Supreme Court: Deciding on the appeals the bench comprising of A.K. Sikri and R.F. Nariman JJ. was posed with question whether advances paid for the purchase of assets while shifting of industrial undertaking from urban area, would amount to utilization of capital gains, allowed as an exemption under Section 54G of Income Tax Act, 1961. Answering the question in affirmative the Court went on discussing application of Section 24 of the General Clauses Act, 1897 over the matter in hand.
The nodus in this case was 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. 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. That being so, the notification dated 22-9-1967 which declared ‘Thane’ an urban area, where appellant’s industrial unit was situated, would ensure to the benefit of the appellant for the purpose of claiming exemption from capital gains under Section 54G.
The Court relying on various previous judgments over both the matters involved and reversing the judgment of the High Court declared 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. 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. The court held that Section. 54G does not require that the machinery etc has to be acquired in the same assessing year in which the transfer takes place. It is sufficient if the capital gain is “utilized” towards purchase of plant and machinery by giving advances to suppliers and also, Section 24 of the General Clauses Act applies also to ‘omissions’ along with `repeals’ and saves rights given by subordinate legislation. Fibre Boards v. CIT, 2015 SCC OnLine SC 707, decided on August 11, 2015
