Section 54D

Section 54D — the law in short

What the courts have decided on section 54D, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Hemsons Industries High CourtHelps taxpayer
  My industrial land was compulsorily acquired and I put up a new factory on land I took on lease rather than buying. The Assessing Officer says s.54D needs a purchase. Does the lease sink the claim?
  Not on this Andhra Pradesh decision. Section 54D(1) offers three alternatives — purchase of land or a building, purchase of a right in land or a building, or CONSTRUCTION of another building — and where the assessee constructed a new factory on leased land within three years and installed new machinery there, the Court held the department's reason for refusal, that the land had not been purchased, untenable. It also adopted the wide, popular meaning of 'industrial undertaking' and held it need not be engaged in manufacture or production.
• P. Alikunju, M.A. Nazeer Cashew Industries v CIT High CourtHelps taxpayer
  My factory land was compulsorily acquired and I put the money into a lodging house. The department says a lodging house is not an 'industrial undertaking', so s.54D is out. Is that right?
  No, on this Kerala decision. 'Industrial undertaking' is not defined in the Act and must be given its popular, natural meaning — any project or business a person undertakes that partakes of the character of a business. Running a lodge therefore qualifies, and the exemption in s.54D was allowed.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.