Both these appeals are by Revenue against separate orders of CIT(A)-XVI, Mumbai, dt. 20th June, 2003 and 23rd June, 2003 relating to asst. yrs. 1997-98 and 1998-99 respectively against order under s. 143(3) of IT Act, 1961. Both appeals relating to same assessee were heard together and are being disposed of by this consolidated order for sake of convenience. Revenue has raised following grounds of appeal in asst. yr. 1997- 98: "1. On facts and in circumstances of case and in law learned CIT(A) erred in directing to grant exemption under s. 54F of Rs. 1,52,18,000 against capital gain even though assessee was in possession of property, income form which was chargeable to tax as Income from house property on date of transfer of original asset." Revenue has raised following grounds of appeal in asst. yr. 1998- 99: "1. On facts and in circumstances of case and in law learned CIT(A) erred in directing to grant exemption under s. 54F of Rs. 63,02,650 against capital gain even though assessee was in possession of property, income form which was chargeable to tax as Income from house property on date of transfer of original asset." Mr. M.B. Reddy, Departmental Representative appeared for Revenue and Mr. Prakash Jotwani, learned counsel appeared for assessee and put forward their rival submissions. brief facts of case are that during year under consideration, assessee had claimed exemption under s. 54F of IT Act against income from capital gains on sale of shares of Mahindra & Mahindra Ltd., amounting to Rs. 1,52,18,000. said exemption claimed under s. 54F of IT Act was denied to assessee as assessee was in possession of farmhouse on date of sale and as farmhouse was residential house, benefits of section were not available to assessee. During appellate proceedings, assessee claimed before CIT(A) that said farmhouse in Haryana was in fact plot of land at Harnala where no farmhouse or any other house existed. assessee further stated that land at Harnala was leased to Punjab State Electricity Board (PSEB) and certain residential buildings have been put up by Board for its staff quarters. assessee filed letter dt. 7th July, 2002 issued by Dy. Chief Engineer, Shanon Power House, Joginder Nagar to effect. CIT(A) directed AO that on-site verification should be carried out t o re-examine matter after considering evidence produced by assessee and also leased agreement with PSEB. In second round of assessment, no on-site verification was carried out by AO and after going through lease agreement and letter issued by Dy. Chief Engineer, PSEB and other documents, AO rejected claim of assessee holding it not eligible for deduction under s. 54F of IT Act and capital gains of Rs. 1,52,18,000 was held to be taxable. During course of second round of Appellate Proceedings assessee clarified that at time when property was leased to PSEB, assessee was minor and application to Hon ble Court of District Judge, Bangalore under Hindu Minority and Guardianship Act, 1956 was made seeking permission of Court to lease property at Harnala to PSEB. copy of order dt. 27th Jan., 1977 was produced before CIT(A) which in-turn was forwarded to AO and AO in his remand report objected to admission of order, which was not furnished in first round before AO but in second round of assessment proceedings. CIT(A) after taking into consideration submissions of learned Authorised Representative that it was prevented by sufficient cause from non-production of said documents before AO as reassessment proceedings commenced on 11th March, 2003 and order was passed on 31st March, 2003 admitted aforesaid order and after considering evidence filed by assessee concluded that after going through different clauses of lease agreement and order of District Judge, Bangalore, there is no specific mention of residential house but general words like hutments and out-houses. Accordingly CIT(A) held that during year under consideration, assessee was not owner of any property, income from which is taxable under head income from house property and as other conditions for claiming exemption under s. 54F were satisfied, AO was directed to grant exemption under s. 54F of IT Act. Similar exemption was claimed under s. 54F of Act to extent of Rs. 63,02,650 in asst. yr. 1998-99, which was also rejected by AO and allowed by CIT(A). Revenue is aggrieved and is in appeal before us. We have heard rival submissions and perused records. assessee along with her brother Shri Martand Singh Mahindra were owners of property at Harnala which was leased to PSEB as per lease agreement dt. 28th March, 1977. preamble of lease provided as under: "Whereas lessee has undertaken to occupy and take on lease property known as Harnala Complex owned by lessors and comprising of land measuring 9 Bigha 18 Biswa along with all huts, outhouses buildings etc. without furniture attached thereto, situated on road from Shanan Power House to Harnala at Harnala and bounded as under: East West North South Property of Khyalu, Lachu and Hachu Property of Smt. Indira Mahindra taken on lease by PSEB Shamlat Rasta (Footpath) Property of Smt. Indira Mahindra More particularly described in schedule and plan attached hereto for purpose of construction in connection with PSEB works." assessee being minor at relevant time of execution of lease agreement permission was sought from District Judge at Bangalore to enter into lease agreement. District Judge at Bangalore vide its order dt. 27th Jan., 1977 had reproduced contentions of assessee by way of petition moved 1977 had reproduced contentions of assessee by way of petition moved before assessee and cl. (vii) stated as under: "The petitioner who has got himself examined as P.W.-I has sworn in his evidence that minors Miss Anjali Mahindra and Master Martand Singh Mahindra, aged 17 years old and 13 years old respectively and they are residing with petitioner at Yelakanka; that immovable property known as Harnala Complex in Himachal Pradesh gifted to minors by their grandfather, is about 9.9 bighas equivalent to about 2.5 acres, and it consists of some dwelling huts, out-houses, which are used as cattle sheds; that huts are in dilapidated condition and they have never been used or occupied; that petitioner is not getting any rents or income from those houses and sheds; that property is within compound of Punjab State Electricity Board; that property is not utilized for any other purpose...." (Emphasis supplied) District Judge after consideration of petition had held as under: "From consideration of documents exte. P1l and Producing-2 and evidence of P.W.-1, it is clear, that property in question, belongs to minors who are residing with their father at Yelakanka, and property which is situated at Himachal Pradesh and consists of some dwelling houses and out- houses which are used as cattle-sheds, is not fetching any income to minors, and proposed lease of petition Schedule property in favour of Punjab State Electricity Board, on lease on rental value of Rs. 2,000 per year for period of fifty years, fetches lump sum of rupees one lakh as advance of lease amount is beneficial to interest of minors. Therefore, I am satisfied...." copy of lease agreement is filed at pp. 19 to 27 of paper book and copy of order of District Judge at Bangalore at pp. 116 to 122 of paper book. During year under consideration, assessee had sold shares of Mahindra and Mahindra Ltd. and capital gains arising on sale of said shares was claimed to be exempt by availing deduction under s. 54F of IT Act on account of investment in another residential property during years under consideration. said exemption claimed by assessee was denied by AO as assessee was owner of property at Harnala as against claim of assessee, no farm house exists on agricultural land at Harnala and only certain hutments existed in dilapidated condition which PSEB was directed to demolish. As per lease agreement between assessee and PSEB, it was also agreed between parties that certain residential quarters shall be constructed by PSEB on said piece of land which in-turn shall be demolished when lessee i.e., PSEB vacates land. AO rejecting claim of assessee and denying exemption under s. 54F of IT Act brought capital gains arising on sale of shares to tax in both asst. yrs. 1997-98 and 1998-99. Though AO was directed to make on- site verification but same was not carried out by AO and CIT(A) after taking into consideration documents produced by assessee including letters issued by PSEB directed AO to allow claim of assessee in respect of deduction claimed under s. 54F of IT Act. provisions of s. 54F of IT Act provides exemption from capital gains on sale of any capital assets other than residential property if sale proceeds are invested in residential house. proviso to s. 54F of IT Act categorically provides said exemption shall be allowed to assessee only if assessee does not own any other property on date of transfer of capital asset other than one purchased by assessee. only question for our determination is whether assessee was owner of any residential property on date of claiming set off of exemption on capital gains arising during years under consideration. perusal of lease agreement very clearly talks of piece of land measuring 9 Bigha and 18 Biswa along with hutments, out-house buildings etc. and it also talks of property known as Harnala Complex . Before District Judge at Bangalore petition talks of immovable property known as Harnala Complex in Himachal Pradesh consisting of some dwelling hut, outhouses which were used as cattle sheds and huts are in dilapidated conditions. District Judge in his order after consideration of documents and evidence of witness concluded that property in question situated at Himachal Pradesh consists of some dwelling houses and out-houses which are used as cattle sheds. During course of reassessment proceedings, AO had written letter on 13th March, 2003 to PSEB seeking clarification as to whether there were any structure including huts, out-houses etc. in property as on date of lease agreement dt. 28th March, 1997. words used in said letter were demolished/repaired which according to AO presumably gives indication that there was house on said land on date of lease belonging to assessee and PSEB has merely done some repairing work on existing structure and demolition for construction of new building. primary piece of evidence to be considered in present case is order passed by District Judge at Bangalore on 27th Jan., 1977, which very categorically stated that said piece of land is agricultural plot consisting of huts and out-houses, which in-turn are being used as cattle sheds. It was further stated that huts were in dilapidated condition and had never been used or occupied by petitioners. In view of categoric finding of District Judge who in-turn had also taken evidence of witnesses, there is no merit in stand of AO that building existed of aforesaid piece of land, without carrying out any on-site verification though directed by CIT(A). No doubt, there may be some huts and out-houses but same cannot be interpreted as residential property of assessee. Though at present there exists building which has been constructed on said piece of land by PSEB but same in no way gives right to suspicion to any finding that any other building existed prior to one constructed by PSEB. Accordingly, we are of view that during years under consideration, assessee was not owner of any other residential property, income from which was taxable under head Income from house property . In view of totality of facts and circumstances of case, assessee was entitled to claim of deduction under s. 54F of IT Act. grounds raised by Revenue in both assessment years are thus dismissed. In result, both appeals filed by Revenue are dismissed. *** INCOME TAX OFFICER v. SMT. ANJALI MEHRA