Section 84 — Capital gains on compulsory acquisition of lands and buildings not to be charged in certain cases
Old Act equivalent: Section 54D of IT Act 1961 Sub-part: E.—Capital gains
Statutory Text
(1) Where an assessee has— (a) capital gains arising from the transfer by way of compulsory acquisition under any law, of a capital asset being land or building or any right in land or building, forming part of an industrial undertaking belonging to him, which was being used by the assessee for the business of the said undertaking in the two years immediately preceding the date of transfer (original asset); and (b) within three years after that date, purchased any other land or building or any right in any other land or building or constructed any other building for shifting or re-establishing the said undertaking or setting up another industrial undertaking (new asset), then, instead of the capital gain being charged to income-tax as income of the tax year in which the transfer took place, it shall be dealt with as follows:— (i) if the capital gains exceeds the cost of new asset, such excess shall be charged under section 67, and for computing any capital gains arising from the transfer of the new asset within three years of its purchase or construction, the cost shall be nil; or (ii) if the capital gains is equal to or less than the cost of new asset, no capital gains shall be charged under section 67 and for computing capital gains from the transfer of the new asset within three years of its purchase or construction, the cost shall be reduced by the amount of the capital gains. (2) If the capital gains referred to in sub-section (1) is not utilised by the assessee to purchase the new asset before filing the return of income under section 263, then— (a) the unutilised amount shall be deposited in a specified bank or institution and utilised as per the scheme notified by the Central Government; (b) such deposit shall be made before the filing of the return not later than the due date applicable in the case of the assessee for filing the return of income under section 263(1); and (c) the proof of deposit shall be submitted along with such return. (3) For the purposes of sub-section (1), the amount already utilised for purchasing or constructing the new asset together with the deposited amount under subsection (2), shall be deemed to be the cost of the new asset. (4) If the amount deposited under sub-section (2) is not fully utilised for the purchase or construction of the new asset within the period specified in sub-section (1), then,— (a) the unutilised amount shall be charged under section 67 as the income of the tax year in which three years from the date of the transfer of the original asset expires; and (b) the assessee shall be entitled to withdraw such unutilised amount in accordance with the scheme referred to in sub-section (2). Capital gains not to be charged on investment in certain bonds.
Sub-sections
Sub-section (1)
Where an assessee has— (a) capital gains arising from the transfer by way of compulsory acquisition under any law, of a capital asset being land or building or any right in land or building, forming part of an industrial undertaking belonging to him, which was being used by the assessee for the business of the said undertaking in the two years immediately preceding the date of transfer (original asset); and (b) within three years after that date, purchased any other land or building or any right in any other land or building or constructed any other building for shifting or re-establishing the said undertaking or setting up another industrial undertaking (new asset), then, instead of the capital gain being charged to income-tax as income of the tax year in which the transfer took place, it shall be dealt with as follows:— (i) if the capital gains exceeds the cost of new asset, such excess shall be charged under section 67, and for computing any capital gains arising from the transfer of the new asset within three years of its purchase or construction, the cost shall be nil; or (ii) if the capital gains is equal to or less than the cost of new asset, no capital gains shall be charged under section 67 and for computing capital gains from the transfer of the new asset within three years of its purchase or construction, the cost shall be reduced by the amount of the capital gains.
Sub-section (2)
If the capital gains referred to in sub-section (1) is not utilised by the assessee to purchase the new asset before filing the return of income under section 263, then— (a) the unutilised amount shall be deposited in a specified bank or institution and utilised as per the scheme notified by the Central Government; (b) such deposit shall be made before the filing of the return not later than the due date applicable in the case of the assessee for filing the return of income under section 263(1); and (c) the proof of deposit shall be submitted along with such return.
Sub-section (3)
For the purposes of sub-section (1), the amount already utilised for purchasing or constructing the new asset together with the deposited amount under subsection (2), shall be deemed to be the cost of the new asset.
Sub-section (4)
If the amount deposited under sub-section (2) is not fully utilised for the purchase or construction of the new asset within the period specified in sub-section (1), then,— (a) the unutilised amount shall be charged under section 67 as the income of the tax year in which three years from the date of the transfer of the original asset expires; and (b) the assessee shall be entitled to withdraw such unutilised amount in accordance with the scheme referred to in sub-section (2). Capital gains not to be charged on investment in certain bonds.
Provisos
None.
Explanations
None.
Tables
None.
Key Structure
- Applies to: Any assessee owning an industrial undertaking whose land or building is compulsorily acquired.
- Asset type: Capital asset being land or building or any right in land or building, forming part of an industrial undertaking, compulsorily acquired under any law; the asset must have been used by the assessee for the business of the undertaking in the two years immediately preceding the date of transfer.
- Conditions: Original asset used for business of industrial undertaking in two years preceding transfer; new land, building, or right purchased or building constructed within three years for shifting, re-establishing, or setting up another industrial undertaking.
- Time limits: Reinvestment within three years after the date of transfer; deposit of unutilised amount before filing return under section 263 and not later than the due date under section 263(1).
- Monetary limits: None specified in this section.
- Exceptions: If the deposited amount is not fully utilised for purchase or construction of the new asset within the three-year period, the unutilised amount becomes chargeable under section 67 as income of the tax year in which three years from the date of transfer expires; early transfer of new asset within three years of purchase or construction results in cost being nil or reduced by the capital gains amount.
Cross-References
- s067-charging — excess capital gains or unutilised deposit charged under section 67.
- s263 — return filing timeline governs the deposit requirement under sub-sections (2) and (4).
Amendment Notes
None noted from the extracted pages.