TaxTMI 
TaxTMI 
2015 (8) TMI 482
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....mounted to Rs. 1,11,42,973/- in the year 1991-1992. The appellant claimed exemption under Section 54G of the Income Tax Act on the entire capital gain earned from the sale proceeds of its erstwhile industrial undertaking situate in Thane in view of the advances so made being more than the capital gain made by it. 2. By an order dated 31.3.1994, the Assessing Officer imposed a tax on capital gains, refusing to grant exemption to the appellant under Section 54G. The reasons given were: "7. I have carefully considered the submission of the assessee. In this case, it is to be noted that the non urban area has not been declared to be so by any general or special order of the Central Govt. Therefore, the assessee cannot take the plea that it has shifted the undertaking to a non urban area. The second point is regarding utilization of capital gains. In this case, the assessee has given advances to different persons. However, such advance does not amount to utilization of capital gains. The assessee is required to acquire the plant and machinery within the time frame spelt out in sub-section (1) of Section 54G. However, if it fails to acquire the plant and machinery before one year of t....
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....rea for the purpose of Chapter XXII-B. He further contended that Section 54G was inserted on 1.4.1988 at the same time that Section 280ZA was omitted and that therefore Section 24 of the General Clauses Act would be attracted to the facts of this case. That being so, the notification dated 22.9.1967 would enure to the benefit of the appellant for the purpose of claiming exemption from capital gains under Section 54G. He also argued that Section 280Y(d), which was omitted with effect from 1990, had been so omitted because it had been rendered redundant with the omission of Section 280ZA. Further, according to learned counsel, on a correct interpretation of Section 54G, the assessee gets a period of three years after the date on which the transfer has taken place to purchase new machinery and plant, and acquire land or construct building. Further, in order to avail the benefit of Section 54G all that the assessee has to do in the assessment year in question is to "utilize" the amount of capital gain for the purposes aforesaid before the date of furnishing the return of income under Section 139. If that is done, it is not necessary for the assessee to deposit before furnishing such re....
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....it certificate. (2) The tax credit certificate to be granted under sub-section (1) shall be for an amount computed in the following manner with reference to the amount of the tax payable by the company on its income chargeable under the head "Capital gains" arising from the transfer of capital assets, being machinery or plant or buildings or lands or any rights in buildings or lands used for the purposes of the business of the said undertaking in the urban area, effected in the course of or in consequence of the shifting of such industrial undertaking, namely:- (a) the amount of expenditure incurred by the company in- (i) purchasing new machinery or plant for the purposes of the business of the company in the area to which the undertaking is shifted; (ii) acquiring lands or constructing buildings for the purposes of its business in the said area; and (iii) shifting its machinery or plant and other effects and transferring its establishment to such area, within a period of three years, from the date of the approval referred to in sub-section (1), or such further period as the Board may allow, shall first be ascertained; (b) the amount of the tax credit certificate shal....
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....r the purposes of the business of the company. The notification dated 22.9.1967 issued under Section 280Y(d) reads as under:- "In pursuance of clause (d) of section 280Y of the Income-tax Act, 1961 (43 of 1961) the Central Government hereby declares the areas shown in column (3) of the Schedule hereto annexed and forming part of the territory of the State or the Union territory, as the case may be, specified in the corresponding entry in column (2) thereof to be "urban areas" for the purposes of Chapter XXII-B of the said Act, namely:- SCHEDULE Serial No. Name of the State or the Union territory Details of the area (1) (2)  ....
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....uses (a) to (d) (such cost and expenses being hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its being purchased, acquired, constructed or transferred, as the case may be, the cost shall be nil; or (ii) if the amount of the capital gain is equal to, or less than, the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its being purchased, acquired, constructed or transferred, as the case may be, the cost shall be reduced by the amount of the capital gain. Explanation.-In this sub-section, "urban area" means any such area within the limits of a municipal corporation or municipality as the Central Government may, having regard to the population, concentration of industries, need for proper planning of the area and other rel....
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.... in approved relocation schemes." 10. Further, the notes on clauses for the Finance Bill, 1987 reads as under:- "Clause 24 seeks to insert two new sections 54G and 54H in the Income-tax Act. The new section 54G provides for exemption of capital gains on transfer of assets in cases of industrial undertaking shifting from urban area. Sub-section (1) provides that if an assessee transfers a long-term capital asset in the nature of machinery, plant, building or land used for the purposes of the business of the industrial undertaking situated in an urban area in connection with the shifting of such undertaking to a non-urban area, and within a period of one year before or three years after the date of transfer, purchases new machinery or plant and acquires land or building or constructs building for the purposes of his business in the area to which the undertaking is shifted or incurs expenses on shifting the original asset and transferring the establishment of the undertaking to such area and incurs expenses on such other purposes as may be specified in a scheme framed by the Central Government, the capital gain shall be exempt to the extent such gain has been utilized for the afo....
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....rial difference inasmuch as Section 280Y(d) is a definition Section defining "urban area" for the purpose of Section 280ZA only and for no other purpose. It is clear that once Section 280ZA is omitted from the statute book, Section 280Y(d) having no independent existence would for all practical purposes also be "dead". Quite apart from this, Section 54G(1) by its explanation introduces the very definition contained in Section 280Y(d) in the same terms. Obviously, both provisions are not expected to be applied simultaneously and it is clear that the explanation to Section 54G(1) repeals by implication Section 280Y(d). 13. Repeal by implication has been dealt with by at least two judgments of this Court. In State of Orissa and another v. M/s M.A. Tulloch and Co., (1964) 4 SCR 461, this Court considered the question as to whether the expression "repeal" in Section 6 of the General Clauses Act would be of sufficient amplitude to cover cases of implied repeal. This Court stated: "The next question is whether the application of that principle could or ought to be limited to cases where a particular form of words is used to indicate that the earlier law has been repealed. The entire th....
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....on 280Z or section 280ZC, he shall be allowed to utilize the same up to 31st March, 1991.This amendment will take effect from 1st April, 1990." Equally, the Memorandum explaining the provisions in the Finance Bill also stated:- "40. Chapter XXII-B of the Income-tax Act, contains provisions relating to tax credit certificates. This was introduced with effect from 1st April, 1965, with various objects, viz., providing an incentive to individuals and Hindu undivided families for investing in newly-floated equity shares of certain companies (section 280Z), facilitating the shifting of industrial undertakings of public companies from urban areas to new areas with a view to relieving congestion in urban areas (section 280ZA), providing resources for purposes relevant to the expansion of industry to companies engaged in important industries and earning profits higher than in a "base year" (section 280ZB), stimulating exports (section 280ZC) and encouraging the production of certain goods liable to central excise duty (section 280ZB). The provisions dealing with tax credit certificates for shifting of industrial undertakings from urban areas to new areas have already been omitted with e....
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....eaning of this section]" 16. In Poonjabhai Vanmalidas v. Commissioner of Income Tax, Ahmedabad, 1992 Supp. (1) SCC 182, this Court in construing Section 24 of the General Clauses Act held:- "7. The effect of Section 24 of the General Clauses Act, 1897, insofar as it is material, is that where the repealed and re-enacted provisions are not inconsistent with each other, any order made under the repealed provisions is deemed to be an order made under the re-enacted provisions. The question, therefore, is whether the provisions of the repealed Section 10(2)(xi), under which the bad debts were written off as irrecoverable in the books of the assessee, are in terms re-enacted by the repealing Act. A comparative table furnished in The Law and Practice of Income Tax, Kanga and Palkhivala (7th edn., volume II) shows that Section 10(2)(xi) of the 1922 Act is equivalent to Sections 36(1)(vii), 36(2) and 41(4) of the 1961 Act. The repealed Section 10(2)(xi) is thus a composite section containing the ingredients of the re-enacted Sections 36(1)(vii), 36(2) and 41(4). Consequently when a debt is written off by an order in terms of Section 10(2)(xi) of the 1922 Act, the Income Tax Office....
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..... It appears that as Section 6 of the General Clauses Act applies to repealed enactments, the legislature in its wisdom thought it proper to make the same specifically applicable in the 1988 Act also which is a repealing and re-enacted statute. Reference to Section 6 of the General Clauses Act in sub-section (1) of Section 30 has been made to avoid any confusion or misunderstanding regarding the effect of repeal with regard to actions taken under the repealed Act. If the legislature had intended not to apply the provisions of Section 24 of the General Clauses Act to the 1988 Act, it would have specifically so provided under the enacted law. In the light of the fact that Section 24 of the General Clauses Act is specifically applicable to the repealing and re-enacting statute, its exclusion has to be specific and cannot be inferred by twisting the language of the enactments. Accepting the contention of the learned counsel for the respondents would render the provisions of the 1988 Act redundant inasmuch as appointments, notifications, orders, schemes, rules, bye-laws made or issued under the repealed Act would be deemed to be non-existent making impossible the working of the re-enact....
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.... the said rule. The said Rule 132A was omitted by a notification dated 30th March, 1966. What was decided in that case is set out by paragraph 17 of the said judgment, which is as follows: "17. Reference was next made to a decision of the Madhya Pradesh High Court in State of Madhya Pradesh v. Hiralal Sutwala [AIR 1959 MP 93] but, there again, the accused was sought to be prosecuted for an offence punishable under an Act on the repeal of which Section 6 of the General Clauses Act had been made applicable. In the case before us, Section 6 of the General Clauses Act cannot obviously apply on the omission of Rule 132-A of the DIRs for the two obvious reasons that Section 6 only applies to repeals and not to omissions, and applies when the repeal is of a Central Act or Regulation and not of a rule. If Section 6 of the General Clauses Act had been applied, no doubt this complaint against the two accused for the offence punishable under Rule 132-A of the DIRs could have been instituted even after the repeal of that rule." 22. It will be clear from a reading of this paragraph that a Madhya Pradesh High Court judgment was distinguished by the Constitution Bench on two grounds. One being....
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....Act applies to all types of repeals. The section applies whether the repeal be express or implied, entire or partial or whether it be repeal simpliciter or repeal accompanied by fresh legislation. The section also applies when a temporary statute is repealed before its expiry, but it has no application when such a statute is not repealed but comes to an end by expiry. The section on its own terms is limited to a repeal brought about by a Central Act or Regulation. A rule made under an Act is not a Central Act or regulation and if a rule be repealed by another rule, section 6 of the General Clauses Act will not be attracted. It has been so held in two Constitution Bench decisions. The passing observation in these cases that "section 6 only applies to repeals and not to omissions" needs reconsideration for omission of a provision results in abrogation or obliteration of that provision in the same way as it happens in repeal. The stress in these cases was on the question that a 'rule' not being a Central Act or Regulation, as defined in the General Clauses Act, omission or repeal of a 'rule' by another 'rule' does not attract section 6 of the Act and proceeding....
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....at a repeal can be by way of an express omission. This being the case, obviously the word "repeal" in both Section 6 and Section 24 would, therefore, include repeals by express omission. The absence of any reference to Section 6A, therefore, again undoes the binding effect of these two judgments on an application of the 'per incuriam' principle. In Mamleshwar Prasad & Anr. v. Kanahaiya Lal (dead) through LRs., (1975) 3 SCR 834, Krishna Iyer, J., succinctly laid down what is meant by the "per incuriam" principle. He stated: "We do not intend to detract from the rule that, in exceptional instances, whereby obvious inadvertence or oversight a judgment fails to notice a plain statutory provision or obligatory authority running counter to the reasoning and result reached, it may not have sway of binding precedents. It should be a glaring case, an obtrusive omission. No such situation presents itself here and we do not embark on the principle of judgment per incuriam." (At page 837) An interesting application of the said principle is contained in State of U.P. & Anr. v. Synthetics and Chemicals Ltd. & Anr., (1991) 3 SCR 64, where a Division Bench of this Court held that one particular....
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....xpression "repeal", it is clear that repeals may take any form and so long as a statute or part of it is obliterated, such obliteration would be covered by the expression "repeal" in Section 6 of the General Clauses Act. 32. In fact in Halsbury's Laws of England Fourth Edition, it is stated that: "So far as express repeal is concerned, it is not necessary that any particular form of words should be used. (R v. Longmead, (1795) 2 Leach 694 at 696). All that is required is that an intention to abrogate the enactment or portion in question should be clearly shown. (Thus, whilst the formula "is hereby repealed" is frequently used, it is equally common for it to be provided that an enactment "shall cease to have effect" (or, If not yet in operation, "shall not have effect") or that a particular portion of an enactment "shall be omitted)." 33. At this stage, it is important to note that a temporary statute does not attract the provision of Section 6 of the General Clauses Act only for the reason that the said statute expires by itself after the period for which it has been promulgated ends. In such cases, there is no repeal for the reason that the legislature has not applied its mind....
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....xpression used in 54G(2) is "which is not utilized by him for all or any of the purposes aforesaid....". It is clear that for the assessment year in question all that is required for the assessee to avail of the exemption contained in the Section is to "utilize" the amount of capital gains for purchase and acquisition of new machinery or plant and building or land. It is undisputed that the entire amount claimed in the assessment year in question has been so "utilized" for purchase and/or acquisition of new machinery or plant and land or building. 37. The High Court is not correct when it states:- "31. The word 'purchase' is not defined under the Act and therefore, has to be construed in the commercial sense. In many dictionaries, the word 'purchase' means the acquisition of property by party's own act as distinguished from acquisition by act of law. In the context in which the expression issued by the Legislature requires first to be understood and interpretation that suits the context requires to be adopted. Exemption of capital gains under Section 54G of the Act can be claimed on transfer of assets in cases of shifting of industrial undertaking from urban area to any other no....