28/02/2019
Capital gains on compulsory acquisition of land and building, forming part of industrial undertaking [Sec. 54D] The provisions of section 54D are given below :-
CONDITIONS :- Capital gains arising on compulsory acquisition of any land or building forming a part of an industrial undertaking is exempt from tax if the following conditions are satisfied
• Such land or building was used by the assessee for the purpose of the industrial undertaking for at least 2 years preceding the date of compulsory acquisition.
• The assessee has purchased any other land or building within a period of 3 years from the date of receipt of compensation or constructed a building within such period.
• Newly acquired land or building should be used for the purpose of shifting or re-establishing the said undertaking or setting up another industrial undertaking.
AMOUNT OF EXEMPTION :- If the amount of capital gains is less than the cost of the new land or building, the entire amount of capital gains is exempt from tax. On the other hand, if the amount of capital gains is greater than the cost of the new land or building, the difference between the amount of capital gains and the cost of new land or building is chargeable to tax as capital gains.
CONSEQUENCES IF NEW LAND 0R BUILDING IS TRANSFERRED WITHIN 3 YEARS :- If the new land or building is transferred within a period of 3 years from the date of its purchase or construction, the amount of capital gains arising therefrom, together with the amount of capital gains exempted earlier, will be chargeable to tax in the year of sale of the new land and building.
To attain this, it has been provided that if the new asset is transferred within 3 years from the date of its acquisition, the amount of exemption under section 54D shall be reduced from the cost of acquisition of the new asset while calculating short-term capital gain on the transfer of the new asset.
SCHEME OF DEPOSIT :- Where the amount of capital gain is not appropriated or utilised by the assessee for purchase or construction of the new asset before the date for furnishing the return of income, it shall be deposited by him on or before the due date of furnishing the return of income, in the deposit account in any branch (except rural branch) of a public sector bank or IDBI Bank in accordance with Capital Gains Accounts Scheme, 1988. The amount already utilised for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the amount utilised for the purchase or construction of the new asset. If the amount deposited is not utilised fully for the purchase or construction of the new asset within the stipulated period, then the amount not so utilised shall be treated as the capital gain of the previous year in which the period of 3 years from the date of transfer of the original asset expires'. 1n such case the assessee shall be entitled to withdraw such amount in accordance with the aforesaid scheme.
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