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2015 (8) TMI 482 - SUPREME COURT

2015 (8) TMI 482 - SUPREME COURT - [2015] 376 ITR 596 (SC) - Entitlement exemption under Section 54G - appellant claimed exemption 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 - Held that:- On a conjoint reading of the Budget Speech, notes on clauses and memorandum explaining the Finance Bill of 1987, it becomes clear that the idea of omitting Section 2 .....

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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 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 .....

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t Section 54G was inserted, namely, 1.4.1988. We are, therefore, of the view that the High Court in not referring to Section 24 of the General Clauses Act has fallen into error. On a reading of Section 24 it becomes difficult to accept Shri Arijit Prasad’s contention that Section 24 would only apply to 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 .....

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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.

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 .....

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zed 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 build .....

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thin 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 aforesai .....

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ied 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 ₹ 1,20,00,000/-, and after deducting an amount of ₹ 11,62,956/-, had earned a capital gain of ₹ 1,08,33,044/-. Since it intended to shift its industrial undertaking from an urban area to a non-urban area .....

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e 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 .....

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n 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 Capi .....

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of the Income Tax Appellate 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 h .....

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o 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 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 .....

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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 done, it is not necessary for the assessee to deposit before furnishing such return, th .....

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plication 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 .....

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s 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 befo .....

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ing 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) .....

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ained; (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 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, .....

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n 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 o .....

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ansfer 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 .....

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rial No. Name of the State or the Union territory Details of the area (1) (2) (3) __________________________________________________________ ……………………… ……………………… ……………………… ……………………… ……………………&he .....

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l 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 d .....

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nment 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 th .....

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et, 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, havin .....

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ok place, or which is not utilised by him for all or any of the purposes aforesaid before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme .....

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purposes mentioned in clauses (a) to (d) of sub-section (1) within the period specified in that sub-section, then,- (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. 9. On the same date, by the same Finance Act, Section 280ZA was omitted with effect .....

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proved 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 .....

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rs 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 owni .....

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ilding 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 i .....

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ch, 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. Howeve .....

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ction 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 .....

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ative 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 of the word repeal in the later statute. (at page 483) Similarly in Ratan Lal Adukia v. Union of India, (1989) 3 SCC 537, this Court held that the substituted Section 80 of the Code of Civil Procedure repealed by implication, insofar as the railways are concerned, Section 20 of the self-same code. In so holding, this Cour .....

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l irreconcilability if the later set of provisions is by itself a complete code with respect to the same matter. In such a case the actual detailed comparison of the two sets of provisions may not be necessary. It is a matter of legislative intent that the two sets of provisions were not expected to be applied simultaneously. Section 80 is a special provision. It deals with certain class of suits distinguishable on the basis of their particular subject matters. (at para 18) 14. Further, the Fina .....

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pter 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 introd .....

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es 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 provision .....

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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, therefore, of the view that the High Court in not referring to Sect .....

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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 .....

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far 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 .....

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ment 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 o .....

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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 .....

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o 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 appl .....

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t 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 .....

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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 presen .....

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la Corporation (P) Ltd. and M.R. Pratap v. Director of Enforcement, New Delhi, (1969) 2 SCC 412 which was 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 th .....

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March, 1966. What was decided in that case is set out by paragraph 17 of the said judgment, which is as follows: 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 .....

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ragraph 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 con .....

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t 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 .....

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nce 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 Genera .....

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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 tha .....

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ment 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 whic .....

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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 .....

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ent so repealed and in operation at the time of such repeal. 29. A reading of this Section would show that a repeal 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. In Mamleshwar Prasad & Anr. v. Kanahaiya Lal (de .....

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s 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. 30. Thirdly, an earlier Constitution Bench judgment referred to earlier .....

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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 o .....

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n 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 the expression repeal in Section 6 of the General Clauses Act. This is for t .....

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ar 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& .....

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tute 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 Secti .....

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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 .....

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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 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 f .....

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strued 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 .....

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4(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 a .....

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