Law:

Section:

Section 54D of the Income-tax Act, 1961 - Capital gains - On compulsory acquisition of land and building - Whether 'running a lodge' is an 'industrial undertaking' within meaning of section 540 - Held, yes Facts The assessee was owning an ice factory and the Government acquired the land and building forming part of the above factory. The department had fixed the capital gains relating to the aforesaid acquisition and assessed it. The assessee on appeal before the AAC contended that the amount declared as capital gains, was utilized by him0 for the construction of a lodging house. It was also contended that the business of running the lodge was an 'industrial undertaking' and since the capital gains arising from the compulsory acquisition of the land and building forming part of the ice factory, were utilized for setting of the lodging house, the same was exempted under section 54D. The AAC disallowed the assessee's claim on the ground that the running of lodge could not be treated as an 'industrial undertaking' within the meaning of section 54D. On second appeal, the Tribunal also upheld the order of the AAC. On reference: Held The Act does not define as to what is an 'industrial undertaking'. However, in common parlance undertaking means an 'enterprise, venture, engagement'. It can as well mean 'the business'. An undertaking mentioned in section S4D must be one maintained by a person for the purpose of carrying on his business. Undertaking for the purpose of this section, however, must be an industrial undertaking. The demonstrative adjective 'industrial' qualifying the word 'undertaking' unmistakably and with precision shows that the undertaking must be one which partakes of the character of a business. That, that is the meaning that was intended by the Parliament is clear from the context in which these words were used in the section. Construing the word 'business' the Supreme Court in the case of Mazagaon Dock Ltd. v.CIT [1958] 34 ITR 368 has observed that the word 'business' is as has often been said, one of wide import and in a fiscal statute it must be construed in a broad rather than a restricted sense. The words 'industrial undertaking', therefore,…

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