[Section 54G] : Capital Gain on Shifting of Industrial Undertaking from Urban Areas to Non-Urban Areas

[Section 54G] : Capital Gain on Shifting of Industrial Undertaking from Urban Areas to Non-Urban Areas

In case following conditions are fulfilled, the capital gain shall be exempted as per rates given below  :

(i)         Capital asset (P & M, Land, buildings or any right therein) is transferred due to shifting of industrial undertaking from urban areas to rural areas; and

(ii)        Capital Gain is reinvested within a period of 1 year before or 3 years after the date in

(a)        purchase of new machinery or plant for the purposes of business of the industrial undertaking in the area to which the said undertaking is shifted;

(b)       acquiring building or land or construction of building for the purpose of his business in the said area;

(c)        shifting the original asset and transferring the establishment of such undertaking to such area; and

(d)       incurred expenses on such other purposes as may be specified in a scheme framed by the Central Government for the purposes of this section.

Amount of exemption.

 In case above-mentioned conditions are fulfilled the amount of exemption under this section will be

 if the amount of the capital gain is greater than the cost and expenses incurred in relation to all or any of the purposes mentioned in clauses (a) to (d) (such cost and expenses being hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its being purchased, acquired, constructed or transferred, as the case may be, the cost shall be nil; or

(ii)        if the amount of the capital gain is equal to, or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its being purchased, acquired, constructed or transferred, as the case may be, the cost shall be reduced by the amount of the capital gain.

Explanation. In this sub-section, “urban area” means any such area within the limits of a municipal corporation or municipality as the Central Government may, having regard to the population, concentration of industries, need for proper planning of the area and other relevant factors, by general or special order, declare to be an urban area for the purposes of this section.

Non-utilization of amount before filing of return [Section 54G(2)]

The amount of capital gain which is not appropriated by the assessee towards the cost and expenses incurred in relation to all or any of the purposes mentioned in clauses (a) to (d) of subsection (1) within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for all or any of the purposes aforesaid before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not latter than the due applicable in the case of the assessee for furnishing the return of income under sub-section 1391 in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for all or any of the purposes aforesaid together with the amount so deposited shall be deemed to be the cost of the new asset

If the amount deposited under this sub-section is not utilised wholly or partly for all or any of the purposes mentioned in clauses (a) to (ci) of sub-section (1) within the period specified in that subsection, 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.