Section 54G of Income Tax Act "Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area"
54G. (1) Subject to the provisions of sub-section (2),
where the capital gain arises from the transfer of a capital
asset, being machinery or plant or building or land or any
rights in building or land used for the purposes of the
business of an industrial undertaking situate in an urban
area, effected in the course of, or in consequence of, the
shifting of such industrial undertaking (hereafter in this
section referred to as the original asset) to any area
(other than an urban area) and the assessee has within a
period of one year before or three years after the date on
which the transfer took place,-
(a) purchased new machinery or plant for the purposes of
business of the industrial undertaking in the area to which
the said undertaking is shifted ;
(b) acquired building or land or constructed building for
the purposes of his business in the said area ;
(c) shifted the original asset and transferred the
establishment of such undertaking to such area; and
(d) incurred expenses on such other purpose as may be
specified in a scheme framed by the Central Government for
the purposes of this section,
then, instead of the capital gain being charged to
income-tax as income of the previous year in which the
transfer took place, it shall be dealt with in accordance
with the following provisions of this section, that is to
say,-
(i) 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 sub-section.
(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 sub-section (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 later than the due date applicable in the case
of the assessee for furnishing the return of income under
sub-section (1) of section 139] 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 :
Provided that 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 (d) of sub-section (1)
within the period specified in that sub-section, 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.
Explanation.-[Omitted by the Finance Act, 1992, w.e.f.
1-4-1993.]