Putting Together a Structure of Plywood Sheets isn’t Constructing a Residential House | Delhi HC

Case Details: Sandeep Hooda vs. Pr. Commissioner of Income-tax-7 - [2024] 169 taxmann.com 20 (Delhi)

Judiciary and Counsel Details

• Vibhu Bakhru & MS Swarana Kanta Sharma, JJ.
• Abhimanyu Bhandari, Sr. Adv., Kunal Sharma, Shubhendu Bhattacharya, Adhirath Chaudhary & Ms Yukti Aggarwal, Advs. for the Appellant. 
•  Aseem Chawla, SSC & Ms Pratishtha Chaudhary, Adv. for the Respondent.

Facts of the Case

The assessee sold a residential property and claimed exemption under Section 54 of the Act. The Assessing Officer (AO) denied the exemption claim on the ground that the assessee had not constructed a residential house but purchased vacant agricultural land. The structure on the agricultural land, which the assessee claimed was a constructed residential house, was only a makeshift structure raised to evade tax liability.

On appeal, the CIT(A) reversed the AO’s order and granted the exemption. However, the Tribunal upheld the AO’s order. The matter reached the Delhi High Court.

High Court Held

The High Court held that Section 54 allowance is available if the assessee utilises the capital gains arising from the sale of residential property for purchasing a residential property or constructing a residential house. It is obvious that constructing a residential house would entail raising the construction for inhabitation as a residential dwelling unit.

The Inspector’s report, which the learned ITAT had accepted, is a makeshift guardroom made of plywood of 7 feet x 6 feet was found on the site, and a similar room of plywood of 16 feet x 12 feet with a toilet attached was found at the said site. Putting together a structure of plywood sheets cannot be construed as constructing a residential house.

The Inspector had also reported that there was no electricity or water connection on the land, and electricity was used by the genset. In the instant case, the structures made of plywood sheets were found to exist on the subject property during the second visit of the Inspector.

Therefore, no question of law arises for consideration of this court, given the description of the subject property in question. The findings of the learned ITAT cannot be assailed as perverse or manifestly erroneous.

List of Cases Reviewed

• ITAT, Delhi in IT Appeal no. 5670/Del/2019, dated 29-4-2024 [para 21] affirmed.