JUDGMENT
1. The assessee is a private limited company. It bad its industrial unit at Majiwada, Thane, which was a notified urban area. With a view to shift its industrial undertaking from urban area to a non-urban area at Kurukumbh industrial area. Kurukumbh village, Pune District, Mahrastra, it had sold its land and building, plant and machinery situate at Majiwada, Thane, to M/s. Shree Vardhan Trust, Gen. Bhonsle Marg, Bombay, for a consideration of Rs. 1,20,00,000/- and after deducting an amount of Rs. 11,62,936/-, had earned a capital gains of Rs. 1,0833,044/-. Since it had an Mention to shift its industrial undertaking from an urban area to non-urban area, out of the capital gains earned, it had paid advance amount to different concerns for purchase of plant and machinery, construction of factory building, levelling of land, etc. It had also paid an advance amount of Rs. 24,62,980/- to M/s. Maharastra Industrial Development Corporation for the purchase of industrial plot in the non-urban area.
2. The assessee company, for the assessment year namaly, 1991-1992, filed its return of income on 31.12.1991, declaring ‘nil’ income. The return of income so filed was processed by the assessing officer under Section 141(i)(a) of Income Tax Act 1961 (‘Act’ tor short) on 4.11.1992 and an intimation was issued to the assessee company after making some adjustments to the income declared in the return filed under Section 139 of the Act. It is relevant to notice at, this stage itself, that the assessee company in its return of income filed, had claimed exemption under Section 54G of the Act on the entire capital gains earned from the sale proceeds of its industrial undertaking situate at Majiwada, Thane.
3. The assessing officer with a view to rectify the mistake in the order of assessment for the assessment year 1991-1992, had initiated proceedings under Section 154 of the Act by issuing a show cause notice to the assessee company. After hearing the representative of the assessee company, the assessing Officer has confirmed the proposal made in the show cause notice by his order dated 25.3.1994 While passing the order disallowing the claim made under Section 54G of the Act, the assessing officer has made the following observations:
“I. The non-urban area where the assessee shifts industrial undertaking has not been declared as non-urban area by the Central Government; and
II. The assessee has not utilised the capital gains for the purpose of purchase of plant and machinery and acquisition of land and building, and as such the assessee was expected to deposit the entire amount of Capital Gains in the Capital Gains Scheme Account with the back before tiling the return and enclose the proof of making such deposit with the return of income. However, the assessee has not done so. Therefore, its claim under Section 54G is disallowed.”
4. In the course of the proceedings under Section 154 of the Act, it was the contention of the assessee that as per the provisions of Section 54G of the Act, the capital gains on account of transfer of industrial undertaking from urban area to non-urban area have to be invested in the purchase of new machinery or plant, acquisition of land or acquisition/construction of building within a period of one year before or three years alter the date of transfer and the assessee within the time frame between 27.11.1989 to 25.11.1993 has paid advance amount for the purchase of new machinery, and for acquiring the land and thereby has satisfied the conditions prescribed under clauses (a) to (d) of sub-section (1) of Section 54G of the Act Secondly, it was contended that the assessee company has utilised the Capital Gains before filing of the return under Section 139(1) of the Act and therefore, there was no need for depositing the capital gains in the special capital gains account scheme with the bank and therefore there is no necessity to file proof of such deposit It was also contended that after the transfer of tend and building on 26.11.1990, it has given advance to different concerns for supply and erection of plant and machinery, erection of factory building and acquisition of land at new non-urban area and therefore, as the assessee has given the advance, the requirement to deposit the Capital Gains in Capital Gains Deposit Account does not arise.
5. The assessing officer while passing the order under Section 154 of the Act, has summed up the whole issue and has observed “that due to non-declaration of the area to be a non-urban area by the Central Government and its failure to deposit the Capital Gains in the Capital Gains Deposit Account, the assessee's claim for exemption under Section 54G of the Act cannot be accepted”.
6. The asseasee company being aggrieved by this portion of the order passed by the Assessing Officer, has filed the first appeal before the first Appellate Authority and the assessee's representative had reiterated the very same submission made before the Assessing Officer and had requested him to direct the Assessing Officer to grant deduction claimed under Section 54G of the Act. The first Appellate Authority, after detailed consideration of the submission made by the assessee's representative has rejected the appeal by his order dated 20.7.1995
7. The assessee company, being Aggrieved by the aforesaid order of the first Appellate Authority, had filed second appeals before the Income Tax Appellate Tribunal in ITA Nos. 767 & 768/1995. The main issue that was raised and canvassed before the Tribunal was allowability or otherwise of exemption under Section 54G of the Act on the capital gains earned by the assessee. The contention of the teamed Counsel for the assessee before the Tribunal was, that it had utilised the entire amount of capital gains by way of making payment advance amount tor purchase of capital asset before the date of filing of return and therefore it was not possible to have deposited the amount of capital gains with the notified authority as required under sub-section (2) of Section 54G of the Act. Secondly, that it is not necessary tor the Central Government to declare a particular area as non-urban area to take the benefit under Section 54G of the Act. The Tribunal while allowing the assessee's appeals has come to the conclusion, that in view of the language employed in sub-section (1) of Section 54G of the Act, the assessee should within the stipulated period of one year prior to the date of sale of the old assets or three years after the said date, should purchase new machinery or plant, etc.; that the date of purchase tor the purpose of allowance of exemption under Section 54 of the Act need not necessarily be the date on which the legal title is vested in the purchaser, and further, it has held that the intention of the legislature seems to be that the assessee has to invest the consideration amount received out of the sale proceeds of the original asset for acquiring the new asset within the specified period and therefore, it is not necessary that within the specified period, the assessee must become legal owner of the new asset. In conclusion, the Tribunal has observed, that tor the purpose of allowing exemption under Section 54G of the Act, the word ‘purchase’ should not fee construed in a strict and stringent manner and on the other hand, ‘purchase’ should mean, spending of money tor the purpose of making purchase and in the instant case, since the assessee has lost control of the entire amount of capital gains in making advances towards such purchase, the condition about investing the amount of capital gains towards making purchases of new assets was substantially fulfilled and therefore, lower authorities were not justified in rejecting the claim of the assessee on this ground.
8. The Tribunal while considering the second ground on which the assessing officer had rejected the claim of the assessee, firstly, has made reference to the notification issued by the Central Government dated 2.3.1994 as required under the Explanation appended to the Section, wherein for the first time, Greater Bombay and some other urban areas of Maharashtra which included the Thane Municipal Corporation were declared as urban areas for the purpose of Section 54G of the Act Secondly, the Tribunal also takes note of the stand of the department, wherein it was contended that the notification has come into force on the date of its publication in the official gazette, namely, 24.3.1994 and therefore, the assessee which has shifted its industrial undertaking before the issuance of the notification is not entitled for the benefit of exemption of Capital Gains under this Section. It was the further contention of the departmental representative that the notification must be considered to be prospective in nature and no retrospective operation can be attributed to the notification. While rebutting the contention so canvassed, it was contended by the assessee's representative that the executive instructions cannot supplement the statute or cover areas to which the statute does not extend and they cannot run contrary to statutory provisons or whittle down their effect. It was his further contention that de-horse the Explanation, the provisions of sub-section (1) of Section 54G of the Act allowed the deduction to the assessee on the basis of general definition of urban area, and non-urban area and the Explanation merely provides a limited interpretation to the explanation urban area and even then the assessee's case falls within the limited interpretation alter the relevant notification was issued by the Government in terms of the explacation and it was further contended that the delay in issuing the notification cannot whittle down the purpose of the Legislature in allowing the due relief to the assessee and others, who are placed in similar position and in that way, the notification can be considered to be having effect as soon as it was issued. It was also argued that the Legislature actually wanted to grant exemption to the assesses which is evident from the notification issued later on and therefore, the question of retrospectivity of the notification should he judged from the point of view of exemption of the said legislation. It was also contended feat the exemption provisions require to be liberally construed and if there are two ways of interpreting the statutory provision, the one beneficial to the subject requires to be adopted.
9. The Tribunal while considering the legal issues canvassed, firstly has considered, whether the notification issued by the Central Government is declaratory and whether it is prospective or retrospective in nature. The view of the Tribunal is, that the Explanation to Section 54G(1) of the Act is declaratory in nature and it goes to limit the scope of the definition of ‘urban areas’ to the extent to which the Government shall declare the same by issue of notification. The Tribunal is further of the view, that the term ‘urban area’ has been defined in the Explanation appended to Section 54G(1) of the Act, whereby the term ‘urban area’ would mean any such area within the limits of the municipal corporation or the municipality as the Central Government may having regard to the population, concentration of industries, need for proper planning of the area or other relevant factors, by general or special orders declare to be an urban area tor the purpose of this Section. On the other hand, the words ‘any area’ (other than the urban area) used in Section 54G of the Act would simply mean ‘any area’ which is not an urban area and will obviously include rural area. They further add, that Section 54G of the Act was introduced with effect from 1.4.1988 and the notification as required under the Explanation was issued only in the month of March, 1994 and therefore, it cannot be said that the intention of the Legislature was to keep a beneficial provision otiose for a long period of six years and the delay must have occurred at the level of the executive on account of bureaucratic red tapism. The Tribunal further observes, that a provision in the Act granting exemption is required to be construed liberally and therefore, even taking into consideration the intention of the Legislature to grant exemption under Section 54G of the Act to such cases of shifting of industrial undertakings only, where the slutting was from certain specified urban areas which the Government wanted to decongest, since the assessee's case ultimately fell within the said specifications by issue of the relevant notification, it must be said that the assessee's case comes within the intention of the Legislature tor allowance of benefit under Section 54G of the Act and they further add, once me notification is validly issued, it is to be held that it was contained in the parent Act itself Lastly, they conclude that the rules and notifications which are merely declaratory in effect, tend to have retrospective effect from the actual date of enactment of the relevant provisions of the statute under which the rules are framed or the notifications are issued. Accordingly, they have concluded that the assessee is entitled to deducticn/exemption of Capital Gains on transfer of assets under Section 54G of the Act.
10. The revenue being aggrieved by the orders passed by the Tribunal, by filing a petition under Sec.256(1) of the Act, had requested the Tribunal to state the case and refer the questions of law, which according to it, would arise out of the order passed by the Tribunal in ITA Nos. 767 & 768/1995 dated 22.11.1995 They are;
“1. Whether, on the tacts and in the circumstances of the ease, the Appellate Tribunal in right in holding that the notification issued at a later date in the matter of declaring ‘Majiwada’ as an urban area was to have retrospective effect and in that view in directing that the entire amount of capital gains accruing to the assessee on account of sale of industrial undertaking located at Majiwada be treated in exempt under the provisions of Sec. 54G?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that advances made by the assessee towards purchases of plant and machinery, land and building etc., partook of the character of “purchase’ as finding place in Sec. 54G and in that view in considering that the ‘purchase’ had been made within the time limits stipulated u/s. 54G(1) and thereafter in directing to grant exemption to the assessee under the said section?”
11. Sri. Indrakumar, learned Stending Counsel for the revenue would contend, that the issuance of the notification declaring a particular area within the limits of the municipal corporation or the municipality as the “urban area” by the Central Government having regard to the population, concentration of industries, need tor proper planning of the area or other relevant factors by general or special orders requires to be declared as an urban area as required under the Explanation appended to the Section for the purpose of Section 54G of the Act and in the absence of issuance of such notification, the assessee cannot seek for any exemption under Section 54G of the Act. While elaborating this contention, the learned Counsel would submit, that, during the accounting period relevant to the assessment year in question Thane’ was not declared as urban area and the same was done only in the month of March, 1994 and therefore, the assessee was not eligible to claim exemption under Section 54G of the Act Secondly it is contended, that payment of advance amount to different concerns for purchase of plant and machinery, construction of factory building, levelling of land, erection of plant and machinery etc., does not amount to utilisation of capital gains and since the capital gains is not deposited with the scheduled banks in the capital gains account scheme, 1988, which is a prerequisite condition to claim benefit under Section 54G of the Act. Thirdly, it is contended that the notification No. S.P.248(E) dated 2.3.1994 was published in the Official Gazette on 24.3.1994 and it is only in this notification, for the first time, Greater Bombay and some other urban areas of Maharashtra, which included Thane Municipal Corporation was declared as “urban area” for the purpose of Section 54G of the Act and the notification itself contains a prevision that if shall come in to force on the date of its publication in the Official Gazette and therefore, the notification cannot be construed as clarificatory and declaratory in nature, and therefore, it will not have any retrospective effect. In aid of this submission, the learned Counsel has relied on several decisions, and reference to those decisions will be made at an appropriate place.
12. Per contra, Sri. K.R Prasad, learned Senior Counsel appearing tor the assessee would contend, thxat Section 54G of the Act provides a tax incentive tor industrial undertaking situate in congested urban locations to shift to non-urban areas. Sub-sec, (1) of Sec.54-G of the Act provides that the assessee should, within a stipulated period of one year prior to the date of the sale of the old asset or three years after the said date, acquire land or purchase new machinery, plant etc. It is also necessary that the urban location from which the undertaking is being shifted should be considered as urban location, congested and mechanism to effect this through the process of notification by Central Government. The learned Senior Counsel would further submit that the word ‘purchase’ has not been defined either in the Act or in the Section and therefore, it is the common meaning that requires to be attributed to the word. According to the learned Senior Counsel, the general meaning that could be attributed to the expression ‘purchase’, is acquisition of substantially all the interest in the property and not necessarily the perfection of title. In this regard, apart from relying on the observations made by the Apex Court in the case of Commissioner of Income Tax v. Arvind Reddy - 120 ITR 46, the learned Senior Counsel also refers to the various shades of the meaning that is provided in the dictionaries. The concise Oxford Dictionary defines ‘purchase’ as acquisition of property by one's personal action, as contrasted to inheritance. In Stroud's Judicial Dictionary the word ‘purchase’ is used to mean as including an agreement to purchase also. The Black's Law Dictionary defines ‘purchase’ as transmission of property from one person to another by voluntary act and agreement founded on valuable consideration In Arvind Reddy's case - 120 ITR 46, the Supreme Court has explained the meaning of the word ‘purchase’ for the purpose of capital gains would marely mean ‘to buy for a price or equivalent of the price, by payment in kind or adjustment towards a debt or the other monetary consideration’. The learned Senior Counsel would submit, that in the present case, for the assessment year in question, the date of filing of the return was on 31.12.2991, and the assessee had invested huge funds in a sum of Rs. 1,11,42,974/- in non-urban industrial area located at Kurkumbh Industrial Area, Kurkumbh Village, Pune District, Maharashtra and the amount invested was by way of advance towards purchase of plot from Maharashtra Industrial Development Corporation, purchase of plant and machinery, etc., and the amount of advance paid exceeds the capital gains of Rs. 1,08,37,044/- and therefore, the Tribunal was justified in allowing the assessee's appeals.
13. in so far as the notification issued by the Central Government, the learned Senior Counsel would submit, that a subordinate legislation issued by the Government cannot override the legislation passed by the Parliament. In aid of this submission, the learned Senior Counsel would contend, that the Section including the Explanation were brought into the statute book by the Finance Act, 1987 with effect from 1.4.1988 and the notification dated 2.3.199-4 was issued by the Central Government including ‘Thane’ as as urban area and the same was published in the gazette on 24.3.1994 and though the notification specifically provides that it shall come in to effect from the date of its publication, it cannot override the provisions of Section 54G of the Act, as these provisions have come into effect with effect from 1.4.1988 In aid of this submission, the learned Senior Counsel relies on the observations made by the Apex Court in the case of State of Kerala v. KM. Chenia Abdulla, [1965] 16 STC 875, East Asiatic Co. India Ltd. v. State of Madras, [1956] 7 STC 299, and the decision of Madras High Court in the case of A.H.M Allaudin v. Additional Income Tax Officer, [1964] 52 ITR 900.
14. In regard to the notification, the sum and substance of the argument of the learned Senior Counsel is that when an exemption provision is inserted in the Act with effect from 1.4.1988, the notification is issued as a part of delegated legislation with effect from 24.3.1994 with a prospective date, the same would conflict with the operation of Section and to the extent notification conflicts with the statute will have to be read down and requires to be declared that it will be effective from 1.4.1988
15. The learned Senior Counsel would further contend, that under the earlier provision, namely, Section 280-ZA of the Act any company owning an industrial undertaking situated in an urban area was entitled for a tax credit certificate with reference to the amount of tax payable on capital gains arising from the transfer of its machinery, and plant to any other area and the Section 54G of the Act inserted with effect from 1.4.1988 is similar to earlier Section before its substitution. Alternatively it is contended, that Section 54G of the Act merely substituted Section 280-ZA of the Act and therefore, the intention of the Legislature was to continue the incentive to shift industrial undertakings from urban areas to non-urban areas, an incentive which was earlier provided by the provisions of Section 280-ZA of the Act
16. The other contention of the learned Senior Counsel is, that Section 280-Y(d) of the Act defines the word ‘urban areas’ to mean 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 Section, in pursuance of the aforesaid provision, the Central Government had issued notification bearing No. SO.3419 dated 22.9.1967 and it was further amended by notification No. SO.718 dated 23.2.1970 and in those notifications, it was notified that Bombay-Thane area was notified as urban area, and therefore, it could not have been the intention of the Government that Thane which was declared as urban area since 1967 should suddenly cease to be an urban area with effect from 1988 and again to be considered to be an urban area with effect from 1994. In a nutshell, the submission of the learned Senior Counsel is that the purchase of land, equipment, etc., for the new industrial undertaking is to include the acquisition of interest in the property and does not necessarily involve the perfection of the title, that the provisions of Section 54G of the Act granting exemption would be available despite the notification of 1994 purporting to be prospective, considering that “Thane’ had already been notified as an urban area as early as 1967 for the purposes of Section 280-ZA of the Act, particularly considering, that Section 54G of the Act was merely replacement of Section 280-ZA of the Act for giving incentives to industrial undertaking to shift its industrial units from urban areas to non-urban areas.
17. In our view, to consider the legal issues canvassed by the learned counsels, some of the provisions of the Income Tax Act, 1961, requires to be noticed.
18. Section 45 of the Act is the charging provision. It provides tor computation of income from capital gains. Under this provision, capital gains are brought to tax as income. The charge under this Section is attracted if three prerequisite conditions are satisfied, namely, there should be a capital asset; there should be transfer of such capital asset; lastly, profits or gains must arise from the transfer of such capital asset in the previous year relevant to the assessment year, if not exempt under Sections 54, 54B, 54D, 54E, 54F, 54G or 54H of the Act.
19. Section 48 of the Act lays down the manner of computing the taxable capital gains and provides tor various deductions. The amount of capital gains is arrived at by deducting three items from the full value of the consideration received. They are, the cost of the acquisition of the capital asset, subject to the provisions of Section 55 of the Act: the cost of any improvement subject to the provisions of Section 55 of the Act; and expenses incurred wholly or exclusively in connection with the transfer of the capital asset.
20. Section 54-G relating to exemption of capital gains on transfer of assets in cases of shitting of industrial undertaking from urban area, has been inserted by Finance Act, 1987 (11 of 1987), with effect from 18th April 1988. This section is consequential to the omission by that Act of Sec.280-ZA of the Act, relating to tax credit certificates for shifting of industrial undertaking from urban area. The scope and object of the newly inserted provision have been elaborated in the circular issued by the Board in circular No. 495 dated 22nd September 1987 as under:
“Exemption of capital gains on shitting of industrial undertakings from urban areas:
27.1: Under See.280-ZA, if a company owning an industrial undertaking shifts the undertaking from an urban area, it qualifies to receive a tax credit certificate in respect of capital gains arising from the transfer of plant and machinery. This provision has been omitted with effect from 1st April 1988 by the Finance Act, 1987.
27.2: With an intent to promote decongestion of urban areas and to ensure a balanced regional growth, the newly inserted Section 54G exempts capital gains on transfer of plant, machinery, land, buildings, etc., used for the purposes of the business of industrial undertaking. The transfer must be effected in the course of, or in consequence of, shifting of the industrial undertaking from an urban area to a non-urban area Capital gains would be exempt, to be the extent it is utilised which a period of one year before or three years after the date of transfer in:
I. acquiring new plant, machinery, land and building, etc. for the purposes of the business of the undertaking in the area to which it is shifted.
II. incurring expenses in the purchase of new plant and machinery, etc., and in the shifting of the establishment of the undertaking; and
III. incurring other expenses as would be specified in a scheme to be drawn up by the Central Government.
The exemption on capital gains will be available only if the industrial undertaking is shifted to non-urban area within a period of one year before or after three years after the date of transfer of the plant, machinery, etc., referred to above.
27.3: The new Scheme tor deposit of amounts for reinvestment of capital gains within the specified period will also be applicable to gains arising from the transfer of plant, machinery, etc, effected in me course of, or in consequence of, the shifting of industrial undertaking from urban to non-urban area.
27.4: The benefit of exemption under Sec.54-G will be available tor shifting of integrated independent units of the industrial undertaking, from an urban area to a non-urban area. For example, in the textile industry, if a distinct part of the industrial undertaking like a spinning unit is shifted from an urban area to a non-urban area, without shifting the weaving unit, the exemption provided for in Section 54-G will still be allowable.
27.5: These amendments will take effect from 1 April, 1988, and will, accordingly, apply in relation to the assessment year 1988-1989 and subsequent years.”
21. In the Explanation appended to Section 54G of the Act the expression “urban area” is defined to mean any such area within the limits of the municipal corporation or the municipality as the Central Government may having regard to the population, concentration of industries, need for proper planning of the area or other relevant factors, by general or special orders declare to be an urban area for the purposes of this Section.
22. In pursuance of the aforesaid provision, the Central Government has issued a notification bearing No. 9483 dated 2.3.1994 and the same is published in the Official Gazette dated 24.3.1994 The said notification is as under:
“Notification No. S.Q.248(E). dated 2 March 1994
In exercise of the powers conferred by the Explanation below sub-section (1) of Sec.54G of the income Tax Act, 1961 (43 of 1961), the Central Government, having regard to the population, concentration of industries, need for proper plaining of the area and other relevant factors, hereby declares the areas tailing within the limits of municipal corporation or municipality, as the case may be, mentioned in column (3) of the schedule hereto annexed and situated within the State shown in column (2) thereof, as urban areas tor the purposes of sub-section (1) of Sec.54G of the income Tax Act, 1961 (43 of 1961).
SCHEDULE
Sl. No.
Name of the State
Name of the municipal corporation Or municipality situated in the State Mentioned in column (2)
(1)
(2)
(3)
1
Maharashtra
1. Greater Bombay
2. Ahmed Nagar
3. Ichalkaranji
4. Jalgaon
5. Kalyan
6. Nagpur City
7. Nasik
8. Pimpri Chinchwad.
9. Pune Municipal Corporation
10. Pune Cantonment Board
11. Thane.
12. Ulhas Nagar
2. This notification shall come into force on the date of its publication the Official Gazette.
[Notification No. 9489 (F. No. 207/1/93-ITA.II]”
23. Section 54G of the Act is attracted when any capital gains result from transfer of fixed assets of as industrial undertaking from urban area. It provides that capital gaits arising on transfer of certain fixed assets of an industrial undertaking are exempted from tax, if the transfer is effected in the course of or in consequence of setting of the industrial undertaking from an urban area to any other non-urban area, The assets in relation to whose transfer the exemption from capital gain tax may be claimed are those which were used for the business of an industrial undertaking in an urban area, such as, plant and machinery, land and building, any right in building or land is transferred to a non-urban area. This exemption may be claimed if the capital gain arising on transfer of any of the aforesaid assets is utilised within one year before or three years after the date on which the transfer took place for the purchase of new machinery or plant for the business of the old undertaking in the new area to which it is shifted, acquisition of building or land or construction of building for the purpose of tax payer's business in that new area or shilling of the old undertaking and its establishment to the new area or incurring of expenditure on such other purposes as specified in a scheme framed by the Central Government notified for this purpose. If the expenditure on the aforesaid assets and activities exceeds the amount of capital gains arising on transfer of original assets, there is no tax. If this out lay is less than the amount of capital gain, only the difference between the two is taxed as capital gain. The period of three years in these cases is reckoned from the date on which the new plant or machinery is purchased or the new building or land is acquired or the building is constructed or the original plant and machinery is shifted to the new area. In other words, Section 54G of the Act provides full or partial exemption to the amount of any short-term or long-term capital gains resulting on transfer of machinery, plant, building or land used for the purpose of the business of an industrial undertaking from urban to non-urban area. If the conditions of Section are fulfilled, viz., the asset or assets concerned is machinery, plant, building or land or any rights in building or land, which was being used for the purposes of the business of an industrial undertaking situated in an urban area and such industrial undertaking is being shitted from its urban area to a different non-urban area and has, within a period of one year before or three years after the date on which the transfer took place, purchased a new asset for being used in the business of the shifted undertaking, then on fulfillment of the above conditions, Section 54G of the Act grants full or partial exemption to the resultant capital gain to the extent such gain is so utilised. In the Section, it is provided that where the assessee had taken resort to deposit the whole of consideration resulting from the transfer of the original asset in a bank deposit scheme under Section 54(2) of the Act, but has not so utilised the whole or part of that amount of the resultant capital gain for the purpose of new acquisition, the whole or the remaining unutilised portion shall be chargeable under Section 45 of the Act as capital gains of the previous year in which the period of three years from the date of transfer of the original assets expire.
24. The first question that requires to be considered and decided is, whether the exemption under Section 54G of the Act is admissible even though only advances were given for the acquisition of land, plant, building and machinery etc., within the time stipulated in the Section?
25. Under Section 540 of the Act, exemption may be claimed, if the capital gain arising on transfer of existing industrial unit in an urban area is utilised within one year before or three years after the date on which the transfer took place, apart from others ‘purchased’ new machinery or plant tor the purposes of business of the industrial undertaking in the area to which the said undertaking is shifted, ‘acquired’ building or land or constructed building for the purposes of his business in the said area, etc., then instead of the capital gain being charged to income tax as income of the previous year in which the transfer took place, it will be dealt as provided under clause (i) and (ii) of Sec.54G of the Act. Sri. Indrakumar, learned Counsel tor the revenue would submit that mere payment of advance amount tor purchase of new machinery or plant or for acquisition of (and or building or for construction of the building) would not amount to purchase of new machinery or plant or acquisition of land and building and since one of the requirements of Section 54G of the Act is not satisfied, the assessee is not eligible for the benefit under Section 54G of the Act. In aid of this submission, firstly, relience is placed on the dictionary meaning of the word purchase from Chambers 21 Century Dictionary, wherein the meaning of the word “purchase’ is stated as to obtain something in return tor payment to buy, something that his been bought, the act of buying. Reliance is also placed on the observations made by the Madras High Court in the case of Verarmmal and tithes v. Subbu Singh - VIII Indian Cases 743. In the said decision, the Madras High Court while interpreting the word ‘purchase’ that finds a place in Schedule II to Article 134 of Limitation Act, 1877 has observed, that “the plain meaning of ‘purchased’ for valuable consideration is that the ownership of the property sold has been absolutely transferred from the vendor to the purchaser in consideration of a price paid or secured by the purchaser to the vendor”.
26. Sri. Prasad, learned Senior Counsel for the assessee, relying on the dictionary meaning of the word purchase’ front various dictionaries and the observations made by the Apex Court in the case of Commissioner of Income Tax v. Arvind Reddy - 120 ITR 46, would submit, that the word ‘purchase’ for purposes of capital gains would merely means to buy for a price or equivalent of the price, by payment in kind or adjustment towards a debt or tor other monetary consideration and therefore, exemption under Section 54G of the Act is admissible even in a case where advances are paid tor acquiring of land and building, plant and machinery, etc.
27. The words purchase and ‘procure’ came up for consideration before the Bombay High Court in the case of Vidarbha Co-op. Marketing Society Ltd., v. Commissioner of Income Tax - 156 ITR 422 (Bom). In the said decision, the Court has observed that ‘While dealing with the taxing statute which deals with income from business, the word ‘purchase’ will, therefore, have to be construed in commercial sense. In the commercial sense, a transaction of purchase is a part of a transaction of a sale. A transaction of sale can never be complete unless there is a transfer of property from the seller to the buyer and the buyer who is the purchaser, must, therefore acquire the property before he can claim to have purchased the property.”
28. In Sec.54G of the Act, the expressions used are ‘purchased’, ‘acquired’, etc. The meaning of the word ‘purchased’ came up for consideration before the Andhra Pradesh High Court in the case of Commissioner Of Income-Tax v. Mrs. Shahzada Begum. - 173 ITR 399. The Court has affirmed the view expressed by the Tribunal. The view expressed by the Tribunal was:
“The Tribunal held that the matter had to be decided on the basis as to when the assessee “purchased” the property and not when the property was sold in favour of the assessee, that the expression ‘purchased’ cannoted the domain and control over the property given into the assessee's hands.”
29. In Law Lexicon by Ramanaiha Aiyer, the word ‘purchase’ is explained to mean the acquisition of property by party's own act, as distinguished from acquisition by act of law. In the same dictionary, by referring to Section 101 of Transfer of Property Act, it is defined to mean ‘to acquire a property whether movable or immovable by paying money or its equivalent’. ‘Purchase’ is a word with two significations - a popular but restricted one and a legal but enlarged one. As a noun in its popular and more limited sense; acquisition by way of bargain and sale for other valuable consideration, the transaction of property from one person to another by their voluntary act and agreement; founded on valuable consideration; the buying of seal estate and of goods and chattels; that which is obtained for a price in money or its equivalent; acquisition for a valuable consideration; bargain. In its technical and larger sense, in case of land, the act of obtaining or acquiring title to the lands and tenements by money, deed gift or any means except by descent; the acquisition of land by any lawful act of the party; in contradiction to acquisition by operation of law. As a verb, to buy, to obtain or secure as one's own by paying or promising to pay price. The verb in its technical broader sense, refers to all titles including those by devise acquired otherwise than by descent.
30. Similarly, the word ‘acquire’ is explained by the Supreme Court in the case of Charanjitlal Chewdary v. Union of India - AIR 1951 SC 41. In the said decision, the Court has observed that the acquisition means and implies, the acquiring of the entire title of the expropriated owner, whatever the nature or extent of that title might be. The entire bundle of rights, which were vested in the original holder, would pass on acquisition to the acquirer leaving nothing in the former.
31. In Devidas Gopala Krishnan v. State of Punjab - AIR 1967 SC 1895, the Supreme Court has observed that the acquisition is the act by which a person acquires property in a thing. Acquire is to become the owner of the property. One can, therefore, acquire a property either by voluntary or involuntary transfer.
32. The learned Senior Counsel Sri. K.R Prasad by relying on the observations made by the Apex Court in the cast of T.N Arvind Reddy - 120 ITR 46, contends that payment of advance amount will also amount to purchase of plant and machinery and acquisition of land and building, etc. It is difficult to accept the submission of the learned Senior Counsel. The tact situation in Arvind Reddy's case - 120 ITR 46, was conversion of joint ownership into sole ownership through release deed and purchase of property. The assesses was the eldest of four brothers constituting a coparcenary. He sold his own house and acquired the common house from his three brothers, who executed release deeds for a consideration of Rs. 30,000/- each, adjusted towards the eighth share agreed to be given to the assessee as the eldest brother, Before the Supreme Court, the question was whether the execution of release deed amounted to ‘purchase of new property’ as envisaged under Section 54(1) of the Act? While answering the question in the affirmative, the Court was pleased to observe, “that the legal meaning of the word ‘purchase’ in Section 54 Clause (1) is not different from its plain meaning which connotes buying for a price or equivalent of price by payment in kind or adjustment towards an old debt or for other monetary consideration. Each release in the circumstances of the present case is a transfer of the releaser's share tor consideration to the release. In plain English, the transferee purchases the share of each of his brothers, Thus Section 54(1) of the Act is attracted”.
33. The word ‘purchase’ is not defined under the Act and therefore have to be consctrued 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 is used 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 shitting 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 utilised within one year or three 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 alter 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 tor 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.
34. The Tribunal has accepted the plea of the assessee that exemption under Section 54G of the Act is admissible even though only advances were given for the acquisition of land and building, plant and machinery, etc, within the, time stipulated in the Section by placing heavy reliance on the observations made by the Apex Court in T.N Arvinda Reddy's case - 120 ITR 47. As we have already noticed, that was a case where there was a conversion of joint ownership into said ownership through release deeds. The Apex Court in the said decision, has observed that the word ‘purchase’ in Section 54 of the Act must be interpreted in its ordinary meaning, as buying tor a price or equivalent of price by payment in kind or adjustment towards old debt or for other monetery consideration. There is no stress in the Section on “cash and carry”. In our view, the observations made by the Apex Court in the aforesaid decision is wrongly understood by the Tribunal while interpreting the word ‘purchased’ and ‘acquired’ that finds a place in Section 54 of the Act. The said decision would not assist the case of the assesses.
35. The next question that requires to be decided is, whether the Tribunal was justified in holding that the exemption under Section 54G of the Act was available even though the notification recognising Majiwada as an urban area was issued at a later date?
36. Sri. K.R Prasad, learned Senior Counsel in justifying the findings and the conclusion reached by the Tribunal, firstly, contends that the earlier provisions, namely, Section 280-ZA of the Act is similar to Section 54G of the Act. Though the said provision was removed from the statute book with effect from 1.4.1988 from the very day Section 54G was introduced and therefore, it is a case of substitution of Section 280-ZA of the Act by Section 54G of the Act and the legislative intent was to continue the incentive to shift industrial undertaking from urban to non-urban areas, an incentive so far given by the provisions of Section 280-ZA of the Act and the notification issued under Section 280-Y of the Act, wherein Bombay-Thane area had been declared as urban area in the year 1967 cannot be again considered as an urban area with effect from 1988 and 1994 by a notification published by the Central Government and therefore, this cannot be legislative intention and the intention of the notification issued in the month of March, 1994 is only to add to the scope of the already existing notification with effect from 1994 and not to negate the effect of the earlier notification which had been in effect from 1967. In aid of his submission, the learned Senior Counsel relies on the view of the learned Author in the book Maxwell on Statute 12 Edition, page 215, wherein, on the retrospective operation of statutes, it is stated:
“Upon the presumption that the legislature does not intend what is unjust rests leaving against giving certain statutes a retrospective operation. They are construed as operating only in cases or on facts which comes in existence after the statutes were passed unless a retrospective effect is clearly intended. It is a fundamental rule of English Law that no statute shall be construed to have retrospective operation, unless such a construction appears very clearly in the terms of Act or arises by necessary and distinct implication.”
37. It is further stated that:
“If however, the language of the dominant intention of the enactment so demands, the Act must be construed so as to have retrospective operation, for the “rule against the retrospective effect of statutes is not a rigid or inflexible rule but is one to be applied always in the light of the language of the statute and the subject matter with which the statute is dealing”.
38. The learned Senior Counsel has also placed reliance on the observations made by the Supreme Court in the case of State of Punjab v. Nestle India Ltd., - [2004] 269 ITR 97. In the said decision, apart from others, the Court has observed that the Government cannot rely on a representation made without complying with the procedure prescribed in the relevant statute, but a citizen may and can compel the Government to act on such representation, if the factors necessary for founding the plea of promissory estoppel are established.
39. It is also brought to our notice, the observations made by the Apex Court in the case of B.K Industries v. Union of India - 1993 (65) ELT 465. In the said decision, the Court has observed that “the Finance Ministers speech is not a law. The parliament may or may not accept his proposal. Indeed, in this case, it did not accept the said proposal immediately but only a year later. It is only from the date of repeal that the said levy became operative”.
40. Sri. Indrakumar, learned Senior Standing Counsel for the department would contend that the notification requires to be issued by the Central Government as envisaged in Explanation to Section 54G of the Act and this notification was issued in the year 1994 and since mere is a clause in the notification which specifically provides that the notification would come into effect form the date it is notified in the official gazette, it is only prospective in nature and since the notification is not in the nature of declaratory notification, it cannot be construed either is clarificatory in nature nor it can be given retrospective effect. In support of his submission, the learned Counsel would rely on the observations made by the Apex Court in the case of Novopan India Ltd., v. Collector of Central Excise and Customs, Hyderabad - [1997] 73 ELT 769 (SC). In the said decision, the Court was pleased to observe:
“14. In Mangalore Chemicals & Fertilizers Ltd., v. Deputy Commissioner of Commercial Taxes [1991 (55) ELT 437 (SC) = 1992 Suppl. (1) SCC 21], a Bench of this Court comprising M.N Venkatachaliah J. (as the learned Chief Justice then was ) and S.C Agarwal, J. stated the relevant principle in the following words:
“Shri. Narasimhamurthy again relied on certain observations in CE v. Parle Exports (P) Ltd. [1998 (38) ELT 741 (SC) = 1989 (1) SCC 345], in support of strict construction of a provision concerning exemptions. There is support of judicial opinion to the view that exemptions from taxation have a tendency to increase the burden on the other unexempted class of tax payers and should be construed against the subject in case of ambiguity. It is an equally well known principle that a person who claims an exemption has to establish his case. Indeed, in the very case of Parle Exports (P) Ltd., relied upon by Shri. Narasimhamurthy, it was observed:
“While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof; provided no violence is done to the language employed. It must, however, be borne in mind that absurd results of construction should be avoided.”
The choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the legislature manifest on the statutory language. Indeed, the need to resort to any interpretative process arises only where the meaning is not manifest on the plain words of the statute. If the words are plain and clear and directly convey the meaning, there is no need tor any interpretation. It appears to us the true rule of construction of a provision as to exemption is the one stated by this Court in Union of India v. Wood Paper Ltd. [1990 (47) ELT 500 (SC) = 1990 (4) SCC 256].
“….. Truly speaking liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lilted and the subject falls in the notification then full play should be given to it and it calls tor a wider and liberal construction…..”
“18. We are, however, of the opinion that, on principle, the decision of this Court in Mangalore Chemicals - and in Union of India v. Wood Papers referred to therein - represents the correct view of law. The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee-assuming that the said principle is good and should-does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exception provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State. This is for the reason explained in Mangalore Chemicals and other decisions, viz., each such exception/exemption increases the tax burden on other members of the community correspondingly. Once, of course, the provision is found applicable to him, full effect must be given to it As observed by a Constitution Bench of this Court in Hansraj Gordhandas v. N.H Dave (1978 (2) ELT (J 350) (SC) - 1969 (2) SCR 253] that such a Notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room tor any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e, by the plain terms of the exemption.”
41. In Union of India v. wood Papers Ltd. - 83 STC 251. the Supreme Court has observed:
“When the question is whether a subject falls in the notification or in the exemption clause, it being in the nature of exception, is to be construed strictly and against the subject but once the ambiguity or doubt about the applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction.”
42. The learned Senior Counsel Sri. Indrakumar in order to suggest, that if the provisions are declaratory, the rule of retrospectivity would not apply, would rely on the observations made by the Apex Court in the case of Commissioner of Income Tax v. Podar Cement Pvt. Ltd. - [1977] 226 ITR 625. In the said decision, the Court has observed:
“In Crawfird's Statutory Construction, at page 107, paragraph 74, reads as follows:
74. Declaratory statutes.- Generally speaking, declaratory statutes can be divided into two classes : (1) those declaratory of the common law, and (2) those declaring the meaning of an existing statute. Obviously, those declaratory of the common law should be construed according to the common law. Those of the second class are to be construed as intended to lay down a rule tor future cases and to act retrospectively. They closely resemble interpretation clause, and their paramount purpose is to remove doubt as to the meaning of existing law, or to correct a construction considered erroneous by the Legislature.”
(emphasis* supplied).
In Francis Bennion's Statutory Interpretation (Second Edition) 1992, page 105, the learned author says “Declaratory Acts - A declaratoiy Act or enactment declares what, the law is on a particular point, often for the avoidence of doubt.”
In Justice G.P Singh's (Sixth edition 1996) “Principles of Statutory Interpretation”, under the heading “declaratory statutes”, the learned author has summed up as follows:
‘Declaratory statutes:
The presumption against retrospective operation is not applicable to declaratory statutes. As stated in Craies and approved by the Supreme Court : ‘for modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason tor passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably such an Act contains a preamble, and also the word “declared” as well as the word “enacted”.’ But the use of the words “it is declared” is not conclusive that the Act is declaratory tor these words may, at times, be used to introduce new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather then. to the form If a new Act is ‘to explain’ an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language ‘shall be deemed always to have meant’ is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act, which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law when the Constitution came into force, the amending Act also will be part of the existing law.”
The above summing up is factually based on the judgments of this court as well as English decisions.”
43. The learned Settlor Counsel has also relied on the observations, made by the Supreme Court in the case of Shyam Sundar v. Ram Kumar - AIR 2001 SC 2472. In the said decision, the Court has observed:
“Where a repeal of provisions of an enactment is followed by iresh legislation by an amending Act such legislation, is prospective in operation and does not effect substantive or vested rights of the parties unless made retrospective either expressly or by necessary intendment. There is a presumption against the retrospective operation of a statute and further a statute is not to be construed to have a greater retrospective operation than its language renders necessary, but an amending Act which attests the procedure is presumed to be retrospective; unless amending Act provides otherwise. The substituted S.15 in the absence of anything in it to show that it is retrospective, does not effect the right of the parties which accrued to them on the date of suit or on the date of passing of the decree by the Court of first instance. The appeals are unattested by change in law in so far it related to determination of the substantive rights of the parties and the same are required to be decided in light of law or pre-emption as it existed on the date of passing of the decree.”
44. The next decision on which reliance was placed by the learned Senior Counsel is the decision of the Apex Court in the case of Collector of Central Excise v. Neoli Sugar Factory - AIR 1993 SC 1921. In the said decision, the Court has observed:
“15. It is then argued by the learned counsel for the appellant that exemption notifications should be strictly concluded (construed - Ed.). There is no quarrel with the proposition that such notifications should be given their due effect, keeping in view the purpose underlying.”
45. The learned Standing Counsel keeping in view the observations made by the Apex Court in several decisions, would contend that merely because the Central Government has issued the notification nearly after six years from the date the statutory provision, namely, Section 54G of the Act was introduced, this Court in exercise of its writ jurisdiction cannot issue a mandamus directing the revenue to give benefit of the statutory provision from an anterior date. In aid of this submission, the learned Counsel would rely upon the observations made by the Apex Court in the case of Aeltemesh Rein v. Union of India - AIR 1988 SC 1768. In the said decision, the Court has observed:
“6. The effect of the above observations of the Constitution Bench is that it is not open to this Court to issue a writ in the nature of mandamus to the Central Government to bring a statute or a statutory provision into force when according to the said statute the date on which it should be brought into force is left to the discretion of the Central Government. As long as the majority view expressed in the above decision holds the field it is not open to this Court to issue a writ in the nature of mandamus directing the Central Government to bring section 30 of the Act into force. But we arc of the view that this decision does not come in the way of the Supreme Court issuing a writ in the nature of mandamus to the Central Government to consider whether the time for bringing section 30 of the Act into force has arrived or not Every discretionary power vested in the Executive should be exercised in a just reasonable and fair way. That is the essence of the rule of law. The Act was passed in 1961 and nearly 27 years have elapsed since it received the assent of the President of India. In several conferences and meetings of lawyers resolutions have been passed in the past requesting the Central Government to bring into force section 30 of the Act. It is not clear whether the Central Government has applied its mind at all to the question whether section 30 of the Act should be Brought into force. In these circumstances, we are of the view that the Central Government should be directed to consider within a reasonable time the question whether it should bring section 30 of the Act into force or not. If on such consideration the Central Government feels that the prevailing circumstances are such mat section 30 of the Act should not be brought into force immediately it is a different matter. But it cannot be allowed to leave the matter to lie over without applying its mind to the said question. Even though the power under section 30 of the Act is discretionary, the Central Government should be called upon in this case to consider the question whether it should exercise the discretion one way or the other having regard to the fact that more than a quarter of century has elapsed from the date on which the Act received the assent of the President of India. The learned Attorney General of the India did not seriously dispute the jurisdiction of this Court to issue the writ in the manner indicated above.”
46. The learned Senior Counsel also relies upon the observations made by the Apex Court in the case of A.K Roy v. Than Singh Tyagi - AIR 1982 SC 710. In the said decision, the Court has observed:
“52. We may now take up for consideration the question which was put in the forefront by Dr. Ghatate, namely, that since the Central Government has failed to exercise its power within a reasonable time, we should issue a mandamus calling upon it to discharge its duty without any further delay. Our decision on this question should not be construed as putting a seal of approval on the delay caused by the Central Government in bringing the previsions of S.3 of the 44 Amendment Act into force. That Amendment received the assent of the President on April 30, 1979 and more than two and half years have already gone by without the Central Government issuing a notification tor bringing Section 3 of the Act into force. But we find ourselves unable to intervene in a matter of this nature by issuing a mandamus to the Central Government obligating it to bring the provisions of Section 3 into force. The Parliament having left to the unfettered judgment of the Central Government the question as regard the time tor bringing the provisions of the 44 Amendment into force, it is not tor the Court to compel the Government to do that which, according to the mandate of the Parliament, lies in its discretion to do when it considers it opportune to do it. The executive is responsible to the Parliament and if the Parliament considers that the executive has betrayed its trust by not bringing any provision of the Amendment into force, it can censure the executive. It would be quite anomalous that the inaction of the executive should have the approval of the Parliament and yet we should show our disapproval of it by issuing a mandamus. The Court's power of judicial review in such cases has to be capable of being exercised both positively and negatively, if indeed it has that power: positively, by issuing a mandamus calling upon the Government to act and negatively by inhibiting it from acting. If it were permissible to the Court to compel the Government by a mandamus to bring a constitutional amendment into force on the ground that the Government has tailed to do what it ought to have done, it would be equally permissible to the Court to prevent the Government from acting, on some such ground as that the time was not yet ripe for issuing the notification for bringing the Amendment into force. We quite see that it is difficult to appreciate what practical difficulty can possibly prevent the Government from bringing into force the provisions of S.3 of the 44 Amendment, after the passage of two and half years. But the remedy, according to us, is not the writ of mandamus. If me Parliament had laid down an objective standard or test governing the decision of the Central Government in the matter of enforcement of me Amendment, it may have been possible to assess the situation judicially by examining the causes of the inaction of the Government in order to see how tar they bear upon the standard or test prescribed by the Parliament. But, the Parliament has lefl the matter to judgment of the Central Government without prescribing any objective norms. That makes it difficult for us to substitute our own judgment for that of the Government of the question whether S.3 of the Amendment Act should be brought into force. This is particularly so when the failure of the Central Government to bring that section into force so far can be no impediment in the way of the Parliament in enacting a provision in the National Security Act on the lines of that section. In tact, the ordinance rightly adopted that section as a model and it is the Act, which has wrongly diseased it. It is tor these reasons that we are unable to accept the submission that by issuing a mandamus, the Central Government must be compelled to bring the provisions of S.3 of the 44 Amendment into force. The question as to the impact of that section which, though a part of the 44 Amendment Act is not yet a part of the Constitution, will be considered later when we will take up for examination the argument as regards the reasonableness of the procedure prescribed by the Act.”
47. Sec.54-G of the Act relating to exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area is inserted by Finance Act, 1987, with effect from 1 of April 1988. This insertion is consequential to the omission by the same Act. The provisions of Sec.280-ZA of the Act, relating to tax credit certificates for shifting of industrial undertaking from urban area and Sec.280-Y of the Act which provided for defination of certain expressions under Chapter XXII-B of the Act including the definition of ‘urban area’. Sec.280Y(d) of the Act provided for definition of ‘urban area’ to mean, any area which the Central Government may by general or special order declare to be an urban area for the purpose of Chapter XXII-B of the Act. This Chapter was in vogue with effect from 1.4.1965 till it was omitted and replaced by Sec.54G of the Act. In compliance with Section 280Y(d) of the Act, the Central Government had issued notification some time in the year 1967, though the substantive provision namely, Sec.280-ZA was inserted by Finance Act, 1965 with effect from 1.4.1965, notifying ‘Bombay-Thane’ area as urban area for the purpose of Chapter XXII-B of the Act. The notification so issued continued to be in force till the new Section 54-G was inserted by the Finance Act, 1987 (11 of 1987) with effect from 1 April 1988. The argument of the learned Senior Counsel Sri. Prasad for the assessee company is that the notification so issued continues to be in force till it was replaced by the Central Government by issuing a notification dated 2.3.1994 and published in the Official Gazette on 24.3.1994 To answer this contention of the learned Senior Counsel, it requires to be noticed, what is the effect of omission of a statutory provision and its replacement of new Section, namely, Sec. 54-G of the Act and secondly, whether the notification issued under the omitted provision still continues to be in force till it is replaced and a fresh notification is issued under the newly inserted provision.
48. In Justice G.P Singh's (Seventh Edition 2000) principles of statutory interpretation under the heading ‘Expiry and Repeal of the Statutes’, the learned Author has summed up the issue as follows:
“Perpetual and Temporary Statutes:
A Statute is either perpetual or temporary. It is perpetual when no time is fixed for its duration and such a statute remains in force until its repeal, which may be express or implied. A perpetual statute is not perpetual in the sense, that it cannot be repealed; it is perpetual in the sense that it is not abrogated by efflux of time or by non-user.
A statute is temporary when its duration is only for a specified time and such statute expires on the expiry of the specified time unless it is repealed earlier. Simply because the purpose of a statute, as mentioned in its preamble, is temporary, the statute cannot be regarded as temporary when no fixed period is specified for its duration. The Finance Acts which are annual Acts are not temporary Acts and they often contain provisions of a general character which are of a permanent operation. A cessation of transitional legislative power has also no effect on the continuance of a perpetual Act enacted during the continuance of that power. The duration of a temporary statute may be extended to a fresh statute or by exercise of a power conferred under the original statute. But, it appears that alter a temporary statute expiree, it cannot be made effective by merely amending the same. The only apt manner of reviving the expired statute is by re-enacting a statute in similar terms or by enacting a statute expressly saying that the expired Act is herewith revived.”
49. The Supreme Court in the case of State Of Rajasthan v. Mangilal Pindwal - AIR 1996 SC 2181 has ruled that the substitution of a provision results in repeal of the earlier provision and its replacement by a new provision. In the present case, it is not in dispute nor it can be disputed that the insertion of Sec.54G of the Act is consequential to omission by that Act of Sec.280ZA, relating to tax credit certificates for shifting of industrial undertaking from urban area. It is also not in dispute that the Central Government as required under Sec.280Y(d) of the Act had notified ‘Bombay-Thane’ as an urban area by issuing a notification some time in the year 1967. Now the question would be what would be the effect of omission of the earlier provision and replacement by a new provision? Consequence of repeal, omission and substitution is explained by the learned Author Justice G.B Singh in principles of statutory interpretation under the heading ‘consequence of repeal’ as under:
“Under the common law rule, the consequences of repeal of a statute are very drastic. Except as to transactions past and closed, a statute after its repeal is as completely obliterated as if it had never been enacted. The effect is to destroy all inchoate rights and all causes of action that may have arisen under the repealed statute. Therefore, leaving aside the cases where proceedings were commenced, prosecuted and bought to finality before the repeal, no proceeding under the repealed statute can be commenced or continued after its repeal.”
50. This is the settled legal position in law. However, the learned Senior Counsel would contend that the notification issued under the repealed provision namely See.280Y(d) of the Act dated 22.9.1967 amended by notification dated 23.2.1970 would not be obliterated and the effect of the earlier notification continues to be in existence. This submission of the learned Senior Counsel, in our view, has no merit for the reason, the notification that is issued under a provision, which has subsequently repealed or substituted, cannot stand on its own. It also gets repealed once the provision under which it is issued gets repealed.
51. The object of the Section 54G of the Act relates to exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area to non-urban area. The Explanation appended to the Section defines the meaning of the expression ‘urban area’ to mean any such area within the limits of Municipal Corporation or Municipality as the Central Government may by general or special order declare to be an urban area. Therefore, in order to effectively implement the provisions of Sec.54G of the Act, a notification requires to be issued by the Central Government declaring the limits of Municipal Corporation or the Municipality as the urban area. The Explanation appended to the Section requires to be read together. In our view, to ascertain the meaning of the Section, it is not permissible to omit the explanation, since explanation is a part of the main Section. The legislature alter laying down the legislative policy has conferred the power on the Central Government to define and notify the urban area. No doubt it is true that the policy of granting exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area was inserted in the Act with effect from 01.04.1988, the said policy could be implemented only when the Central government notifies the urban area. In the absence of such notification, the benefit under the provision is not available to a person in case of shifting of industrial undertaking from urban area. An Act cannot be said to commence or to be in force unless it is brought in to operation by legislative enactment or by exercise of authority by a delegatee empowered to bring into operation. When enforcement is left to the discretion of the Government without laying down any objective standards, no writ of mandamus can be issued to the Government to enforce the statute or the provision. But if considerable time has elapsed since passing of the statute, a writ can be issued directing the Government to consider the question whether the statute or the provisions should be brought in to force. This is what the Supreme Court has observed in Altamesh Rein v. Union of India, AIR 1988 SC 1768 and in Attorney General of India v. Amratlal Prajivandas, AIR 1994 SC 2179. Therefore, in our opinion, by legislative interpretation Courts are not expected to give effect to a provision, when the legislative intention is for effectively implementing the exemption provision, the Central Government should issue a notification, notifying the urban area.
52. Lastly, in our view, the section appears to be a conditional legislation. The section is dependent on the issue of notification by the Central Government. The words used in the notification are plain and unambiguous. Therefore, the words must be applied as they stand, even if there is a suspicion that the result may not represent the real intention of the legislature. In the present case, notification issued clearly states that it conies in to force from the date of issuance of the notification. That only means, it is prospective. Therefore, by interpretation retrospective operation cannot be attributed to the notification and if it is done, in our view, it not only leads to absurdity and runs contrary to the language employed in the notification. Therefore, we are unable to accept the findings and conclusion reached by the Tribunal.
53. In the result, the two questions of law referred by the Tribunal for our opinion are answered in negative and against the assessee. Accordingly, reference proceedings are disposed off. No order as to costs.