M/S FIBRE BOARDS (P) LTD BANGALOARE vs. CIT BANGALORE.

REPORTABLE IN THE 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 J U D G M E N T R.F. Nariman, J. 1. The assessee, a private limited company, had an industrial unit at Majiwada, Thane, which was a notified urban JUDGMENT area. With a view to shift its industrial undertaking from an urban area to a 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 a consideration of Rs.1,20,00,000/-, and after deducting an amount of Rs.11,62,956/-, had earned a capital 1 Page 1 gain of Rs.1,08,33,044/-. Since it intended to shift its industrial undertaking from an urban area to a non-urban area, out of the capital gain so earned, the appellant paid by way of advances

advances amounted 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 JUDGMENT 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 2 Page 2

To sum up, on both counts, i.e., due to non declaration of the area to be a non urban area by Central Govt. and its failure to deposit the capital gain in the Capital Gains Deposit Account, the assessee’s claim is not applicable.” 3. By its order dated 20.7.1995, the Commissioner, Income Tax (Appeals) dismissed the appellant’s appeal. By its order JUDGMENT dated 20.11.1995, the Income Tax Appellate Tribunal allowed the assessee’s appeal stating that even an agreement to purchase is good enough and that the explanation to Section 54G being declaratory in nature would be retrospective. 4. By the impugned judgment dated 26.5.2005, the High Court reversed the judgment of the Income Tax Appellate 3 Page 3 Tribunal and held that as the notification declaring Thane to be an urban area stood repealed with the repeal of the Section under which it was made, the appellant did not satisfy the basic

area. Further, the expression “purchase” in Section 54G cannot be equated with the expression “towards purchase” and, therefore, admittedly as land, plant and machinery had not been purchased in the assessment year in question, the exemption contained in Section 54G had to be denied. It is the correctness of this judgment that is assailed before us. 5. Shri Dhruv Mehta, learned senior advocate appearing on behalf of the assessee argued before us and pointed out that JUDGMENT Chapter XXII-B of the Income Tax Act, prior to 1.4.1988, contained Section 280ZA which when read with the definition of “urban area” in Section 280Y(d) gave to a person who shifted from an urban area to another area, a tax credit certificate with reference to the amount of tax payable by the Company on income tax chargeable under the Heading “Capital Gains” and would be given relief accordingly. He referred us to a 4 Page 4 notification dated 22.9.1967 by which Thane had been declared to be an urban area for the purpose of Chapter XXII-B. He further contended that Section 54G was inserted on 1.4.1988 at

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 JUDGMENT 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 5 Page 5 done, it is not necessary for the assessee to deposit before furnishing such return, the amount in a Capital Gain Deposit Scheme and utilize such proceeds in accordance with the

the explanation added to Section 54G(1) being in the same terms as Section 280Y(d) has repealed Section 280Y(d) by implication. 6. Learned counsel for the revenue, Shri Arijit Prasad supported the judgment of the High Court and argued that Section 24 of the General Clauses Act had no application to the facts of the present case as it only applied to `repeals’ and not ‘omissions’, and also that it saved rights that were given by JUDGMENT subordinate legislation, and as the notification dated 22.9.1967 did not by itself confer any right on the appellant, Section 24 of the 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 the assessment year in question, in any event the conditions precedent for the applicability of Section 6 Page 6 54G were not met. As was pointed out by the assessee itself by a letter dated 25.11.1993, even till that date land had not been acquired but only possession was taken and a factory

interference. 7. We have heard learned counsel for the parties. In order to appreciate the submissions made by both sides, it is necessary to first set out the 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 JUDGMENT (d) “urban area” means any area which the Central Government may, having regard to the population, concentration of industries, need for proper planning of the area and other relevant factors, by general or special order declare to be an urban area for the 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

(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 JUDGMENT (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 shall bear to the amount of tax payable by the company on its income chargeable under the head “Capital 8 Page 8 gains” as aforesaid, the same proportion as the amount of expenditure ascertained under clause (a) bears to the amount of the said income:

(4) Where a capital asset, being machinery or plant purchased for the purposes of the business of the company in the area to which the undertaking is shifted or building or land, or any right in building or land, acquired, or as the case may be, constructed in the said area, is transferred by the company within a period of five years from the date of purchase, acquisition or, as the case may be, the date of completion of construction to any person other than the Government, a local authority, a corporation established, by a Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), an amount equal to one-half of the amount for which a tax credit certificate has been granted to the company under sub-section (1) shall be deemed to be tax due from the company on the thirtieth day JUDGMENT 9 Page 9 following the date of transfer under a notice of demand issued under Section 156, and all the provisions of this Act shall apply accordingly.

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:- JUDGMENT SCHEDULE Serial No. Name of the State or Details of the area the Union territory (1) (2) (3) __________________________________________________________ ……………………… ……………………… ……………………… 10 Page 10 ……………………… ……………………… 6. Maharashtra (i) Bombay Thana Area. (ii) Poona-Pimpri-Chinchwad area.

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13 Page 13 9. On the same date, by the same Finance Act, Section 280ZA was omitted with effect from the same date i.e. 1.4.1988. We have been referred to the Budget Speech of the

“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 the sale of land and buildings in such areas provided these are reinvested 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. JUDGMENT 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 14 Page 14

Explanation to sub-section (1) defines “urban area” on the lines of the definition in section 280Y.” 11. The relevant part of the memorandum explaining the provisions in the Finance Bill, 1987 reads as under: “34. Under the existing provisions of section 280ZA of the Income-tax Act, any company owning an industrial undertaking situated in an urban area, is entitled for a tax credit certificate with reference to the amount of the tax payable on capital gains arising from the transfer of its machinery, plant, etc., to any other area. These provisions have not proved to be very effective. With a view to promoting decongestion of urban areas and balanced regional growth, the Bill seeks to exempt capital gains arising on transfer of long- term capital assets 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 industrial undertaking from an urban area to a non- urban area. Accordingly, capital gains arising in such cases will be exempt to the extent they are utilized within a period of one year before or three years after the date of transfer, for the purchase of new machinery or plant or acquiring land and building, etc., for the purpose of the business in the JUDGMENT 15 Page 15 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 as may be specified. As a consequential measure, section 280ZA of the Income-tax Act is proposed to be omitted. st These amendments will take effect from 1 April, 1988, and will, accordingly, apply in relation to the assessment year 1988-89 and subsequent years.” 12. 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 JUDGMENT 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. It is clear that once Section 280ZA is omitted from the 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 the very

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: JUDGMENT “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 theory underlying implied repeals is that there is no need for the later enactment to state in express terms that an earlier enactment has been repealed by using any particular set of words or form of drafting but that if the legislative intent to supersede the earlier law is manifested by the enactment of provisions as to effect such supersession, then there is in law a repeal notwithstanding the absence 17 Page 17 of the word ‘repeal’ in the later statute.” (at page 483) Similarly in Ratan Lal Adukia v. Union of India , (1989) 3 SCC

of Civil Procedure repealed by implication, insofar as the railways are concerned, Section 20 of the self-same code. In so holding, this Court stated:- “The doctrine of implied repeal is based on the postulate that the legislature which is presumed to know the existing state of the law did not intend to create any confusion by retaining conflicting provisions. Courts, in applying this doctrine, are supposed merely to give effect to the legislative intent by examining the object and scope of the two enactments. But in a conceivable case, the very existence of two provisions may by itself, and without more, lead to an inference of mutual irreconcilability if the later set of provisions is by itself a complete code with respect to the same matter. In such a case the actual detailed comparison of the two sets of provisions may not be necessary. It is a matter of legislative intent that the two sets of provisions were not expected to be applied simultaneously. Section 80 is a special provision. It deals with certain class of suits distinguishable on the basis of their particular subject matters.” (at para 18) JUDGMENT 18 Page 18 14. Further, the Finance Act which omitted the whole of Chapter XXII-B of which Section 280Y(d) is a part, in its notes on clauses stated:

Under the provisions of this Chapter, which was st introduced with effect from 1 April, 1965, tax credit certificates were granted to assessees fulfilling certain conditions. These certificates were to be utilized for the adjustment of the tax liability or for refund or both. This Chapter has now become virtually redundant and is, therefore, being omitted. However, if a person still possesses any tax credit certificates granted under section 280Z or section 280ZC, he shall be allowed to utilize the same up to st 31 March, 1991. st This amendment will take effect from 1 April, 1990.” Equally, the Memorandum explaining the provisions in the JUDGMENT Finance Bill also stated:- “40. Chapter XXII-B of the Income-tax Act, contains provisions relating to tax credit certificates. st This was introduced with effect from 1 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 19 Page 19

The tax credit certificates granted under section 280Z or section 280ZC and not presented so far for payment or adjustment of tax liability can, however, st be presented before the Assessing Officer up to 31 day of March, 1991, for the said purposes.” 15. From a reading of the notes on clauses and the Memorandum of the Finance Bill, 1990, it is clear that Section JUDGMENT 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 a definition of “urban area” for the purpose of Section 280ZA which had been omitted with effect from the very date that Section 54G was inserted, namely, 1.4.1988. We are, 20 Page 20 therefore, of the view that the High Court in not referring to Section 24 of the General Clauses Act has fallen into error. Section 24 states:

construing Section 24 of the General Clauses Act held:- 21 Page 21

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17. In State of Punjab v. Harnek Singh , (2002) 3 SCC 481, this Court held:-

23. We do not find any force in the submission of the learned counsel appearing for the respondents that as reference made in sub-section (2) of Section 30 of the 1988 Act is only to Section 6 of the General Clauses Act, the other provisions of the said Act are not applicable for the purposes of deciding the controversy with respect to the notifications issued under the 1947 Act. We are further of the opinion that the High Court committed a mistake of law by holding that as notifications have not expressly been saved by Section 30 of the Act, those would not enure or survive to govern any investigation done or legal proceedings instituted in respect of the cases registered under the 1988 Act. There is no dispute that the 1988 Act is both repealing and re-enacting the law relating to prevention of corruption to which the provisions of Section 24 of the General Clauses Act are specifically applicable. 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- JUDGMENT 23 Page 23

JUDGMENT 18. On a 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 the appellant. Unlike Section 6 of the General Clauses Act, which saves certain rights, Section 24 merely continues notifications,

The idea of Section 24 of the General Clauses Act is, as its marginal note shows, to continue uninterrupted subordinate legislation that may be made under a Central Act that is repealed and re-enacted with or without modification. It being clear in the present case that Section 280ZA which was repealed by omission and re-enacted with modification in section 54G, the notification declaring Thane to be an urban area dated 22.9.1967 would continue under and for the purposes of Section 54G. It is clear, therefore, that the JUDGMENT impugned judgment in not referring to section 24 of the General Clauses Act at all has thus fallen into error. 19. But then Shri Arijit Prasad put before us two roadblocks in the 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 an “omission” would not amount to

application. 20. Shri Prasad is correct in relying upon these two Constitution Bench judgments for they do indeed say that in Section 6 of the General Clauses Act, the word “repeal” would not take within its ken an “omission”. 21. In Rayala Corporation (P) Ltd. , what fell for decision was whether proceedings could be validly continued on a complaint in respect of a charge made under Rule 132A of the JUDGMENT Defence of India Rules, which ceased to be in existence before the accused were convicted in respect of the charge made under the said rule. The said Rule 132A was omitted by a th notification dated 30 March, 1966. What was decided in that case is set out by paragraph 17 of the said judgment, which is as follows: 26 Page 26

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 that Section 6 of JUDGMENT the General Clauses Act does not apply to a rule but only applies to a Central Act or Regulation, and secondly, that Section 6 itself would apply only to a “repeal” not to “an omission”. This statement of law was followed by another Constitution Bench in the Kolhapur Canesugar Works Ltd . case. After setting out paragraph 17 of the earlier judgment, the second constitution bench judgment states as follows: 27 Page 27 “33. In para 21 of the judgment the Full Bench has noted the decision of a Constitution Bench of this Court in Chief Inspector of Mines v. Karam Chand Thapar [AIR 1961 SC 838] and has relied upon the principles laid down therein. The Full Bench overlooked the position that that was a case under Section 24 of the General Clauses Act which makes provision for continuation of orders, notification, scheme, rule, form or bye-law, issued under the repealed Act or regulation under an Act after its repeal and re-enactment. In that case Section 6 did not come up for consideration. Therefore the ratio of that case is not applicable to the present case. With respect we agree with the principles laid down by the Constitution Bench in Rayala Corpn. Case [(1969) 2 SCC 412 : (1970) 1 SCR 639] . In our considered view the ratio of the said decision squarely applies to the case on hand.”

concerned itself with the applicability of Section 6 of the General Clauses Act to the deletion of Rule 10 and 10A of the th Central Excise Rules on 6 August, 1977. JUDGMENT 24. An 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 a larger bench on the point that an omission would not amount to a repeal for the purpose of Section 6 of the General Clauses Act. Though the Court found substance in the argument favouring the 28 Page 28 reference to a larger bench, ultimately it decided that the prosecution in cases of non-compliance of the provision therein contained was only transitional and cases covered by it were

25. We may also point out that in G.P. Singh’s Principles of th Statutory Interpretation, 12 Edition, the learned author has criticized the aforesaid judgments in the following terms: “Section 6 of the General Clauses 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 JUDGMENT 29 Page 29 not attract section 6 of the Act and proceedings initiated under the omitted rule cannot continue unless the new rule contains a saving clause to that effect….”(At pages 697 and 698)

appropriate course in the present case would have been to refer the aforesaid judgment to a larger bench. But we do not find the 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 the Madhya Pradesh High Court judgment. Ordinarily, both reasons would form the ratio decidendi for the said decision and both reasons would be binding upon us. But we find that JUDGMENT once it is held that Section 6 of the General Clauses Act would itself not apply to a rule which is subordinate legislation as it applies only to a Central Act or Regulation, it would be wholly unnecessary to state that on a construction of the word “repeal” in Section 6 of the General Clauses Act, “omissions” made by the legislature would not be included. Assume, on the other hand, that the Constitution Bench had given two reasons for the 30 Page 30 non-applicability of Section 6 of the General Clauses Act. In such a situation, obviously both reasons would be ratio decidendi and would be binding upon a subsequent bench.

interpretation of the word “repeal”, an “omission” would not be included. We are, therefore, of the view that the second so- called ratio of the Constitution Bench in Rayala Corporation (P) Ltd. cannot be said to be a ratio decidendi at all and is really in the nature of obiter dicta . 28. Secondly, we find no reference to Section 6A of the General Clauses Act in either of these Constitution Bench judgments. Section 6A reads as follows: JUDGMENT “6A. Repeal of Act making textual amendment in Act or Regulation - Where any Central Act or Regulation made after the commencement of this Act repeals any enactment by which the text of any Central Act or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal.” 31 Page 31 29. A reading of this Section would show that a repeal by an amending Act can be by way of an express omission. This being the case, obviously the word “repeal” in both Section 6

therefore, again undoes the binding effect of these two 1 judgments on an application of the ‘per incuriam’ principle. 30. Thirdly, an earlier Constitution Bench judgment referred to earlier in this judgment, namely, State of Orissa v. M.A.

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 the “per incuriam” principle. He stated: JUDGMENT “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 conclusion of a Bench of seven Judges was per incuriam – see: the discussion at pages 80, 81 and 91 of the said judgment. 32 Page 32

31. The two later Constitution Bench judgments also did not have the benefit of the aforesaid exposition of the law. It is clear that even an implied repeal of a statute would fall within 33 Page 33 the expression “repeal” in Section 6 of the General Clauses Act. This is for the reason given by the Constitution Bench in M.A. Tulloch & Co. that only the form of repeal differs but there is no

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).” JUDGMENT 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 34 Page 34 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 to a live

being obliterated by a subsequent legislative enactment. But

JUDGMENT enactment of two Sections of the Income Tax Act. This Court found that Section 24 of the General Clauses Act would apply to such omission and re-enactment. The Court has stated as follows: “As noticed earlier, the omission of Section 2(27) and re-enactment of Section 80-JJ was done simultaneously. It is a very well-recognized rule of interpretation of statutes that where a provision of an Act is omitted by an Act and the said Act 35 Page 35 simultaneously re-enacts a new provision which substantially covers the field occupied by the repealed provision with certain modification, in that event such re-enactment is regarded having force continuously and the modification or changes are treated as amendment coming into force with effect from the date of enforcement of the re-enacted provision. Viewed in this background, the effect of the re-enacted provision of Section 80-JJ was that profit from the business of livestock and poultry which enjoyed total exemption under Section 10(27) of the 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 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 JUDGMENT purposes of Section 54A. 36. A reading of Section 54G makes it clear that the assessee is given a window of three years after the date on which transfer has taken place to “purchase” new machinery or plant or “acquire” building or land. We find that the High Court has completely missed the window of three years given to the assessee to purchase or acquire machinery and building or 36 Page 36 land. This is why the expression 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

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 non-urban area. This exemption may be claimed if the capital gains arising on transfer of any of assets of existing industrial unit is utilized within one year or three JUDGMENT 37 Page 37

JUDGMENT 38. We are of the view that the aforesaid construction of Section 54G would render nugatory a vital part of the said 38 Page 38 Section so far as the assessee is concerned. Under sub- section (1), the assessee is given a period of three years after the date on which the transfer takes place to purchase new

High Court is right, the assessee has to purchase and/or acquire machinery, plant, land and building within the same assessment year in which the transfer takes place. Further, the High Court has missed the key words “not utilized” in sub- section (2) which would show that it is enough that the capital gain made by the assessee should only be “utilized” by him in the assessment year in question for all or any of the purposes aforesaid, that is towards purchase and acquisition of plant and machinery, and land and building. Advances paid for the JUDGMENT purpose of purchase and/or acquisition of the aforesaid assets would certainly amount to utilization by the assessee of the capital gains made by him for the purpose of purchasing and/or acquiring the aforesaid assets. We find therefore that on this ground also, the assessee is liable to succeed. The appeals 39 Page 39 are, accordingly, allowed and the judgment of the High Court is set aside. ……………………….J. (A.K. Sikri) ……………………….J. (R.F. Nariman) New Delhi; August 11, 2015 JUDGMENT 40 Page 40