M/s Fibre Boards (P) Ltd. v. Commissioner of Income-tax, Bangalore
[Citation -2015-LL-0811-5]

Citation 2015-LL-0811-5
Appellant Name M/s Fibre Boards (P) Ltd.
Respondent Name Commissioner of Income-tax, Bangalore
Court SUPREME COURT
Relevant Act Income-tax
Date of Order 11/08/2015
Judgment View Judgment
Keyword Tags industrial undertaking • plant and machinery • purchase of land • capital gain • sale of land • urban area
Bot Summary: 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. His further contention was that in any case the explanation added to Section 54G(1) being in the same terms as Section 280Y(d) has repealed Section 280Y(d) by implication. On a conjoint reading of the aforesaid Budget Speech, notes on clauses and memorandum explaining the Finance Bill of 1987, it becomes clear that the idea of omitting Section 280ZA and introducing on the same date Section 54G was to do away with the tax credit certificate scheme together with the prior approval required by the Board and to substitute the repealed provision with the new scheme contained in Section 54G. It is true that Section 280Y(d) was only omitted by the Finance Act, 1990 and was not omitted together with Section 280ZA. However, we agree with learned counsel for the appellant that this would make no material 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. The repealed Section 10(2)(xi) is thus a composite section containing the ingredients of the re-enacted Sections 36(1)(vii), 36(2) and 41(4). Accordingly, in the light of Section 24 of the General Clauses Act, 1897, the relevant order made under Section 10(2)(xi) of the 1922 Act with reference to which the debt in question had been written off, is deemed to be an order made under Section 36(1)(vii) of the 1961 Act and such order is what is contemplated under Section 41(4) of that Act. Reference to Section 6 of the General Clauses Act in sub-section 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. For all the aforesaid reasons, we are therefore of the view that on omission of Section 280ZA and its re-enactment with modification in Section 54G, Section 24 of the General Clauses Act would apply, and the notification of 1967, declaring Thane to be an urban area, would be continued under and for the purposes of Section 54A. 36.


REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 5525-5526 OF 2005 M/S FIBRE BOARDS (P) LTD. BANGALORE APPELLANT VERSUS COMMISSIONER OF INCOME TAX, BANGALORE ...RESPONDENT JUDGMENT R.F. Nariman, J. 1. assessee, private limited company, had industrial unit at Majiwada, Thane, which was notified urban area. With view to shift its industrial undertaking from urban area to non-urban area at Kurukumbh Village, Pune District, Maharashtra, it sold its land, building and plant and machinery situated at Majiwada, Thane to Shree Vardhman Trust for consideration of Rs.1,20,00,000/-, and after deducting amount of Rs.11,62,956/-, had earned capital 1 Page 1 gain of Rs.1,08,33,044/-. Since it intended to shift its industrial undertaking from urban area to non-urban area, out of capital gain so earned, appellant paid by way of advances various amounts to different persons for purchase of land, plant and machinery, construction of factory building etc. Such advances amounted to Rs.1,11,42,973/- in year 1991-1992. appellant claimed exemption under Section 54G of Income Tax Act on entire capital gain earned from sale proceeds of its erstwhile industrial undertaking situate in Thane in view of advances so made being more than capital gain made by it. 2. By order dated 31.3.1994, Assessing Officer imposed tax on capital gains, refusing to grant exemption to appellant under Section 54G. reasons given were: 7. I have carefully considered submission of assessee. In this case, it is to be noted that non urban area has not been declared to be so by any general or special order of Central Govt. Therefore, assessee cannot take plea that it has shifted undertaking to non urban area. second point is regarding utilization of capital gains. In this case, assessee has given advances to different persons. However, such 2 Page 2 advance does not amount to utilization of capital gains. assessee is required to acquire plant and machinery within time frame spelt out in sub-section (1) of Section 54G. However, if it fails to acquire plant and machinery before one year of transfer or within period of filing return, it is supposed to deposit capital gains in Capital Gains Deposit Scheme. It cannot be said that giving advance to different concerns means utilization of money for acquiring assets. Therefore, assessee was to deposit capital gains in specific account and file proof of such deposit. As assessee had not done so, it is not entitled for deduction u/s 54G. To sum up, on both counts, i.e., due to non declaration of area to be non urban area by Central Govt. and its failure to deposit capital gain in Capital Gains Deposit Account, assessee s claim is not applicable. 3. By its order dated 20.7.1995, Commissioner, Income Tax (Appeals) dismissed appellant s appeal. By its order dated 20.11.1995, Income Tax Appellate Tribunal allowed assessee s appeal stating that even agreement to purchase is good enough and that explanation to Section 54G being declaratory in nature would be retrospective. 4. By impugned judgment dated 26.5.2005, High Court reversed judgment of Income Tax Appellate 3 Page 3 Tribunal and held that as notification declaring Thane to be urban area stood repealed with repeal of Section under which it was made, appellant did not satisfy basic condition necessary to attract Section 54G, namely that transfer had to be made from urban area to non urban area. Further, expression purchase in Section 54G cannot be equated with expression towards purchase and, therefore, admittedly as land, plant and machinery had not been purchased in assessment year in question, exemption contained in Section 54G had to be denied. It is correctness of this judgment that is assailed before us. 5. Shri Dhruv Mehta, learned senior advocate appearing on behalf of assessee argued before us and pointed out that Chapter XXII-B of Income Tax Act, prior to 1.4.1988, contained Section 280ZA which when read with definition of urban area in Section 280Y(d) gave to person who shifted from urban area to another area, tax credit certificate with reference to amount of tax payable by Company on income tax chargeable under Heading Capital Gains and would be given relief accordingly. He referred us to 4 Page 4 notification dated 22.9.1967 by which Thane had been declared to be urban area for purpose of Chapter XXII-B. He further contended that Section 54G was inserted on 1.4.1988 at same time that Section 280ZA was omitted and that therefore Section 24 of General Clauses Act would be attracted to facts of this case. That being so, notification dated 22.9.1967 would enure to benefit of appellant for 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 omission of Section 280ZA. Further, according to learned counsel, on correct interpretation of Section 54G, assessee gets period of three years after date on which transfer has taken place to purchase new machinery and plant, and acquire land or construct building. Further, in order to avail benefit of Section 54G all that assessee has to do in assessment year in question is to utilize amount of capital gain for purposes aforesaid before date of furnishing return of income under Section 139. If that is 5 Page 5 done, it is not necessary for assessee to deposit before furnishing such return, amount in Capital Gain Deposit Scheme and utilize such proceeds in accordance with scheme which Central Government may by notification frame in this behalf. His further contention was that in any case explanation added to Section 54G(1) being in same terms as Section 280Y(d) has repealed Section 280Y(d) by implication. 6. Learned counsel for revenue, Shri Arijit Prasad supported judgment of High Court and argued that Section 24 of General Clauses Act had no application to facts of present case as it only applied to `repeals and not omissions , and also that it saved rights that were given by subordinate legislation, and as notification dated 22.9.1967 did not by itself confer any right on appellant, Section 24 of General Clauses Act would not be attracted. He further submitted that as no purchase of plant and machinery and/or acquisition of land or building or construction of building had actually taken place in assessment year in question, in any event conditions precedent for applicability of Section 6 Page 6 54G were not met. As was pointed out by assessee itself by letter dated 25.11.1993, even till that date land had not been acquired but only possession was taken and factory building had not yet been constructed. This being so, according to him, High Court s judgment needs no interference. 7. We have heard learned counsel for parties. In order to appreciate submissions made by both sides, it is necessary to first set out statutory provisions. Section 280Y(d) as it stood prior to its omission in 1990 read thus:- 280Y. Definitions. In this Chapter, - (a) Xxx (b) Xxx (c) Xxx (d) urban area means any area which Central Government may, having regard to population, concentration of industries, need for proper planning of area and other relevant factors, by general or special order declare to be urban area for purposes of this Chapter. Section 280ZA as it stood before its amendment in 1988 read as follows:- 7 Page 7 280ZA. Tax credit certificates for shifting of industrial undertaking from urban area.- (1) If any company owning industrial undertaking situate in urban area shifts, with prior approval of Board, such undertaking to any area (not being area in which such undertaking is situate), it shall be granted tax credit certificate. (2) tax credit certificate to be granted under sub-section (1) shall be for amount computed in following manner with reference to amount of tax payable by company on its income chargeable under head Capital gains arising from transfer of capital assets, being machinery or plant or buildings or lands or any rights in buildings or lands used for purposes of business of said undertaking in urban area, effected in course of or in consequence of shifting of such industrial undertaking, namely:- (a) amount of expenditure incurred by company in- (i) purchasing new machinery or plant for purposes of business of company in area to which undertaking is shifted; (ii) acquiring lands or constructing buildings for purposes of its business in said area; and (iii) shifting its machinery or plant and other effects and transferring its establishment to such area, within period of three years, from date of approval referred to in sub-section (1), or such further period as Board may allow, shall first be ascertained; (b) amount of tax credit certificate shall bear to amount of tax payable by company on its income chargeable under head Capital 8 Page 8 gains as aforesaid, same proportion as amount of expenditure ascertained under clause (a) bears to amount of said income: Provided that amount of tax credit certificate shall in no case exceed amount of tax aforesaid. (3) amount shown on tax credit certificate granted to company under this section shall, on certificate being produced before Income-tax Officer, be adjusted against any liability of company under Indian Income-tax Act,1922 (11 of 1922), or this Act, existing on date on which certificate was produced before Income-tax Officer and where amount of such certificate exceeds such liability, or where there is no such liability, excess or whole of such amount, as case may be, shall, notwithstanding anything contained in Chapter XIX, be deemed, on said date, to be refund due to company under that Chapter and provisions of this Act shall apply accordingly. (4) Where capital asset, being machinery or plant purchased for purposes of business of company in area to which undertaking is shifted or building or land, or any right in building or land, acquired, or as case may be, constructed in said area, is transferred by company within period of five years from date of purchase, acquisition or, as case may be, date of completion of construction to any person other than Government, local authority, corporation established, by Central, State or Provincial Act or Government company as defined in section 617 of Companies Act, 1956 (1 of 1956), amount equal to one-half of amount for which tax credit certificate has been granted to company under sub-section (1) shall be deemed to be tax due from company on thirtieth day 9 Page 9 following date of transfer under notice of demand issued under Section 156, and all provisions of this Act shall apply accordingly. Explanation. - Any land or building used for residence of persons employed in business of company or for use of such persons as hospital, cr che, school, canteen, library, recreational centre, shelter, rest-room or lunch-room shall, for purposes of this section, be deemed to be land or building used for purposes of business of company. notification dated 22.9.1967 issued under Section 280Y(d) reads as under:- In pursuance of clause (d) of section 280Y of Income-tax Act, 1961 (43 of 1961) Central Government hereby declares areas shown in column (3) of Schedule hereto annexed and forming part of territory of State or Union territory, as case may be, specified in corresponding entry in column (2) thereof to be urban areas for purposes of Chapter XXII-B of said Act, namely:- SCHEDULE Serial No. Name of State or Details of area Union territory (1) (2) (3) __________________________________________________________ 10 Page 10 6. Maharashtra (i) Bombay Thana Area. (ii) Poona-Pimpri-Chinchwad area. (iii) Khopoli area. (iv) Areas within limits of- (a)Nagpur Municipal Corporation. (b)Sholapur Municipal Corporation. 8. Section 54G of Income Tax Act inserted by Finance Act, 1987 with effect from 1.4.1988 reads as follows: 54G. Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area. (1) Subject to provisions of sub-section (2), where capital gain arises from transfer of capital asset, being machinery or plant or building or land or any rights in building or land used for purposes of business of industrial undertaking situate in urban area, effected in course of, or in consequence of, shifting of such industrial undertaking (hereafter in this section referred to as original asset) to any area (other than urban area) and assessee has within period of one year before or three years after date on which transfer took place, (a) purchased new machinery or plant for purposes of business of industrial undertaking in area to which said undertaking is shifted; (b) acquired building or land or constructed building for purposes of his business in said area; 11 Page 11 (c) shifted original asset and transferred establishment of such undertaking to such area; and (d) incurred expenses on such other purpose as may be specified in scheme framed by Central Government for purposes of this section, then, instead of capital gain being charged to income-tax as income of previous year in which transfer took place, it shall be dealt with in accordance with following provisions of this section, that is to say, (i) if amount of capital gain is greater than cost and expenses incurred in relation to all or any of purposes mentioned in clauses (a) to (d) (such cost and expenses being hereafter in this section referred to as new asset), difference between amount of capital gain and cost of new asset shall be charged under section 45 as income of previous year; and for purpose of computing in respect of new asset any capital gain arising from its transfer within period of three years of its being purchased, acquired, constructed or transferred, as case may be, cost shall be nil; or (ii) if amount of capital gain is equal to, or less than, cost of new asset, capital gain shall not be charged under section 45; and for purpose of computing in respect of new asset any capital gain arising from its transfer within period of three years of its being purchased, acquired, constructed or transferred, as case may be, cost shall be reduced by amount of capital gain. Explanation. In this sub-section, urban area means any such area within limits of municipal corporation or municipality as Central Government may, having regard to population, concentration of industries, need for proper planning of area and other relevant factors, by general or 12 Page 12 special order, declare to be urban area for purposes of this sub-section. (2) amount of capital gain which is not appropriated by assessee towards cost and expenses incurred in relation to all or any of purposes mentioned in clauses (a) to (d) of sub- section (1) within one year before date on which transfer of original asset took place, or which is not utilised by him for all or any of purposes aforesaid before date of furnishing return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than due date applicable in case of assessee for furnishing return of income under sub-section (1) of section 139] in account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which Central Government may, by notification in Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for purposes of sub-section (1), amount, if any, already utilised by assessee for all or any of purposes aforesaid together with amount, so deposited shall be deemed to be cost of new asset: Provided that if amount deposited under this sub-section is not utilised wholly or partly for all or any of purposes mentioned in clauses (a) to (d) of sub-section (1) within period specified in that sub-section, then, (i) amount not so utilised shall be charged under section 45 as income of previous year in which period of three years from date of transfer of original asset expires; and (ii) assessee shall be entitled to withdraw such amount in accordance with scheme aforesaid. 13 Page 13 9. On same date, by same Finance Act, Section 280ZA was omitted with effect from same date i.e. 1.4.1988. We have been referred to Budget Speech of Minister of Finance when he introduced Finance Act, 1987. Among other things, learned Minister stated:- 83. Concentration of industries in many of our urban areas poses serious problems of congestion, pollution and hazards. In order to encourage industries to shift out of such areas, I propose to exempt capital gains made on sale of land and buildings in such areas provided these are reinvested in approved relocation schemes. 10. Further, notes on clauses for Finance Bill, 1987 reads as under:- Clause 24 seeks to insert two new sections 54G and 54H in Income-tax Act. 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 assessee transfers long-term capital asset in nature of machinery, plant, building or land used for purposes of business of industrial undertaking situated in urban area in connection with shifting of such undertaking to non-urban area, and within period of one year before or three years after date of transfer, purchases new machinery or plant and acquires land or building or constructs building for purposes of his business in area to which 14 Page 14 undertaking is shifted or incurs expenses on shifting original asset and transferring establishment of undertaking to such area and incurs expenses on such other purposes as may be specified in scheme framed by Central Government, capital gain shall be exempt to extent such gain has been utilized for aforesaid purposes. Explanation to sub-section (1) defines urban area on lines of definition in section 280Y. 11. relevant part of memorandum explaining provisions in Finance Bill, 1987 reads as under: 34. Under existing provisions of section 280ZA of Income-tax Act, any company owning industrial undertaking situated in urban area, is entitled for tax credit certificate with reference to amount of tax payable on capital gains arising from transfer of its machinery, plant, etc., to any other area. These provisions have not proved to be very effective. With view to promoting decongestion of urban areas and balanced regional growth, Bill seeks to exempt capital gains arising on transfer of long- term capital assets in nature of machinery, plant, building or land used for purposes of business of industrial undertaking situated in urban area in connection with shifting of such industrial undertaking from urban area to non- urban area. Accordingly, capital gains arising in such cases will be exempt to extent they are utilized within period of one year before or three years after date of transfer, for purchase of new machinery or plant or acquiring land and building, etc., for purpose of business in 15 Page 15 area to which undertaking is shifted or incurs expenses on shifting original asset and transferring establishment of undertaking to such area and incurs expenses as may be specified. As consequential measure, section 280ZA of Income-tax Act is proposed to be omitted. These amendments will take effect from 1 st April, 1988, and will, accordingly, apply in relation to assessment year 1988-89 and subsequent years. 12. On conjoint reading of aforesaid Budget Speech, notes on clauses and memorandum explaining Finance Bill of 1987, it becomes clear that idea of omitting Section 280ZA and introducing on same date Section 54G was to do away with tax credit certificate scheme together with prior approval required by Board and to substitute repealed provision with new scheme contained in Section 54G. It is true that Section 280Y(d) was only omitted by Finance Act, 1990 and was not omitted together with Section 280ZA. However, we agree with learned counsel for appellant that this would make no material difference inasmuch as Section 280Y(d) is definition Section defining urban area for purpose of Section 280ZA only and for no other purpose. It is clear that once Section 280ZA is omitted from 16 Page 16 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 very definition contained in Section 280Y(d) in same terms. Obviously, both provisions are not expected to be applied simultaneously and it is clear that 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 question as to whether expression repeal in Section 6 of General Clauses Act would be of sufficient amplitude to cover cases of implied repeal. This Court stated: next question is whether application of that principle could or ought to be limited to cases where particular form of words is used to indicate that earlier law has been repealed. entire theory underlying implied repeals is that there is no need for later enactment to state in express terms that earlier enactment has been repealed by using any particular set of words or form of drafting but that if legislative intent to supersede earlier law is manifested by enactment of provisions as to effect such supersession, then there is in law repeal notwithstanding absence 17 Page 17 of word repeal in later statute. (at page 483) Similarly in Ratan Lal Adukia v. Union of India, (1989) 3 SCC 537, this Court held that substituted Section 80 of Code of Civil Procedure repealed by implication, insofar as railways are concerned, Section 20 of self-same code. In so holding, this Court stated:- doctrine of implied repeal is based on postulate that legislature which is presumed to know existing state of law did not intend to create any confusion by retaining conflicting provisions. Courts, in applying this doctrine, are supposed merely to give effect to legislative intent by examining object and scope of two enactments. But in conceivable case, very existence of two provisions may by itself, and without more, lead to inference of mutual irreconcilability if later set of provisions is by itself complete code with respect to same matter. In such case actual detailed comparison of two sets of provisions may not be necessary. It is matter of legislative intent that two sets of provisions were not expected to be applied simultaneously. Section 80 is special provision. It deals with certain class of suits distinguishable on basis of their particular subject matters. (at para 18) 18 Page 18 14. Further, Finance Act which omitted whole of Chapter XXII-B of which Section 280Y(d) is part, in its notes on clauses stated: Clause 46 seeks to omit Chapter XXII-B of Income-tax Act relating to tax credit certificates. Under provisions of this Chapter, which was introduced with effect from 1st April, 1965, tax credit certificates were granted to assessees fulfilling certain conditions. These certificates were to be utilized for adjustment of tax liability or for refund or both. This Chapter has now become virtually redundant and is, therefore, being omitted. However, if person still possesses any tax credit certificates granted under section 280Z or section 280ZC, he shall be allowed to utilize same up to 31st March, 1991. This amendment will take effect from 1st April, 1990. Equally, Memorandum explaining provisions in Finance Bill also stated:- 40. Chapter XXII-B of Income-tax Act, contains provisions relating to tax credit certificates. This was introduced with effect from 1 st April, 1965, with various objects, viz., providing incentive to individuals and Hindu undivided families for investing in newly-floated equity shares of certain companies (section 280Z), facilitating shifting of industrial undertakings of public companies from urban areas to new areas with view to relieving congestion in urban areas (section 280ZA), providing resources for purposes relevant to 19 Page 19 expansion of industry to companies engaged in important industries and earning profits higher than in base year (section 280ZB), stimulating exports (section 280ZC) and encouraging production of certain goods liable to central excise duty (section 280ZB). provisions dealing with tax credit certificates for shifting of industrial undertakings from urban areas to new areas have already been omitted with effect from 1 st April, 1988. No tax credit certificates can be granted at present under remaining provisions of this Chapter. Thus, provisions contained in Chapter XXII-B, have become virtually redundant. Therefore, as measure of rationalization, it is proposed to delete Chapter containing these provisions with effect from 1st day of April, 1990. tax credit certificates granted under section 280Z or section 280ZC and not presented so far for payment or adjustment of tax liability can, however, be presented before Assessing Officer up to 31 st day of March, 1991, for said purposes. 15. From reading of notes on clauses and Memorandum of Finance Bill, 1990, it is clear that Section 280Y(d) which was omitted with effect from 1.4.1990 was so omitted because it had become redundant . It was redundant because it had no independent existence, apart from providing definition of urban area for purpose of Section 280ZA which had been omitted with effect from very date that Section 54G was inserted, namely, 1.4.1988. We are, 20 Page 20 therefore, of view that High Court in not referring to Section 24 of General Clauses Act has fallen into error. Section 24 states: 24. Continuation of orders, etc., issued under enactments repealed and re-enacted. Where any 44[Central Act] or Regulation, is, after commencement of this Act, repealed and re- enacted with or without modification, then, unless it is otherwise expressly provided any 45 [appointment notification,] order, scheme, rule, form or bye- law, 45 [made or] issued under repealed Act or Regulation, shall, so far as it is not inconsistent with provisions re-enacted, continue in force, and be deemed to have been 45 [made or] issued under provisions so re-enacted, unless and until it is superseded by any 45 [appointment notification,] order, scheme, rule, form or bye-law, 45[made or] issued under provisions so re-enacted 46 [and when any 44 [Central Act] or Regulation, which, by notification under section 5 or 5A of Scheduled Districts Act, 1874, (14 of 1874) or any like law, has been extended to any local area, has, by subsequent notification, been withdrawn from re-extended to such area or any part thereof, provisions of such Act or Regulation shall be deemed to have been repealed and re-enacted in such area or part within meaning 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 General Clauses Act held:- 21 Page 21 7. effect of Section 24 of General Clauses Act, 1897, insofar as it is material, is that where repealed and re-enacted provisions are not inconsistent with each other, any order made under repealed provisions is deemed to be order made under re-enacted provisions. question, therefore, is whether provisions of repealed Section 10(2)(xi), under which bad debts were written off as irrecoverable in books of assessee, are in terms re-enacted by repealing Act. comparative table furnished in Law and Practice of Income Tax, Kanga and Palkhivala (7th edn., volume II) shows that Section 10(2)(xi) of 1922 Act is equivalent to Sections 36(1)(vii), 36(2) and 41(4) of 1961 Act. repealed Section 10(2)(xi) is thus composite section containing ingredients of re-enacted Sections 36(1)(vii), 36(2) and 41(4). Consequently when debt is written off by order in terms of Section 10(2)(xi) of 1922 Act, Income Tax Officer exercises same power as he would have exercised on enactment of Section 36(1)(vii) of 1961 Act. These two provisions are, therefore, consistent with each other. Section 36(1)(vii) is subject to provisions of sub-section (2) of that section. Therefore, both Sections 36(1)(vii) and 36(2) of 1961 Act, being two of ingredients of Section 10(2)(xi) of 1922 Act, must be read together with reference to order under which debts had been written off. Accordingly, in light of Section 24 of General Clauses Act, 1897, relevant order made under Section 10(2)(xi) of 1922 Act with reference to which debt in question had been written off, is deemed to be order made under Section 36(1)(vii) of 1961 Act and such order is what is contemplated under Section 41(4) of that Act. Any amount which is recovered on any such debt is attracted by provisions of Section 41(4) of 1961 Act and is, therefore, chargeable to tax in terms of that sub- 22 Page 22 section to extent of excess specified therein. (at para 7). 17. In State of Punjab v. Harnek Singh, (2002) 3 SCC 481, this Court held:- 17. Section 24 of General Clauses Act deals with effect of repeal and re-enactment of Act and object of section is to preserve continuity of notifications, orders, schemes, rules or bye-laws made or issued under repealed Act unless they are shown to be inconsistent with provisions of re-enacted statute. 23. We do not find any force in submission of learned counsel appearing for respondents that as reference made in sub-section (2) of Section 30 of 1988 Act is only to Section 6 of General Clauses Act, other provisions of said Act are not applicable for purposes of deciding controversy with respect to notifications issued under 1947 Act. We are further of opinion that High Court committed mistake of law by holding that as notifications have not expressly been saved by Section 30 of Act, those would not enure or survive to govern any investigation done or legal proceedings instituted in respect of cases registered under 1988 Act. There is no dispute that 1988 Act is both repealing and re-enacting law relating to prevention of corruption to which provisions of Section 24 of General Clauses Act are specifically applicable. It appears that as Section 6 of General Clauses Act applies to repealed enactments, legislature in its wisdom thought it proper to make same specifically applicable in 1988 Act also which is repealing and re- 23 Page 23 enacted statute. Reference to Section 6 of General Clauses Act in sub-section (1) of Section 30 has been made to avoid any confusion or misunderstanding regarding effect of repeal with regard to actions taken under repealed Act. If legislature had intended not to apply provisions of Section 24 of General Clauses Act to 1988 Act, it would have specifically so provided under enacted law. In light of fact that Section 24 of General Clauses Act is specifically applicable to repealing and re- enacting statute, its exclusion has to be specific and cannot be inferred by twisting language of enactments. Accepting contention of learned counsel for respondents would render provisions of 1988 Act redundant inasmuch as appointments, notifications, orders, schemes, rules, bye-laws made or issued under repealed Act would be deemed to be non-existent making impossible working of re-enacted law impossible. provisions of 1988 Act are required to be understood and interpreted in light of provisions of General Clauses Act including Sections 6 and 24 thereof. (at paras 7 and 23). 18. On reading of Section 24 together with what has been stated by this Court above, it becomes difficult to accept Shri Arijit Prasad s contention that Section 24 would only apply to 24 Page 24 notifications which themselves gave rights to persons like appellant. Unlike Section 6 of General Clauses Act, which saves certain rights, Section 24 merely continues notifications, orders, schemes, rules etc. that are made under Central Act which is repealed and re-enacted with or without modification. idea of Section 24 of General Clauses Act is, as its marginal note shows, to continue uninterrupted subordinate legislation that may be made under Central Act that is repealed and re-enacted with or without modification. It being clear in present case that Section 280ZA which was repealed by omission and re-enacted with modification in section 54G, notification declaring Thane to be urban area dated 22.9.1967 would continue under and for purposes of Section 54G. It is clear, therefore, that impugned judgment in not referring to section 24 of General Clauses Act at all has thus fallen into error. 19. But then Shri Arijit Prasad put before us two roadblocks in form of two Constitution Bench decisions. He cited Rayala Corporation (P) Ltd. and M.R. Pratap v. Director of Enforcement, New Delhi, (1969) 2 SCC 412 which was 25 Page 25 followed in Kolhapur Canesugar Works Ltd. & Anr. v. Union of India & Ors., (2000) 2 SCC 536. He argued based upon these two judgments that omission would not amount to repeal and that since present case was concerned with omission of Section 280ZA, Section 24 would have no application. 20. Shri Prasad is correct in relying upon these two Constitution Bench judgments for they do indeed say that in Section 6 of General Clauses Act, word repeal would not take within its ken omission . 21. In Rayala Corporation (P) Ltd., what fell for decision was whether proceedings could be validly continued on complaint in respect of charge made under Rule 132A of Defence of India Rules, which ceased to be in existence before accused were convicted in respect of charge made under said rule. said Rule 132A was omitted by notification dated 30th March, 1966. What was decided in that case is set out by paragraph 17 of said judgment, which is as follows: 26 Page 26 17. Reference was next made to decision of Madhya Pradesh High Court in State of Madhya Pradesh v. Hiralal Sutwala [AIR 1959 MP 93] but, there again, accused was sought to be prosecuted for offence punishable under Act on repeal of which Section 6 of General Clauses Act had been made applicable. In case before us, Section 6 of General Clauses Act cannot obviously apply on omission of Rule 132- of DIRs for two obvious reasons that Section 6 only applies to repeals and not to omissions, and applies when repeal is of Central Act or Regulation and not of rule. If Section 6 of General Clauses Act had been applied, no doubt this complaint against two accused for offence punishable under Rule 132- of DIRs could have been instituted even after repeal of that rule. 22. It will be clear from reading of this paragraph that Madhya Pradesh High Court judgment was distinguished by Constitution Bench on two grounds. One being that Section 6 of General Clauses Act does not apply to rule but only applies to Central Act or Regulation, and secondly, that Section 6 itself would apply only to repeal not to omission . This statement of law was followed by another Constitution Bench in Kolhapur Canesugar Works Ltd. case. After setting out paragraph 17 of earlier judgment, second constitution bench judgment states as follows: 27 Page 27 33. In para 21 of judgment Full Bench has noted decision of Constitution Bench of this Court in Chief Inspector of Mines v. Karam Chand Thapar [AIR 1961 SC 838] and has relied upon principles laid down therein. Full Bench overlooked position that that was case under Section 24 of General Clauses Act which makes provision for continuation of orders, notification, scheme, rule, form or bye-law, issued under repealed Act or regulation under Act after its repeal and re-enactment. In that case Section 6 did not come up for consideration. Therefore ratio of that case is not applicable to present case. With respect we agree with principles laid down by Constitution Bench in Rayala Corpn. Case [(1969) 2 SCC 412 : (1970) 1 SCR 639] . In our considered view ratio of said decision squarely applies to case on hand. 23. Kolhapur Canesugar Works Ltd. judgment also concerned itself with applicability of Section 6 of General Clauses Act to deletion of Rule 10 and 10A of Central Excise Rules on 6th August, 1977. 24. attempt was made in General Finance Company & Anr. v. Assistant Commissioner of Income Tax, Punjab, (2002) 7 SCC 1 to refer these two judgments to larger bench on point that omission would not amount to repeal for purpose of Section 6 of General Clauses Act. Though Court found substance in argument favouring 28 Page 28 reference to larger bench, ultimately it decided that prosecution in cases of non-compliance of provision therein contained was only transitional and cases covered by it were few and far between, and hence found on facts that it was not appropriate case for reference to larger bench. 25. We may also point out that in G.P. Singh s Principles of Statutory Interpretation, 12th Edition, learned author has criticized aforesaid judgments in following terms: Section 6 of General Clauses Act applies to all types of repeals. section applies whether repeal be express or implied, entire or partial or whether it be repeal simpliciter or repeal accompanied by fresh legislation. section also applies when temporary statute is repealed before its expiry, but it has no application when such statute is not repealed but comes to end by expiry. section on its own terms is limited to repeal brought about by Central Act or Regulation. rule made under Act is not Central Act or regulation and if rule be repealed by another rule, section 6 of General Clauses Act will not be attracted. It has been so held in two Constitution Bench decisions. passing observation in these cases that section 6 only applies to repeals and not to omissions" needs reconsideration for omission of provision results in abrogation or obliteration of that provision in same way as it happens in repeal. stress in these cases was on question that 'rule' not being Central Act or Regulation, as defined in General Clauses Act, omission or repeal of 'rule' by another 'rule' does 29 Page 29 not attract section 6 of Act and proceedings initiated under omitted rule cannot continue unless new rule contains saving clause to that effect . (At pages 697 and 698) 26. In view of what has been stated hereinabove, perhaps appropriate course in present case would have been to refer aforesaid judgment to larger bench. But we do not find need to do so in view of what is stated by us hereinbelow. 27. First and foremost, it will be noticed that two reasons were given in Rayala Corporation (P) Ltd. for distinguishing Madhya Pradesh High Court judgment. Ordinarily, both reasons would form ratio decidendi for said decision and both reasons would be binding upon us. But we find that once it is held that Section 6 of General Clauses Act would itself not apply to rule which is subordinate legislation as it applies only to Central Act or Regulation, it would be wholly unnecessary to state that on construction of word repeal in Section 6 of General Clauses Act, omissions made by legislature would not be included. Assume, on other hand, that Constitution Bench had given two reasons for 30 Page 30 non-applicability of Section 6 of General Clauses Act. In such situation, obviously both reasons would be ratio decidendi and would be binding upon subsequent bench. However, once it is found that Section 6 itself would not apply, it would be wholly superfluous to further state that on interpretation of word repeal , omission would not be included. We are, therefore, of view that second so- called ratio of Constitution Bench in Rayala Corporation (P) Ltd. cannot be said to be ratio decidendi at all and is really in nature of obiter dicta. 28. Secondly, we find no reference to Section 6A of General Clauses Act in either of these Constitution Bench judgments. Section 6A reads as follows: 6A. Repeal of Act making textual amendment in Act or Regulation - Where any Central Act or Regulation made after commencement of this Act repeals any enactment by which text of any Central Act or Regulation was amended by express omission, insertion or substitution of any matter, then, unless different intention appears, repeal shall not affect continuance of any such amendment made by enactment so repealed and in operation at time of such repeal. 31 Page 31 29. reading of this Section would show that repeal by amending Act can be by way of express omission. This being case, obviously word repeal in both Section 6 and Section 24 would, therefore, include repeals by express omission. absence of any reference to Section 6A, therefore, again undoes binding effect of these two judgments on application of per incuriam principle.1 30. Thirdly, earlier Constitution Bench judgment referred to earlier in this judgment, namely, State of Orissa v. M.A. Tulloch & Co., (1964) 4 SCR 461 has also been missed. Court there stated: 1 In Mamleshwar Prasad & Anr. v. Kanahaiya Lal (dead) through LRs., (1975) 3 SCR 834, Krishna Iyer, J., succinctly laid down what is meant by per incuriam principle. He stated: We do not intend to detract from rule that, in exceptional instances, whereby obvious inadvertence or oversight judgment fails to notice plain statutory provision or obligatory authority running counter to reasoning and result reached, it may not have sway of binding precedents. It should be glaring case, obtrusive omission. No such situation presents itself here and we do not embark on principle of judgment per incuriam. (At page 837) interesting application of said principle is contained in State of U.P. & Anr. v. Synthetics and Chemicals Ltd. & Anr., (1991) 3 SCR 64, where Division Bench of this Court held that one particular conclusion of Bench of seven Judges was per incuriam see: discussion at pages 80, 81 and 91 of said judgment. 32 Page 32 .Now, if legislative intent to supersede earlier law is basis upon which doctrine of implied repeal is founded could there be any incongruity in attributing to later legislation same intent which Section 6 presumes where word repeal' is expressly used. So far as statutory construction is concerned, it is one of cardinal principles of law that there is no distinction or difference between express provision and provision which is necessarily implied, for it is only form that differs in two cases and there is no difference in intention or in substance. repeal may be brought about by repugnant legislation, without even any reference to Act intended to be repealed, for once legislative competence to effect repeal is posited, it matters little whether this is done expressly or inferentially or by enactment of repugnant legislation. If such is basis upon which repeals and implied repeals are brought about it appears to us to be both logical as well as in accordance with principles upon which rule as to implied repeal rests to attribute to that legislature which effects repeal by necessary implication same intention as that which would attend case of express repeal. Where intention to effect repeal is attributed to legislature then same would, in our opinion, attract incident of saving found in Section 6 for rules of construction embodied in General Clauses Act are, so to speak, basic assumptions on which statutes are drafted . (At page 484) 31. two later Constitution Bench judgments also did not have benefit of aforesaid exposition of law. It is clear that even implied repeal of statute would fall within 33 Page 33 expression repeal in Section 6 of General Clauses Act. This is for reason given by Constitution Bench in M.A. Tulloch & Co. that only form of repeal differs but there is no difference in intent or substance. If even implied repeal is covered by expression repeal , it is clear that repeals may take any form and so long as statute or part of it is obliterated, such obliteration would be covered by expression repeal in Section 6 of 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 intention to abrogate enactment or portion in question should be clearly shown. (Thus, whilst formula "is hereby repealed" is frequently used, it is equally common for it to be provided that enactment "shall cease to have effect" (or, If not yet in operation, "shall not have effect") or that particular portion of enactment "shall be omitted). 33. At this stage, it is important to note that temporary statute does not attract provision of Section 6 of General Clauses Act only for reason that said statute 34 Page 34 expires by itself after period for which it has been promulgated ends. In such cases, there is no repeal for reason that legislature has not applied its mind to live statute and obliterated it. In all cases where temporary statute expires, statute expires of its own force without being obliterated by subsequent legislative enactment. But even in this area, if temporary statute is in fact repealed at point of time earlier than its expiry, it has been held that Section 6 of General Clauses Act would apply. See: State of Punjab v. Mohar Singh, (1955) 1 SCR 893 at page 898. 34. In CIT v. Venkateswara Hatcheries (P) Ltd., (1999) 3 SCC 632, this Court was faced with omission and re- enactment of two Sections of Income Tax Act. This Court found that Section 24 of General Clauses Act would apply to such omission and re-enactment. Court has stated as follows: As noticed earlier, omission of Section 2(27) and re-enactment of Section 80-JJ was done simultaneously. It is very well-recognized rule of interpretation of statutes that where provision of Act is omitted by Act and said Act 35 Page 35 simultaneously re-enacts new provision which substantially covers field occupied by repealed provision with certain modification, in that event such re-enactment is regarded having force continuously and modification or changes are treated as amendment coming into force with effect from date of enforcement of re-enacted provision. Viewed in this background, effect of re-enacted provision of Section 80-JJ was that profit from business of livestock and poultry which enjoyed total exemption under Section 10(27) of Act from Assessment Years 1964-65 to 1975- 76 became partially exempt by way of deduction on fulfilment of certain conditions. (At para 12) 35. For all aforesaid reasons, we are therefore of view that on omission of Section 280ZA and its re-enactment with modification in Section 54G, Section 24 of General Clauses Act would apply, and notification of 1967, declaring Thane to be urban area, would be continued under and for purposes of Section 54A. 36. reading of Section 54G makes it clear that assessee is given window of three years after date on which transfer has taken place to purchase new machinery or plant or acquire building or land. We find that High Court has completely missed window of three years given to assessee to purchase or acquire machinery and building or 36 Page 36 land. This is why expression used in 54G(2) is which is not utilized by him for all or any of purposes aforesaid . . It is clear that for assessment year in question all that is required for assessee to avail of exemption contained in Section is to utilize amount of capital gains for purchase and acquisition of new machinery or plant and building or land. It is undisputed that entire amount claimed in assessment year in question has been so utilized for purchase and/or acquisition of new machinery or plant and land or building. 37. High Court is not correct when it states:- 31. word purchase is not defined under Act and therefore, has to be construed in commercial sense. In many dictionaries, word purchase means acquisition of property by party s own act as distinguished from acquisition by act of law. In context in which expression issued by Legislature requires first to be understood and interpretation that suits context requires to be adopted. Exemption of capital gains under Section 54G of Act can be claimed on transfer of assets in cases of shifting of industrial undertaking from urban area to any other non-urban area. This exemption may be claimed if capital gains arising on transfer of any of assets of existing industrial unit is utilized within one year or three 37 Page 37 years after date on which transfer took place for purchase of new machinery or plant for purposes of business of industrial undertaking in area to which said undertaking is shifted. Legislature consciously has not used expression towards purchase of plant and machinery as in Section 54(4) of Act in contrast to Section 54(2) of Act wherein words towards is used before word purchase . expression purchased used in sub-clause (a) of section 54G of Act requires to be understood as domain and control given to assessee. In present case, it is not in dispute that assessee has paid advance amount for acquisition of land, plant, building and machinery, etc., within time stipulated in Section, but it is not case of assessee that after such payment of advance amount, it has taken possession of land and building, plant and machinery. In our view, if argument of learned Senior Counsel for assessee is accepted, it would defeat very purpose and object of Section itself. By merely paying some amount by way of advance towards cost of acquisition of land for shifting its industrial unit from urban area to non-urban area, assessee cannot claim exemption from payment of tax on capital gains. This cannot be intention of Legislature and interpretation, which would defeat very purpose, and object of Act requires to be avoided. (at para 31 of impugned judgment) 38. We are of view that aforesaid construction of Section 54G would render nugatory vital part of said 38 Page 38 Section so far as assessee is concerned. Under sub- section (1), assessee is given period of three years after date on which transfer takes place to purchase new machinery or plant and acquire building or land or construct building for purpose of his business in said area. If High Court is right, assessee has to purchase and/or acquire machinery, plant, land and building within same assessment year in which transfer takes place. Further, High Court has missed key words not utilized in sub- section (2) which would show that it is enough that capital gain made by assessee should only be utilized by him in assessment year in question for all or any of purposes aforesaid, that is towards purchase and acquisition of plant and machinery, and land and building. Advances paid for purpose of purchase and/or acquisition of aforesaid assets would certainly amount to utilization by assessee of capital gains made by him for purpose of purchasing and/or acquiring aforesaid assets. We find therefore that on this ground also, assessee is liable to succeed. appeals 39 Page 39 are, accordingly, allowed and judgment of High Court is set aside. .J. (A.K. Sikri) .J. (R.F. Nariman) New Delhi; August 11, 2015 40 Page 40 M/s Fibre Boards (P) Ltd. v. Commissioner of Income-tax, Bangalore
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