Home Income Tax Capital Gain Capital gain exemption on compulsory acquisition of lands and buildings forming part of industrial undertaking

Capital gain exemption on compulsory acquisition of lands and buildings forming part of industrial undertaking

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Capital gain on compulsory acquisition of lands and buildings forming part of industrial undertaking not to be charged in certain cases-Section 54D

Eligible Assessee: Any assessee having industrial undertaking

Nature of Capital Asset compulsorily acquired(transferred) : Long-term or Short -term land or building or any right in land or building, forming part of an industrial undertaking belonging to the assessee. It should have been used for business of the said undertaking in the two years immediately preceding the date on which the transfer (compulsory acquisition) took place

Re-investment Conditions/New Asset : The assessee has within a period of three years after the date on which the transfer took place purchased any other land or building or any right in any other land or building or constructed any other building for the purposes of shifting or re-establishing the said undertaking or setting up another industrial undertaking.

Computation of taxable amount of Capital Gain

 

Situation Taxable Capital Gain If new land or building etc. transferred within 3 years of its purchase or construction
If amount of capital gain is more than cost of the land etc. Capital Gain  ()     Cost of new

land or building

purchased or

constructed etc.

Cost of new land or building etc. shall be nil
If amount of capital gain is equal to or less than cost of the land etc. Nil Cost of new land or building etc. shall be reduced by the amount of the capital gain exempted

Therefore, capital gain to the extent of cost of new land or building purchased or constructed shall be exempt.

Deposit of unutilised capital gain amount in Capital gains accounts-Sub section(2) The amount of the capital gain which is not utilised by the assessee for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return, shall be deposited by him before furnishing such return under the capital gains account scheme within the due date applicable for furnishing of return u/s 139(1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset.

What if the amount deposited is not utilised  If the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,—

(i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and

(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.

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