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Compulsory Acquisition of Land and Buildings

Compulsory Acquisition of Land and Buildings

  1. This deduction is available to all categories of tax payers. The conditions for claiming this deduction are as under:
    1. the asset transferred is land or building or any right in land or building which formed part of an industrial undertaking belonging to the tax payer.
    2. asset in question is transferred by way of compulsory acquisition under any law.
    3. the asset in question was used for the purpose of business of such undertaking at least for two years immediately before the date of compulsory acquisition.

    The deduction is available if within 3 years of the date of compulsory acquisition, the taxpayer, for the purposes of shifting or re-establishing the old industrial undertaking or setting up a new industrial undertaking;

    1. purchases any other land, building or any right in any other land or building, or
    2. constructs any other building.Deduction from the LTCG is given to the extent of above investment.If the new asset is not acquired by the due date for furnishing the return of income for the relevant assessment year the unutilised amount of capital gains must be deposited in a Capital Gains Deposit Account. In case the deposited amount is not utilized fully or partially for the above purpose within three years from the date of compulsory acquisition, the unutilized portion would be taxed as Capital Gains in the previous year in which the period of three years expires.The cost of acquisition of the new asset would be reduced by the deduction allowed from LTCG if transferred within a period of 3 years from its date of acquisition.
  2. Transfer of fixed assets of an industrial undertaking effected to shift it from urban areaThe deduction is available to all categories of tax payers. The conditions for claiming the deduction are as under:

    1. the transfer is effected in the course of or in consequence of shifting the undertaking from an urban area to any area other than an urban area;
    2. asset transferred is machinery, plant, building, land or any right in building or land used for the business of industrial undertaking in an urban area;
    3. the capital gain is utilised within one year before or 3 years after the date of transfer (a) for purchasing new machinery or plant or building or land for tax payer’s business in that new area; or (b) shifting of the old undertaking and its establishment to the new area; or (c) incurring of expenditure on such other purposes as specified in the scheme notified for the purpose.

    Deduction from LTCG is given to the extent of the outlay for aforesaid asset and activities.

    The unutilised amount of capital gain as on the date on which return of income for the relevant Assessment Year is due must be deposited in a Capital Gains Deposit account. In case the deposited amount is not utilized fully or partially for the above purposes within three years from the date of transfer of original asset, the unutilized portion would be taxed as Capital Gains in the previous year in which the period of three years expires.

    The cost of acquisition of the new asset would be reduced by the deduction allowed from LTCG within a period of 3 years from its date of acquisition.

Compulsory Acquisition of Land and Buildings

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