In case, We are a industrial undertaking (factory)
And there has been compulsory acquisition of our factory land and building
And we set up new factory or shift our facrory
Then LTCG/STCG on Compulsory Acquisition will be exempt
Conditions to be Fulfilled
- Deduction is available only to all assessees but they should be industrial undertaking (factory)
- This deduction is on both LTCG and STCG
- Land Building must be used in for industrial purposefor 2 years preceding date of transfer
- Person should invest the amount of LTCG in purchasing new Land or Building for setting up new industrial undertaking,shifting
Time Period
- New Land must be purchased or constructed within 3 years of date of transfer
Amount Exempt is Lower of
- Amount of Long Term Capital Gain
- Amount Invested
Question 1
Factory land purchased by Mr A for 5 lacs in May 2013 for the purpose of his manufacturing business
It was compulsory acquired by Government and compensation received was Rs 7 lacs in June 2015
Mr A purchased new factory building for 10 lacs in July 2015 and shifted his factory there
What is treatment?
View answer
Exemption under Section 54D is available as
- There is compulsory acquisition of factory land and building
- Mr is an industrial undertaking having used factory for 2 years
- it is STCG
- Also new land building is purchased within 3 years of transfer
|
Particulars |
Amt |
|
Full Value of Consideration |
700000 |
|
|
|
|
Less |
|
|
|
|
|
COA |
500000 |
|
|
|
|
Short Term Capital Gain/(Loss) |
200000 |
|
|
|
|
Less |
|
|
Exemption under Section 54D |
|
|
Lower of |
|
|
Amount Invested |
1000000 |
|
STCG |
200000 |
|
Lower |
200000 |
|
|
|
|
Income from Capital Gain |
0 |
Q2
Solve last question assuming factory land was purchased in May 2014
View answer
Since,it is not used for 2 years for industrial purpose before date of transfer,exemption will not be available
|
Particulars |
Amt |
|
Full Value of Consideration |
700000 |
|
|
|
|
Less |
|
|
|
|
|
COA |
500000 |
|
|
|
|
Short Term Capital Gain/(Loss) |
200000 |
|
|
|
|
Less |
|
|
Exemption under Section 54D |
0 |
|
|
|
|
|
|
|
Income from Capital Gain |
200000 |
Consequences if New Land/Building Sold within 3 years
STCA will be calculated on Sale
Amount of Capital Gain Exempt earlier will be reduced from Cost while Calculating this STCA
Q3
Suppose in Q1 above,new Factory Land which was purchased for 1000000 in July 15 was later sold for 1500000 in August 2016
View answer
Amount of Capital gain exempt earlier will be reduced from COA
|
Particulars |
Amt |
|
Full Value of Consideration |
1500000 |
|
|
|
|
Less |
|
|
Expenses of Transfer |
0 |
|
COA |
800000 |
|
(1000000-200000) |
|
|
COI |
|
|
Short Term Capital Gain/(Loss) |
700000 |