Page 1

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  

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 2

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  

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 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  

2

Page 3

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  transfer  or  within  the  period  of  filing  return,  it  is  supposed to deposit the capital gains in the Capital  Gains Deposit Scheme. It cannot be said that giving  advance to different concerns means utilization of  money  for  acquiring  the  assets.  Therefore,  the  assessee was  to  deposit  the  capital  gains  in  the  specific account and file proof of such deposit. As  the 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 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  

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 4

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  

condition  necessary  to  attract  Section  54G,  namely  that  a  

transfer had to be made from an urban area to a non urban  

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  

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 5

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  

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  

5

Page 6

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  

scheme  which  the  Central  Government  may  by  notification  

frame in this behalf.  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.  

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  

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 7

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  

building  had  not  yet  been  constructed.   This  being  so,  

according  to  him,  the  High  Court’s  judgment  needs  no  

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

(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 8

280ZA.  Tax  credit  certificates  for  shifting  of  industrial undertaking from urban area.- (1) If any  

company owning an industrial undertaking situate in  an urban area shifts, with the prior approval of the  Board, such undertaking to any area (not being the  area in which such undertaking is situate), it shall be  granted a tax credit 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 shall  bear to the amount of tax payable by the company  on its income chargeable under the head “Capital  

8

Page 9

gains”  as  aforesaid,  the  same  proportion  as  the  amount of expenditure ascertained under clause (a)  bears to the amount of the said income:

Provided that the amount of the tax credit certificate  shall  in  no  case  exceed  the  amount  of  the  tax  aforesaid.  

(3) The amount shown on a tax credit certificate  granted to a company under this section shall,  on  the certificate being produced before the Income-tax  Officer,  be  adjusted  against  any  liability  of  the  company under the Indian Income-tax Act,1922 (11  of 1922), or this Act, existing on the date on which  the certificate was produced before the Income-tax  Officer  and  where  the  amount  of  such  certificate  exceeds such  liability,  or  where  there  is  no  such  liability, the excess or the whole of such amount, as  the  case  may  be,  shall,  notwithstanding  anything  contained in Chapter XIX, be deemed, on the said  date, to be refund due to the company under that  Chapter and the provisions of this Act  shall  apply  accordingly.

(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  

9

Page 10

following  the  date  of  transfer  under  a  notice  of  demand  issued  under  Section  156,  and  all  the  provisions of this Act shall apply accordingly.  

Explanation. - Any land or building used for the  residence of persons employed in the business of  the company or for the use of such persons as a  hospital,  crèche,  school,  canteen,  library,  recreational centre, shelter, rest-room or lunch-room  shall, for the purposes of this section, be deemed to  be  land  or  building  used for  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 Details of the area the Union territory

(1)                         (2)                             (3)         __________________________________________________________ ………………………

………………………

………………………

10

Page 11

………………………

………………………

6. Maharashtra (i) Bombay Thana Area.

(ii) Poona-Pimpri-Chinchwad area.

(iii) Khopoli area.

(iv) Areas within the limits of-

(a)Nagpur Municipal Corporation.

(b)Sholapur Municipal Corporation.

8. Section  54G  of  the  Income  Tax  Act  inserted  by  the  

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 the  provisions of sub-section (2), where the capital gain  arises  from the  transfer  of  a  capital  asset,  being  machinery or plant or building or land or any rights  in  building  or  land  used  for  the  purposes  of  the  business of an industrial undertaking situate in an  urban  area,  effected  in  the  course  of,  or  in  consequence  of,  the  shifting  of  such  industrial  undertaking (hereafter in this section referred to as  the original asset) to any area (other than an urban  area) and the assessee has within a period of one  year before or three years after the date on which  the transfer took place,— (a)  purchased  new  machinery  or  plant  for  the  purposes of business of the industrial undertaking in  the area to which the said undertaking is shifted; (b) acquired building or land or constructed building  for the purposes of his business in the said area;

11

Page 12

(c)  shifted  the  original  asset  and  transferred  the  establishment  of  such  undertaking  to  such  area;  and (d)  incurred  expenses  on  such  other  purpose  as  may be specified in a scheme framed by the Central  Government for the purposes of this section, then, instead of the capital  gain being charged to  income-tax as income of the previous year in which  the  transfer  took  place,  it  shall  be  dealt  with  in  accordance  with  the  following  provisions  of  this  section, that is to say,— (i) if the amount of the capital gain is greater than  the cost and expenses incurred in relation to all or  any of the purposes mentioned in clauses (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 relevant factors, by general or  

12

Page 14

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  

Minister of Finance when he introduced the Finance Act, 1987.  

Among other things, the 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 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.

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 15

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 aforesaid  purposes.  

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  

15

Page 16

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.

These amendments  will  take effect  from 1st 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  

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 17

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  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 19

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:

“Clause 46 seeks to omit Chapter XXII-B of the  Income-tax Act relating to tax credit certificates.

Under  the  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 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  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  

19

Page 20

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 effect from 1st April, 1988.  No tax credit certificates can be granted at present  under  the  remaining  provisions  of  this  Chapter.  Thus,  the provisions contained in Chapter  XXII-B,  have become virtually  redundant.  Therefore,  as a  measure of rationalization, it is proposed to delete  the Chapter containing these provisions with effect  from the 1st day of April, 1990.

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,  be presented before the Assessing Officer up to 31st  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  

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 21

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:

“24.  Continuation  of  orders,  etc.,  issued  under  enactments  repealed  and  re-enacted.  —Where  any 44[Central  Act]  or  Regulation,  is,  after  the  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 the repealed Act  or  Regulation, shall, so far as it is not inconsistent with  the provisions re-enacted, continue in force, and be  deemed to have been 45 [made or] issued under the  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  the  provisions  so  re-enacted 46 [and  when any 44 [Central Act] or Regulation, which, by a  notification under section 5 or 5A of the Scheduled  Districts Act, 1874, (14 of 1874) or any like law, has  been  extended  to  any  local  area,  has,  by  a  subsequent  notification,  been  withdrawn  from  the  re-extended to such area or any part  thereof,  the  provisions  of  such  Act  or  Regulation  shall  be  deemed to have been repealed and re-enacted in  such  area  or  part  within  the  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 the General Clauses Act held:-

21

Page 22

“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  Officer exercises the same power as he would have  exercised on the enactment of Section 36(1)(vii) of  the 1961 Act. These two provisions are, therefore,  consistent  with  each  other.  Section  36(1)(vii)  is  subject to the provisions of sub-section (2) of that  section.  Therefore,  both  Sections  36(1)(vii)  and  36(2) of the 1961 Act, being two of the ingredients  of Section 10(2)(xi) of the 1922 Act, must be read  together  with  reference  to  an  order  under  which  debts had been written off. 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.  Any  amount  which  is  recovered  on  any  such  debt  is  attracted  by  the  provisions of Section 41(4) of the 1961 Act and is,  therefore,  chargeable  to  tax in  terms of  that  sub-

22

Page 23

section  to  the  extent  of  the  ‘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  the General  Clauses Act  deals  with the effect of repeal and re-enactment of an Act  and  the  object  of  the  section  is  to  preserve  the  continuity  of  the  notifications,  orders,  schemes,  rules  or  bye-laws  made  or  issued  under  the  repealed  Act  unless  they  are  shown  to  be  inconsistent  with  the  provisions  of  the  re-enacted  statute.

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-

23

Page 24

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-enacted  law  impossible.  The  provisions  of  the  1988  Act  are  required  to  be  understood  and  interpreted  in  the  light of the provisions of the General Clauses Act  including Sections 6  and 24 thereof.”  (at  paras 7  and 23).  

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 25

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,  

orders, schemes, rules etc. that are made under a Central Act  

which is repealed and re-enacted with or without modification.  

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  

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 26

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  

“repeal” and that since the present case was concerned with  

the  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 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  

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  

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:

26

Page 27

“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 that Section 6 of  

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 28

“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.”

23. The  Kolhapur  Canesugar  Works Ltd.  judgment  also  

concerned  itself  with  the  applicability  of  Section  6  of  the  

General Clauses Act to the deletion of Rule 10 and 10A of the  

Central Excise Rules on 6th August, 1977.

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 29

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  

few and far between, and hence found on facts that it was not  

an appropriate case for reference to a larger bench.   

25. We may also point out that in G.P. Singh’s  Principles of  

Statutory Interpretation,  12th 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  

29

Page 30

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)   

26. In view of what has been stated hereinabove, perhaps the  

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  

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 31

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.  

However, once it is found that Section 6 itself would not apply, it  

would  be  wholly  superfluous  to  further  state  that  on  an  

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:

“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 32

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  

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.1  

30. Thirdly,  an 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.  The  

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:

“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 33

“….Now,  if  the  legislative  intent  to  supersede the  earlier law is the basis upon which the doctrine of  implied  repeal  is  founded  could  there  be  any  incongruity in attributing to the later legislation the  same intent which Section 6 presumes where the  word ‘repeal' is expressly used. So far as statutory  construction is concerned, it is one of the cardinal  principles of the law that there is no distinction or  difference  between  an  express  provision  and  a  provision which is necessarily implied,  for it is only  the form that differs in the two cases and there is no  difference in intention or in substance. A repeal may  be brought about by repugnant legislation, without  even  any  reference  to  the  Act  intended  to  be  repealed, for once legislative competence to effect a  repeal  is  posited,  it  matters  little  whether  this  is  done expressly or inferentially or by the enactment  of repugnant legislation.  If  such is the basis upon  which  repeals  and  implied  repeals  are  brought  about it appears to us to be both logical as well as  in  accordance with  the principles  upon which  the  rule as to  implied repeal  rests to  attribute  to  that  legislature  which  effects  a  repeal  by  necessary  implication the same intention as that which would  attend  the  case  of  an  express  repeal.  Where  an  intention  to  effect  a  repeal  is  attributed  to  a  legislature  then  the  same  would,  in  our  opinion,  attract the incident of the saving found in Section 6  for  the  rules  of  construction  embodied  in  the  General  Clauses  Act  are,  so  to  speak,  the  basic  assumptions on which statutes are drafted…….” (At  page 484)  

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 34

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  

difference in intent or substance.  If even an implied repeal is  

covered by the expression “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  

34

Page 35

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  

statute  and  obliterated  it.   In  all  cases  where  a  temporary  

statute  expires,  the  statute  expires  of  its  own  force  without  

being obliterated by a subsequent legislative enactment.  But  

even in this area, if a temporary statute is in fact repealed at a  

point of time earlier than its expiry, it has been held that Section  

6 of  the 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  an  omission  and  re-

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 36

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  

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 37

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  

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 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  

37

Page 38

years after the date on which the transfer took place  for  purchase  of  new  machinery  or  plant  for  the  purposes  of  the  business  of  the  industrial  undertaking  in  the  area  to  which  the  said  undertaking is shifted.  The Legislature consciously  has not used the expression ‘towards the purchase  of plant and machinery’ as in Section 54(4) of the  Act in contrast to Section 54(2) of the Act wherein  the  words  ‘towards’  is  used  before  the  word  ‘purchase’.   The  expression  ‘purchased’  used  in  sub-clause (a) of section 54G of the Act requires to  be understood as the domain and control given to  the  assessee.   In  the  present  case,  it  is  not  in  dispute that the assessee has paid advance amount  for  acquisition  of  land,  plant,  building  and  machinery,  etc.,  within  the  time  stipulated  in  the  Section, but it is not the case of the assessee that  after such payment of advance amount, it has taken  possession  of  land  and  building,  plant  and  machinery.   In  our  view,  if  the  argument  of  the  learned  Senior  Counsel  for  the  assessee  is  accepted,  it  would  defeat  the  very  purpose  and  object of the Section itself.  By merely paying some  amount  by  way  of  advance  towards  the  cost  of  acquisition of land for shifting its industrial unit from  urban area to non-urban area, an assessee cannot  claim  exemption  from  payment  of  tax  on  capital  gains.   This  cannot  be  the  intention  of  the  Legislature  and  an  interpretation,  which  would  defeat the very purpose, and the object of the Act  requires to be avoided.” (at para 31 of the impugned  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 39

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  

machinery or  plant  and acquire building or  land or  construct  

building for the purpose of his business in the said area.  If the  

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  

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 40

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

40