1. This section provides exemption on transfer of asset in the case of shifting of industrial undertaking from the urban area to non-urban area. Exemption can be availed if the following conditions are satisfied:

1. A capital asset being plant, machinery, land or building or any right in land or building used for the purpose of an industrial undertaking situated in an urban area is transferred.

 

2. The transfer is effected for the purpose of shifting of such industrial undertaking from urban area to non-urban area.

 

3. The assesse has within a period of 1 year before or 3 years after the date of transfer:

 

1. Purchased new plant or machinery for business of industrial undertaking in non-urban area.
2. Acquired land/ building or constructed building for the business in the said area

 

3. Shifted the original asset and transferred the establishment to such area.

 

4. Incurred expenses

 

4. The new assets purchased above should not be transferred within a period of 3 years from the date of its acquisition/ construction. In case it is transferred, the exemption given earlier would be taken back.

 

 

2. Scheme of Deposit

 

The new asset can be purchased/ constructed within 3 years from the date of transfer of original asset. However, the taxpayer has to submit his return of income on or before the due-date of submission of return of income. If the amount of capital gain is not utilized for purchase/ construction of the new property till the due-date of submission of return of income, then it should be deposited in the “Capital Gains Deposit Account Scheme.”

 

The deposit should be utilized for purchase/ construction of new property within the stipulated time-frame. The unutilized amount will be taxable in the year in which the 3-year time limit expires. It shall be treated as long-term or short-term capital gains depending upon the original capital gain.

 

3. Capital Gains on transfer of assets in cases of shifting of industrial undertaking from urban area to any Special Economic Zone (SEZ) - Section 54GA

 

Exemption can be availed if the following conditions are satisfied:

 

1. A capital asset being plant, machinery, land or building or any right in land or building used for the purpose of an industrial undertaking situated in an urban area is transferred.
2. The transfer is effected for the purpose of shifting of such industrial undertaking from urban area to any Special Economic Zone (SEZ). Such SEZ may be situated in urban area or any other area.
3. The assessee  has within a period of 1 year before or 3 years after the date of transfer:
   1. Purchased new plant or machinery for business of industrial undertaking in the SEZ to which the said undertaking is shifted.
   2. Acquired land/ building or constructed building for the business in the SEZ.
   3. Shifted the original asset and transferred the establishment to SEZ.
   4.  Incurred expenses on such other purpose as may be specified in a scheme framed by the Central Government for the purposes of this section.
4. The new assets purchased above should not be transferred within a period of 3 years from the date of its acquisition/ construction. In case it is transferred, the exemption given earlier would be taken back.

 

4. Amount of Exemption

 

The amount of exemption under section 54GA would be lower of the following:

 

1. The amount of capital gain generated on transfer of capital assets in the case of shifting of an industrial undertaking.
2. The cost and expenses incurred in relation to all or any of the purposes mentioned  above.

 

5. Capital Gain on transfer of residential property – Section 54H

 

Section 54H has been introduced for the assesse to finance their small/ medium enterprise by transferring their residential property. It encourages investment in SME segment (Small & Medium Enterprises) in the manufacturing sector.

Exemption under this section is available if the following conditions are satisfied:

 

1. The assesse is an individual or H.U.F. No other person is eligible for claiming exemption under section 54GB.
2. The asset transferred should be a long-term residential property. It may be a house or a plot of land.
3. The transfer should take place during April 1, 2012 and March 31, 2017.
4. The assesse will have to utilize the net sale consideration for subscription in equity shares in an “eligible company”, before the due-date of furnishing of return of income.
5. The eligible company should utilize this amount for the purchase of a “new asset “, before the due-date of furnishing of return of income by the assesse or shall deposit the amount in Capital Gain deposit account.

 

 

6. New Asset

 

It means new plant and machinery but does not include the following:

 

1. Any plant or machinery which is used in India or outside India by any person before its installation by the eligible company. (i.e 2nd hand plant & machinery not allowed).

 

2. Any plant & machinery which is installed in once premises/ residential accommodation/ guest house (i.e plant & machinery should be used only for manufacturing purposes).

 

3. Any once appliance.

4. Computer/ Computer software.

5. Any vehicle.

6. Any plant or machinery which is allowed 100% deduction (by depreciation or   otherwise) in any previous year.

 

7. Revoke of exemption

 

In the following cases, exemption will be taken back. It shall be taxable as long term capital gain of the Assess in the year in which the assesse or the eligible company commits the following defaults:

 

1. If the equity shares in the eligible company are sold or otherwise transferred by the assesse within 5 years from the date of its acquisition.

 

2. If the new asset is sold or otherwise transferred by the assesse within 5 years from the date of its acquisition.

 

3. If the deposit account is not utilized fully or partly by the eligible company for purchasing the new asset within 1 year from the date of subscription in equity shares by the assesse.

 

 

 

Print