TaxTMI 
TaxTMI 
2019 (1) TMI 1353
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....idential house within the meaning of Sec. 54F in absence of the basic amenities such as a toilet, water & electricity connection & kitchen. 3. Ld. CIT(A) erred in law and on facts to hold constructed house inhabitable ignoring Municipal Tax bills classifying structure as residential property occupied by appellant's employee & the fact confirmed by the Inspector. 4. Ld. CIT(A) further erred in law and on facts in not appreciating that cost of land purchased forms part of cost of residential house and law does not lay down any stipulation as to size of the house or size of plot of land. 5. Ld. CIT(A) erred in law and on facts holding that entire land appurtenant to the house not eligible for exemption u/s54F of the Act overlooking CBDT circular & judicial decisions submitted by the appellant. 6. Ld. CIT(A) erred in law and on facts treating genuine claim as sham & a ploy to defraud government. Ld. CIT(A) ought to have refrained making such uncalled for comments. 7. Without prejudice to the above, since the purchase of land is undisputed during the year withdrawal of exemption if any can be made only after expiry of 3 years from date of tra....
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.... the AO conducted spot verification of the newly purchased land through its Inspector at the site and photographs of the site as well as the report of the Inspector were obtained. The report (reproduced in assessment order) contained various adverse remarks and therefore, was confronted to the assessee. 4. The salient features emerge from the spot verification report are that the site has boundary wall on four sides with an iron gate installed at one of the corners of the plots. Further, two rooms (covering a very small area of the plot) alongwith a small store room having common walls with tin-shed roofing were constructed at one of the corners near the entry gate of the above said premises. It was pointed out in the report that rooms were devoid of any windows or ventilation except for a bulb and some loose wires hanging on the side walls of the room. The path from entrance gate to the rooms was kuccha with no pavement or walk-way constructed from the entry gate to the rooms. An electricity meter was further found installed at the premises which was claimed to be there for approximately two years. However, no permanent source of water viz; water tank or water pipeline could....
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.... land is also not relevant. It was contended that once, a residential house is found to have been constructed and occupied, there is sufficient compliance. 6. The AO however found the submissions of the assessee to be bereft of any merit. The AO observed that the cost of construction of the rooms (tin-shed roofing) was meager Rs. 90,003/-. Having regard to the tin-shed roofing, absence of window, ventilators, absence of any permanent source of water except a nonfunctioning bore well, no facility for any washroom/bathroom or toilet of any kind or nature, no kitchen or any permanent arrangement for cooking, construction are barely 300-350 sq.ft. (30-35 sq.meter) vis-a-vis 4310 sq.mtrs of land and absence of any approval or appropriate authorization for such residential construction. The AO thus discarded the contention of the assessee that sale consideration has been appropriated / invested essentially for purchase of residential house and not mere purchase of land/plot simplicitor. The AO accordingly observed that the conditions prescribed for availing exemption under s.54F of the Act are clearly not met and consequently denied the exemption of Rs. 1,17,83,494/- claimed by the as....
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....fore furnishing such return in an account in a specified bank or institution in a specified scheme, which has to be utilized, wholly or partly, for purchase or construction of new asset within the period specified in sub-section(l). 5.2 Thus in the context of the facts of the appellant the construction of new asset i.e. residential house should have been completed on or before 17/06/2016 which has elapsed and taken note by the AO. The transfer of old asset on 17/06/2013 and purchase of two plots on 07/01/2014 are not in dispute. The appellant has claimed that the two plots are adjoining to each other and they form part of the exemption claimed u/s 54F. 5.3 During the course of the appellate proceedings the appellant has filed two photographs containing the front view of the constructed structure and the gate (of the plot) and has submitted a drawing showing the plot and the plan and elevation of the constructed structure. Description is "Farm Plan for S.No. 447/2 & 448 Vatva" and total plinth area of three rooms taken together as 34ft by 10ft 9 in i.e. 365,5 sq. ft. or 35 Sq. Mtrs. (approx). The facts of the constructed structure gathered by the AO are not dispute....
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....w constructed structure qualifies as a residential house; 5. If the constructed structure qualifies as a residential house, what should be area of the land appurtenant thereto for the purpose of section 54F; and 6. If the entire plot of land can be the land appurtenant to the residential house whether the second plot of land in the case of the appellant if it is adjoining the first plot on which construction was made can also be treated as land appurtenant to the residential house. 5.6 It is noted from the assessment order that there is no discussion by the AO of the proviso of sub-section (1) of section 54F which excludes a person having more than one residential house on the date of transfer of the original asset from the benefit of exemption under the section. Similarly, there is no mention whether the new land(s) acquired out of the consideration of the original property is such that a residential house could be constructed there. Assuming that there is no issue related, to first three issues enumerated above, the issue that is required to be examined is whether the new asset is a residential house and if so what area of land can be treated as part of....
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....nd construction up to two floors only and it is stipulated that no vacant land appurtenant to house is construed as agricultural land and such land is liable to property the restriction is irrespective of the size of the farm. Farm houses are allowed in green zones only. This is in the context that property tax is not liveable on vacant land and buildings (other than dwelling houses) exclusively used for agriculture purposes. A "building" is defined to mean a house, out house, stable, latrine, urinal, shed, hut, wall (other than a boundary wall) or any other structure, whether of masonry, bricks, wood, mud, metal or other material but does not include any potable shelter. For the purpose of property tax buildings are classified use wise and a "residential building" means any building used for dwelling purposes by a family/ families/individual but excludes any premises for commercial use including lodging, guest house, hotel or similar purposes. The building cannot be habitable and worthy of dwelling unless there are minimum basic amenities such as a toilet, a provision for water and electricity and a kitchen. These minimum features have to be there irrespective of....
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....truction may not be complete but the building must be habitable. I am also of the considered view that the structure constructed by the appellant is not fit for habitation and the appellant does not intend to use the same for his residence or to let it out. The practical test of a building being habitable is that whether the owner and his family can reside there. It is not so in the case. Thus the AO is held to be justified in holding that he constructed structure is not a residential house and accordingly the appellant is not eligible for exemption u/s 54F. To buttress the stand of the AO, I may mention CIT Vs Sambandam Udaykumar (2012) 19 taxmann.com 17 (Kar) wherein it is held that whether assessee had invested money in construction of a residential house, merely because construction is not complete in all respects and it was not a fit condition to be occupied within a period stipulated, that would not disentitle assessee from claiming benefit u/s 54F because this judgment is applicable where an assessee has under taken the construction but the construction could not be completed within the prescribed time of three years because of conditions beyond his control and for ....
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....y the requirement of section is satisfied...". Here in the case of the appellant the structure constructed does not meet the criteria of being used for the purpose of residence as laid down in the case of Amita Gupta Vs DCIT. 5.9 Accordingly under the circumstances of facts and law the denial of exemption u/s54F to the appellant appears justified. 6. Though having held that the constructed structure is not a residential but ding it may not be required now but it may be appropriate, in case the appellant goes before the higher appellate bodies, to deal with the claim of the appellant that entire area of the plot (combination of two plots - survey no. 448 of 2610 sq. mtr. and survey ho. 447/2 of 1700 sq. mtr.) which is vacant after temporary makeshift construction of about 35 sq. mtr. of plinth area should be considered for the purpose of exemption u/s 54F. For this claim reliance has been by the appellant on Addl.CIT Vs Narendra Mohan Unyal (supra) wherein it has been held that there is no rider that no deduction could be allowed in respect of investment of capital gains made on acquisition of land appurtenant to the building or on the investment on land on which t....
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....and one bill for area of structure as 35 sq. meters and other bill for area of vacant plot as 2580 sq. meters. The said bill very rightly does not include Survey No. 447/2 for which the AMC may have to raise a separate bill for vacant land tax. 6.2 Second it appears that the provisions of the Area Development Authority and the ULB were not placed before the HonTDle Tribunal/Court in the case of Addl.CIT vs Narendra Mohan Unyal. Had they been brought to the attention of the Hon'ble [Tribunal/Court by the Counsel of the Revenue it might have examined them and harmonised those provisions with the provisions of the section 54F of the Income Tax at and the CBDT Circular relied upon by the Appellant. And in my considered view the harmonious reading would be that the second plot should not have been allowed as land appurtenant to the building constructed on first plot in absence of any order of the ULB allowing merger of two plots. While one plot cannot be treated as land appurtenant to a building in another adjoining plot, there is equally a strong case that entire area of a very big plot can also not be treated as land appurtenant to the building on that plot. That is why t....
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....wer authorities on facts. The learned Senior Counsel observed that from the site inspection report itself, it is clear that two rooms were found together with store room. A Chula was also found for cooking food. The electricity connection has also been admitted in the inspection report. In the circumstances, one cannot say that the residential house of habitable nature was not constructed on the plot of land. The learned Senior Counsel next contended that the extent of land on which super structure of residential nature was required to be constructed is not defined or prescribed. It was contended that what is required to be adjusted or set off against the capital gain is the cost of residential house as a whole i.e. purchased or constructed and not just the cost of construction of new residential house. It was asserted that the cost of new residential house would necessarily include the cost of land, the cost of material used in the construction and all other costs relatable to the acquisition and/or construction of the residential house as held in several judicial precedents as well as the CBDT Circular. The learned Senior Counsel thereafter referred to the layout plan (page no....
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....laced on various judicial pronouncements on behalf of the assessee are totally misconceived as the question involved is entirely factual in nature with totally dissimilar facts. The assessee has sought exemption of whopping of Rs. 1.17 Crores against which the cost of construction is less than Rs. 1 Lakh and with insignificant use of land for construction. The learned DR thus submitted that no interference with the order of the Revenue authorities is called for having regard to the aim and object of Section 54F of the Act. 12. We have carefully considered the rival submissions. The substantive issue in the present case is maintainability of deduction / exemption under s.54F of the Act in the peculiar set of facts where the substantial portion of the sale consideration is appropriated towards purchase of land and the construction cost of superstructure constructed on the land is very marginal. An integrally connected issue also arises as to whether the co-owned superstructure on a combined adjoining plots of land can be regarded as 'residential house' for the purposes of Section 54F of the Act or not. 12.1 To reiterate, the relevant facts as emerged out from the order of the R....
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....n the setting of the facts of a particular case. In circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases as held by the Hon'ble Supreme Court in the case of Padmasundara Rao (Deced.) vs. State of Tamilnadu & Ors. [2002] 255 ITR 147 (SC). 12.5 Adverting to the facts, we notice that the share of sale consideration of the assessee from sale of original asset stands at Rs. 1,28,48,933/-. Out of this, assessee claims to have appropriated Rs. 1,17,65,000/- towards purchase of land and statedly invested Rs. 90,003/- towards construction of superstructure. Against such deployment of sale consideration in land and superstructure, the assessee seeks exemption of Rs. 1,17,83,494/- under s.54F of the Act on the premises that the sale consideration arising from transfer of original asset has been appropriated towards purchase of residence house (including cost of land). At this juncture, we affirmatively appreciate the contentions raised on behalf of the assessee that the cost of new residential house is not just the cost of construction of new residential house but encompasses both the cost of land as well as the cost o....