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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Managerial Decisions

Kaveri Textiles Ltd transferred its urban plant on 1 July 2024 with capital gain of Rs. 60 lakh and used only Rs. 20 lakh for the new asset before the return due date. It deposited Rs. 40 lakh in the specified scheme but never utilised it. Under the Income-tax Act, 2025, how is the Rs. 40 lakh treated?

The unutilised Rs. 40 lakh is charged as income of the tax year in which the three-year period from the date of transfer expires. The company may withdraw the amount under the notified scheme, but the deposit does not give permanent exemption.

  1. ACharged as income of the tax year in which three years from the date of transfer expire, with the right to withdraw it under the schemeCorrect
  2. BCharged as income of the tax year of transfer itself
  3. CExempt permanently because it was deposited
  4. DCharged as income in the tax year of the filing of the return

Explanation

Unutilised deposited amount is charged as income of the tax year in which the three-year period from the date of transfer expires, and the assessee may withdraw it under the scheme. It is not taxed in the transfer year or exempt for good.

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