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

Under the Income-tax Act, 2025, a company shifts its industrial undertaking from an urban area to a non-urban area and claims exemption of capital gains on transfer of the original asset. Within what period relative to the date of transfer must the new machinery or plant be purchased for the undertaking in the new area?

The new machinery or plant must be purchased within one year before or three years after the date of transfer of the original asset. This is the window prescribed in section 87 for the exemption on shifting an industrial undertaking from an urban area.

  1. AWithin one year before or three years after the date of transferCorrect
  2. BWithin two years before or one year after the date of transfer
  3. CWithin one year after the date of transfer only
  4. DWithin six months before or two years after the date of transfer

Explanation

Section 87 requires the new asset to be purchased, acquired or constructed within one year before or three years after the date of transfer. The other periods are not in the text and would wrongly shorten or alter the window.

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