Section 84 — Compulsory Acquisition Industrial Reinvestment | ITA 2025

Section 84 — - COMPULSORY ACQUISITION OF INDUSTRIAL UNDERTAKING LAND / BUILDING

Section 84 is the substantive equivalent of 1961 s. 54D -- the reinvestment exemption for industrial undertakings facing COMPULSORY ACQUISITION of their land / building / rights therein. The compulsory acquisition (under any law -- LAA 1894 / RFCTLARR 2013 / state legislation) is forced; assessee has no choice in transfer; CG-roll-over relief recognises the involuntary nature. ELIGIBILITY: any assessee operating industrial undertaking; original asset = LAND / BUILDING / rights in land or building used for the business in 2 YEARS preceding compulsory acquisition. NEW ASSET: purchase of land / building OR construction of building for SHIFTING / RE-ESTABLISHING the undertaking OR setting up another industrial undertaking. WINDOW: 3 years after transfer. CGAS deposit if incomplete. 3-year claw-back. The provision dovetails with s. 67(12)/(13) compulsory acquisition charging mechanics.

Statutory text — Income-tax Act, 2025

Marginal note -- Capital gain on compulsory acquisition of lands and buildings not to be charged in certain cases

(1) Where an assessee has—

(a) capital gains arising from the transfer by way of compulsory acquisition under any law, of a capital asset being land or building or any right in land or building, forming part of an industrial undertaking belonging to him, which was being used by the assessee for the business of the said undertaking in the two years immediately preceding the date of transfer (original asset); and

(b) within three years after that date, purchased any other land or building or any right in any other land or building or constructed any other building for shifting or re-establishing the said undertaking or setting up another industrial undertaking (new asset), then, instead of the capital gain being charged to income-tax as income of the tax year in which the transfer took place, it shall be dealt with as follows:—

(i) if the capital gains exceeds the cost of new asset, such excess shall be charged under section 67, and for computing any capital gains arising from the transfer of the new asset within three years of its purchase or construction, the cost shall be nil; or

(ii) if the capital gains is equal to or less than the cost of new asset, no capital gains shall be charged under section 67 and for computing capital gains from the transfer of the new asset within three years of its purchase or construction, the cost shall be reduced by the amount of the capital gains.

(2) If the capital gains referred to in sub-section (1) is not utilised by the assessee to purchase the new asset before filing the return of income under section 263, then—

(a) the unutilised amount shall be deposited in a specified bank or institution and utilised as per the scheme notified by the Central Government;

(b) such deposit shall be made before the filing of the return not later than the due date applicable in the case of the assessee for filing the return of income under section 263(1); and

(c) the proof of deposit shall be submitted along with such return.

(3) For the purposes of sub-section (1), the amount already utilised for purchas- ing or constructing the new asset together with the deposited amount under sub- section (2), shall be deemed to be the cost of the new asset.

(4) If the amount deposited under sub-section (2) is not fully utilised for the purchase or construction of the new asset within the period specified in sub-section (1), then,—

(a) the unutilised amount shall be charged under section 67 as the income of the tax year in which three years from the date of the transfer of the original asset expires; and

(b) the assessee shall be entitled to withdraw such unutilised amount in accordance with the scheme referred to in sub-section (2).

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 84	INCOME-TAX ACT, 1961 -- s. 54D
Sub-s. (1)(a) -- compulsory acquisition under any law of land/building of industrial undertaking	1961 s. 54D(1)
Sub-s. (1)(b) -- 3-year-after window for purchase / construction of new land/building for shifting / re-establishment / new undertaking	1961 s. 54D(1)
Sub-s. (1)(i)/(ii) -- excess charged + cost-NIL claw-back / cost-reduced	1961 s. 54D(1) Proviso
Sub-s. (2) -- CGAS deposit before s. 263 due date	1961 s. 54D(2)
Sub-s. (3) -- utilised + deposited = deemed cost	1961 s. 54D(2) Proviso
Sub-s. (4) -- unutilised at 3-year expiry charged	1961 s. 54D(2) Proviso

STATUTORY ARCHITECTURE

ELIGIBILITY: (a) ASSESSEE: ANY assessee (individual / HUF / firm / LLP / company) -- broader than s. 82 / 83. (b) ORIGINAL ASSET: LAND or BUILDING or any RIGHT in land or building, forming part of INDUSTRIAL UNDERTAKING belonging to assessee. (c) USE REQUIREMENT: assessee USED for BUSINESS of the undertaking in 2 YEARS immediately PRECEDING date of transfer. (d) TRIGGER: COMPULSORY ACQUISITION under any law (Land Acquisition Act 1894 / RFCTLARR Act 2013 / state-level laws / SEZ Act / NHAI / metro / DFCC). (e) NEW ASSET: purchase of OTHER land / building / rights OR construction of building for: (i) SHIFTING the undertaking; (ii) RE-ESTABLISHING the undertaking; OR (iii) Setting up ANOTHER industrial undertaking. (f) WINDOW: 3 YEARS AFTER date of transfer (no 1-year-before window). MECHANICS (sub-s. 1(i)/(ii)): (i) CG > cost of new asset: excess chargeable u/s 67; new asset cost = NIL for 3-year claw-back; (ii) CG <= cost: no charge; new asset cost reduced by exempt CG. CGAS DEPOSIT (sub-s. 2): standard before s. 263 due date. EXPIRY CHARGE (sub-s. 4): unutilised at 3-year expiry charged in expiry year.

INTERACTION WITH SECTION 67(12)/(13)

Compulsory acquisition triggers s. 67(12)-(13) -- the year-of-receipt charge regime: (a) Initial compensation: chargeable in year of FIRST RECEIPT; (b) Enhanced compensation: chargeable in year of receipt with cost-of-acquisition NIL. Section 84 provides a parallel reinvestment-exemption pathway. The interaction: (i) Year of first receipt of compensation: s. 67(12)(a) charge with s. 84 reinvestment route; (ii) Subsequent enhancement: s. 67(12)(b) charge with NIL cost; s. 84 reinvestment also available for the enhanced compensation in its receipt year. Practitioner: each compensation tranche is independent -- reinvest portion of each within 3 years from RESPECTIVE receipt date for fresh s. 84 claim.

PLANNING NOTES

(i) NHAI / METRO / DFCC / SEZ ACQUISITIONS -- common compulsory-acquisition scenarios; document the gazette notification + acquisition order. (ii) 2-YEAR PRE-USE -- maintain factory utilisation records, payroll, energy bills proving continuous business use. (iii) NEW UNDERTAKING -- 'another industrial undertaking' permits expansion / diversification; not limited to identical line-of-business. (iv) ENHANCED COMPENSATION -- each tranche reset for s. 84 window; track receipts year-by-year. (v) CGAS DISCIPLINE -- before s. 263 due date for relevant year. (vi) PAIR WITH s. 87 / 88 -- where compulsory acquisition is for shifting from urban area, may also qualify for s. 87 / 88 (urban-area shift) -- choose more beneficial.

CROSS-REFERENCES

Section 67(12)/(13) -- Compulsory acquisition charging mechanics.
Section 70 / 71 -- Transactions not regarded / withdrawal.
Section 72 -- Mode of computation.
Section 82 / 83 / 86 / 87 / 88 -- Sister reinvestment exemptions.
Section 89 -- Compulsory acquisition time window (s. 54H).
Section 263 -- Return-filing due date.
CGAS-88 scheme.
Land Acquisition Act 1894 / RFCTLARR Act 2013 -- compulsory acquisition framework.

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