Arijit Pasayat, C.J:— At the instance of the assessee, the following question has been referred under section 256(1) of the Income-tax Act, 1961 (in short “the Act”), for the opinion of this court by the Income-tax Appellate Tribunal, New Delhi (in short, “the Tribunal”):
“Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in rejecting the assessee's claim for exemption under section 54 of the Income-tax Act, 1961, and in holding that the asses-see was rightly assessable on the capital gains of Rs. 52,840 for the assessment year 1972-73?”
2. The factual position, in a nutshell, is as follows:
3. The assessee, an individual, sold his property No. E-64, Greater Kailash, New Delhi (in short, “E-64”) for Rs. 2,50,000 on July 17, 1971. The cost of the property, so far as the assessee is concerned, was Rs. 1,57,554. Thus, there was a capital gain of Rs. 92,446. The assessee purchased a plot of land at E-58, Greater Kailash, New Delhi, on January 24, 1971, for Rs. 80,000 and started construction thereon. The assessee claimed that within two years from the date of sale of E-64 he had constructed the property for the purpose of his residence and the cost of such construction amounted to Rs. 1,10,000, and as such he was entitled to exemption from the tax for capital gain amounting to Rs. 92,446.
4. The cost of construction, in addition to the cost of land, was stated to be Rs. 30,000. The Income-tax Officer rejected the said claim on the ground that there was no evidence of user as residence. Reliance was placed on a statement dated January 28, 1974, wherein the assessee had himself stated that the building was not worth occupying. The matter was carried in appeal before the Appellate Assistant Commissioner (in short “the AAC”). The said authority upheld the conclusions of the Assessing Officer and rejected the appeal. The matter was carried in further appeal before the Tribunal. By order dated June 25, 1976, the matter was remitted back to the Appellate Assistant Commissioner by the Tribunal for afresh consideration. The Appellate Assistant Commissioner again considered the matter and rejected the assessee's appeal by order dated October 11, 1976. The matter was again carried before the Tribunal which, by order dated April 20, 1978, upheld the rejection of the assessee's claim.
5. On being moved, as stated above, the reference was made.
6. We have heard learned counsel for the parties. Learned counsel for the assessee submitted that, in view of the conclusions of the Tribunal, that servant quarters had been constructed, the further conclusion that, keeping in view the assessee's status, it cannot be said that the house was being used for the purpose of residence cannot be maintained. It was further submitted that what was necessary for claiming exemption related to user of the property for the purpose of residence and the status of the assessee and/or total built in area has no relevance so far as that aspect is concerned. Learned counsel for the Revenue, on the other hand, referred to the statement dated January 28, 1974, wherein the assessee himself admitted that the building was not worth occupying.
7. We find that the Tribunal has not really considered the essence of the dispute in the background of the factual aspects which were on record. It is to be noted that the assessee himself had stated that the property was not worth occupying. There is no dispute about the statement having been made by the assessee. Additionally, we find that the construction was of the garage and servant quarters. The Appellate Assistant Commissioner referred to some personal visits and found that there was actually no occupation by any servant or tenant and even there was no cooking. In view of the accepted statement of the assessee that the building was not worth occupying and was not inhabitable, the conclusion that the assessee was not entitled to the exemption is in order.
8. The question is answered in the affirmative, in favour of the Revenue and against the assessee.
9. This reference is accordingly disposed of.