Section 54D Exemption for Compulsory Acquisition of Industrial Undertaking

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?

Q2

Solve last question assuming factory land was purchased in May 2014

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