- (1.) 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 income of the residential unit has been taxed as income from house property in the preceding years? (ii) Whether under Section 54 of the Income Tax Act, the term residential means a dwelling place with basic amenities fit for human habitation and which is actually habitable and does not include any other parameter to be called residential? Briefly, the facts as narrated in the appeal may be noticed. The assessee is a resident of Jalandhar. He filed his return on 22.8.1997 for the assessment year 1997-98 in which long term capital gain amounting to Rs. 3,98,300/- from sale of his residential house measuring 250 square yards at Delhi for a sum of Rs. 8 lacs was claimed to be exempted on the ground that investment was made for purchase of residential plot in Janta Enclave, District Ludhiana for a sum of Rs. 4,08,000/-. The Assessing Officer during scrutiny concluded vide order dated 14.9.1999, Annexure A.3 that the residential plot purchased by the assessee was only one room set in Ludhiana and therefore as it was having no amenities, the exemption under section 54 of the Act could not be granted to the assessee and addition of Rs. 5,34,428/- was made on account of long term capital gain. Aggrieved by the order passed by the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), Jalandhar [CIT(A)]. The CIT(A) vide order dated 2.6.2000, Annexure A.4 concluded that the residential house could not be considered for the purpose of exemption 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.
(2.) 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 parameters of a "residential house" and the benefit under section 54(1) of the Act was admissible to the assessee.
(3.) On the other hand, learned counsel for the revenue supported the order passed by the ITAT.;