Basic amenities in the claimed residential house. 3. Nature of the property purchased. 4. Interpretation of "residential house" under section 54. 5. Relevance of the Punjab & Haryana High Court judgment. Summary: Issue 1: Eligibility for deduction u/s 54 of the Income Tax Act, 1961 The primary issue to be decided is whether the assessee is eligible for claiming deduction u/s 54 of the Income-tax Act, 1961. The assessee sold a residential property on 25.09.2014 and claimed deduction u/s 54 for the capital gain earned. The AO observed that the assessee did not construct a new residential property within the stipulated time frame. Issue 2: Basic amenities in the claimed residential houseThe AO noted that the property purchased by the assessee lacked basic amenities such as proper water and electricity connection, and the constructed area was a makeshift arrangement. The Inspector's report confirmed the absence of these amenities, and the AO concluded that the property did not qualify as a residential house. Issue 3: Nature of the property purchasedThe AO observed that the assessee purchased agricultural land with the intention to construct a residential house, but the construction was not completed within the required period. The property was reported to have only makeshift structures and lacked essential amenities. Issue 4: Interpretation of "residential house" under section 54The learned AO emphasized that a residential house should have basic amenities such as a boundary wall, kitchen, washroom, bedroom, electricity, and water connection. The AO concluded that the assessee's property did not meet these criteria and thus did not qualify as a residential house for the purpose of section 54. Issue 5: Relevance of the Punjab & Haryana High Court judgmentThe AO relied on the judgment of the Hon'ble Punjab & Haryana High Court in the case of Ashok Syal v. CIT, which stated that a house must have basic living amenities to qualify as a residential house. The AO denied the deduction u/s 54 based on this judgment. Conclusion:The Tribunal upheld the AO's decision, stating that the assessee did not construct a residential house with the required basic amenities within the prescribed time frame. The certificates from the Sarpanch and Architect were deemed insufficient to prove the existence of a habitable residential house. Therefore, the appeal of the Revenue was allowed, and the deduction u/s 54 was denied. Order pronounced in open court on 29.04.2024.
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