TMI Blog2020 (7) TMI 823X X X X Extracts X X X X X X X X Extracts X X X X ..... 31-7-2020 - SHRI A. T. VARKEY, JM DR. A.L.SAINI, AM For the Appellant : Shri J.P. Gupta, FCA For the Respondent : Shri T. Hunar, JCIT, Sr. DR ORDER Per Dr. A. L. Saini: The captioned appeal filed by the assessee, pertaining to assessment year 2014-15, is directed against the order passed by the Commissioner of Income Tax (Appeal)- Shillong, in appeal no. CIT(A)/SHG/10083/2018-19 dated 17.04.2019, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) / 92C(4) / 263 of the Income Tax Act, 1961 (in short the Act ) dated 30/11/2018. 2.When this appeal was called out for hearing, the ld. Counsel for the assessee invited our attention to the order dated 10.06.2020, passed by the Tribunal in the case of M/s Raipur Steel Casting India (P) Ltd. and Srinath Ji Furnishing Pvt. Ltd. in I.T.A. No. 895 1035/Kol/2019, for assessment year 2014-15.Wherein the Tribunal held that effect of omission of clause (i) of section 92BA w.e.f 01.04.2017 had the effect of it being omitted from its inception hence, reference to Transfer Pricing Officer (TPO) is bad in law. The ld. Counsel for the assessee submitted that the present issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de or is to be made to a person referred to in clause (b) of sub-section (2) of section 40A. Clause (i) of section 92BA of the Act, inter alia provides that any expenditure in respect of which payment has been made by assessees to certain specified person under section 92BA are covered within the ambit of specified domestic transactions. As a matter of compliance and reporting, taxpayers need to obtain the chartered accountant`s certificate in Form 3CEB providing the details such as list of related parties, nature and value of specified domestic transactions, method used to determine the arm`s length price for specified domestic transactions, positions taken with regard to certain transactions not covered as specified domestic transactions etc. This has considerable increased the compliance burden of the taxpayers. In order to reduce the compliance burden of the taxpayers, it was proposed by the Finance Act 2017 to provide that expenditure in respect of which payment has been made by the assessee to a person referred to in section 40A(2)(b) are to be excluded from the scope of section 92BA of the Act. The whole object of the omission of clause (i) of section 92BA is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from the judgment of the Hon`ble Supreme Court in the case of Rayala Corporation (P) Ltd (1970 AIR 494) wherein the Hon`ble Supreme Court has defined the terminology omission and Repeal and distinguished these terminologies also. The relevant para of the judgment is reproduced below: The argument of Mr. Sen was that, even if there was a contravention of R. 132A(2) by the accused when that Rule was in force, the act of contravention cannot be held to be a thing done or omitted to be done under that rule, so that, after that rule has been omitted, no prosecution in respect of that contravention can be instituted. He conceded the possibility that, if a prosecution had ,already been started while R. 132A was in force, that prosecution might have been competently continued. Once the Rule was omitted altogether, no new proceeding by way of prosecution could be initiated even though it might be in respect of an offence committed earlier during the period that the rule was in force. We are inclined to agree with the submission of Mr. Sen that the language contained in clause 2 of the Defence of India (Amendment) Rules, 1965 can only afford protection to action already taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his trial and conviction take place after the regulation expired ? The Privy Council took notice of sub- s. (3) of section 11 of the Emergency Powers (Defence) Act, 1939 which laid down that the expiry of this Act shall not affect the operation thereof as respects things previously done or omitted to be done . It was argued before the Privy Council that the phrase things previously done does not cover offences previously committed. This argument was rejected by Viscount Simon on behalf of the Privy Council and it was held that the appellant in that case could be convicted in respect of the offence which he had committed when the regulation was in force. That case, however,is distinguishable from the case before us inasmuch as, in that case, the saving provision laid down that the operation of that Act itself was not to be affected by the expiry as respects things previously done or omitted to be done. The Act could, therefore, be held to be in operation in respect of acts already committed, so that the conviction could be validly made even after the expiry of the Act in respect of an offence committed before the expiry. In the case before us, the operation of R. 132A of the D. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Therefore, offences committed against temporary Acts must be prosecuted and punished before the Act expires and as soon as the Act expires any proceedings which are being taken against a person will ipso facto terminate. The Court cited with approval the decision in the case of Wicks v. Director of Public Prosecutions(4), and held that, in view s. 1 (4) of the Defence of India Act, 1939, as amended by Ordinance No. XII of 1946, the prosecution for a conviction for an offence committed when the Defence of India Act was in force, was valid even after the Defence of India Act had ceased to be in force. That case is, however, distinguishable from the case before us in two respects. In that case, the prosecution had been started before the Defence of India Act ceased to be in force and, secondly, the language introduced in the amended sub-s. (4) of s. 1 of the Act had the effect of making applicable the principles laid down in s. 6 of the General Clauses Act, so that a legal proceeding could be instituted even after the repeal of the Act in respect of an offence committed during the time when the Act was in force. As we have indicated earlier, the notification of the Ministry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erminate. Argument advanced by Shri Vijay Shankar, (CIT-DR), on behalf of the Revenue was that the prosecution/penalty in respect of clause (i) of section 92BA of the Act, was in force in assessment year 2014-15, and therefore it is valid even after 01.04.2017, [when the clause(i) was omitted]. We do not agree with ld DR for the Revenue because omitted clause (i) of section 92BA of the Act, does not contain any condition/ saving clause to the effect that a legal proceeding could be instituted even after the omission of clause (i) of section 92BA of the Act. It is clear that when clause (i) of section 92BA was omitted, the Legislature did not make any provision that any prosecution/penalty committed under clause (i) of section 92BA of the Act, would continue to remain punishable even after its omission w.e.f. 01.04.2017, therefore, in the absence of such condition/ saving clause it would be presumed that clause (i) of section 92BA had obliterated from the inception, that is, it would be presumed that clause (i) of section 92BA was never existed in the statute book. 13. We note that the Hon`ble Supreme Court in the case of KolhapurCanesugar Works Ltd (2000), Civil Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal of a `Rule'. The position will not be different even if the rule has been framed by virtue of the power vested under an enactment; it remains a `rule' and takes its colour from the definition of the term in the Act (General Clauses Act). At the cost of repetition we may say that the omissions in the judgment in M/s Rayala Corporation (supra) pointed out in paragraph 17 of the Judgment of the full Bench have no substance as they are not relevant for determination of the question raised for the reasons stated herein. Shivani Ispat and Rolling Mill (P) Ltd. 31. In paragraph 21 of the judgment the Full Bench has noted the decision of a Constitution Bench of this Court in Chief Inspector of Mines v. K.C. Thapar, AIR 1961 SC 838 and has relied upon the principles laid down therein. The Full Bench overlooked the position that was a case under section 24 of the General Clauses Act which makes provision for continuation of orders, notification, scheme, rule, form or bye-law, issued under the repealed Act or Regulation under an Act after its repeal and re-enactment. In that case section 6 did not come up for consideration. Therefore the ratio of that case is not appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectly decided. The said decisions are overruled. In the case in hand Rule 10 or Rule 10-A is neither a Central Act nor a Regulation as defined in the Act. It may be a Rule under Section 3(51) of the Act. Section 6 is applicable where any Central Act or Regulation made after commencement of the General Clauses Act repeals any enactment. It is not applicable in the case of omission of a Rule . The position is well known that at common law, the normal effect of repealing a statute or provision is to obliterate it from the statute book as completely as if it had never been passed, and the statute must be considered as a law that never existed. To this rule, an exception is engrafted by the provisions Section 6(1). If a provision of a statute is unconditionally omitted without a saving Clause in favour of pending proceedings, all actions must stop where the omission finds them, and if final relief has not been granted before the omission goes into effect, it cannot be granted afterwards. Savings of the nature contained in Section 6 or in special Acts may modify the position. Thus the operation of repeal or deletion as to the future and the past largely depends on the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs, all actions must stop where the omission finds them, and if final relief has not been granted before the omission goes into effect, it cannot be granted afterwards. Savings of the nature contained in Section 6 or in special Acts may modify the position. Thus, the operation of repeal or deletion as to the future and the past largely depends on the savings applicable. In a case where a particular provision in a statute is omitted and in its place another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings then it can be reasonably inferred that the intention of the legislature is that the pending proceeding shall not continue but a fresh proceeding for the same purpose may be initiated under the new provision. Case before us is that the clause(i) of section 92BA is unconditionally omitted without a saving Clause in favour of pending proceedings therefore ld PCIT cannot exercise the jurisdiction under section 263 of the Act. 14. Our view is also fortified by the judgment of the Hon`ble Supreme Court in the case of General Finance Co. 257 ITR 338 (SC), wherein the Hon`ble Supreme Court relied on its previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of the Revenue. iii. Third grievance is thatthe judgments of Hon`ble Supreme Court, which were relied by the assessee in its favour, in the case of Kolhapur Canesugar Works Ltd. V Union of India (2002) 2 SCC 536 and in Royala Corporation P. Ltd. V Director of Enforcement (1969) 2 SCC 412 and in the case of General Finance Co. Vs. Asstt CIT (2002) 257 ITR 338 (SC) were overruled by the Hon`ble Supreme Court by its subsequent judgments in the case of M/s. Shree Bhagwati Steel Rolling Mills vs. C.I.T. Excise Others - 2015(326) ELT 209(S.C.), and M/s. Fibre Boards 62 Taxmann.com 135 (S.C.), therefore, the assessee cannot use them in his favour. 16. Regarding the first grievance of ld DR to the effect that in the assessment year 2014-15, the clause (i) of section 92BA was in force therefore, the exercise of the jurisdiction under section 263 of the Act during the currency of the Act is very much valid. The said issue has been already addressed by us in para 12 of this order, hence we do not repeat the same for the sake of brevity. 17. Regarding second grievance of ld DR who relied on the following two judgments of Hon`ble Supreme Court, namely: (1) M/s. Shree Bh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore with the Karnataka High Courts view we set aside the judgment of the Punjab and Haryana High Court and declare that a Chartered Engineer Certificate dealing with the sanctioned electrical load for a furnace is a relevant consideration which can be looked at in the absence of other factors mentioned in Rule 3. This appeal is disposed of accordingly. 44. Conclusion We have declared in this judgment that the interest and penalty provisions under the Rules 96ZO, ZP, and ZQ of the Central Excise Rules, 1994 are invalid for the reasons assigned in the judgment. Accordingly, the appeals filed by the Revenue are dismissed and the appeals filed by the assessees are allowed to the extent indicated above. It may be noted that in an appeal from a judgment of the Allahabad High Court dated 8.11.2012 in SLP (C) No. 9796/2012, it has been held that the levy of penalty under the aforesaid provisions is mandatory in character. In view of what has been held by us today, this appeal will also have to be allowed in the same terms as the other assessees appeals which have been allowed. All the aforesaid appeals are disposed of accordingly. Having gone through the concluding para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ane to be an urban area dated 22.9.1967 would continue under and for the purposes of Section 54G. It is clear, therefore, that the impugned judgment in not referring to section 24 of the General Clauses Act at all has thus fallen into error. 19. But then Shri Arijit Prasad put before us two roadblocks in the form of two Constitution Bench decisions. He cited Rayala Corporation (P) Ltd. and M.R. Pratap v. Director of Enforcement, New Delhi, (1969) 2 SCC 412 which was followed in Kolhapur Canesugar Works Ltd. Anr. v. Union of India Ors., (2000) 2 SCC 536. He argued based upon these two judgments that an omission would not amount to repeal and that since the present case was concerned with the omission of Section 280ZA, Section 24 would have no application. 20. Shri Prasad is correct in relying upon these two Constitution Bench judgments for they do indeed say that in Section 6 of the General Clauses Act, the word repeal would not take within its ken an omission . 21. In Rayala Corporation (P) Ltd., what fell for decision was whether proceedings could be validly continued on a complaint in respect of a charge made under Rule 132A of the Defence of India Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h respect we agree with the principles laid down by the Constitution Bench in RayalaCorpn. Case [(1969) 2 SCC 412 : (1970) 1 SCR 639]. In our considered view the ratio of the said decision squarely applies to the case on hand. 23. The Kolhapur Canesugar Works Ltd. judgment also concerned itself with the applicability of Section 6 of the General Clauses Act to the deletion of Rule 10 and 10A of the Central Excise Rules on 6th August, 1977. 24. An attempt was made in General Finance Company Anr. v. Assistant Commissioner of Income Tax, Punjab, (2002) 7 SCC 1 to refer these two judgments to a larger bench on the point that an omission would not amount to a repeal for the purpose of Section 6 of the General Clauses Act. Though the Court found substance in the argument favouring the reference to a larger bench, ultimately it decided that the prosecution in cases of non-compliance of the provision therein contained was only transitional and cases covered by it were few and far between, and hence found on facts that it was not an appropriate case for reference to a larger bench. 25. We may also point out that in G.P. Singh s Principles of Statutory Interpretation, 12th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other hand, that the Constitution Bench had given two reasons for the non-applicability of Section 6 of the General Clauses Act. In such a situation, obviously both reasons would be ratio decidendi and would be binding upon a subsequent bench. However, once it is found that Section 6 itself would not apply, it would be wholly superfluous to further state that on an interpretation of the word repeal , an omission would not be included. We are, therefore, of the view that the second so-called ratio of the Constitution Bench in Rayala Corporation (P) Ltd. cannot be said to be a ratio decidendi at all and is really in the nature of obiter dicta. 28. Secondly, we find no reference to Section 6A of the General Clauses Act in either of these Constitution Bench judgments. Section 6A reads as follows: 6A. Repeal of Act making textual amendment in Act or Regulation - Where any Central Act or Regulation made after the commencement of this Act repeals any enactment by which the text of any Central Act or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Act intended to be repealed, for once legislative competence to effect a repeal is posited, it matters little whether this is done expressly or inferentially or by the enactment of repugnant legislation. If such is the basis upon which repeals and implied repeals are brought about it appears to us to be both logical as well as in accordance with the principles upon which the rule as to implied repeal rests to attribute to that legislature which effects a repeal by necessary implication the same intention as that which would attend the case of an express repeal. Where an intention to effect a repeal is attributed to a legislature then the same would, in our opinion, attract the incident of the saving found in Section 6 for the rules of construction embodied in the General Clauses Act are, so to speak, the basic assumptions on which statutes are drafted . (At page 484) 31. The two later Constitution Bench judgments also did not have the benefit of the aforesaid exposition of the law. It is clear that even an implied repeal of a statute would fall within the expression repeal in Section 6 of the General Clauses Act. This is for the reason given by the Constitution Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision which substantially covers the field occupied by the repealed provision with certain modification, in that event such re-enactment is regarded having force continuously and the modification or changes are treated as amendment coming into force with effect from the date of enforcement of the re-enacted provision. Viewed in this background, the effect of the re-enacted provision of Section 80-JJ was that profit from the business of livestock and poultry which enjoyed total exemption under Section 10(27) of the Act from Assessment Years 1964-65 to 1975-76 became partially exempt by way of deduction on fulfilment of certain conditions. (At para 12) 35. For all the aforesaid reasons, we are therefore of the view that on omission of Section 280ZA and its re-enactment with modification in Section 54G, Section 24 of the General Clauses Act would apply, and the notification of 1967, declaring Thane to be an urban area, would be continued under and for the purposes of Section 54A. 36. A reading of Section 54G makes it clear that the assessee is given a window of three years after the date on which transfer has taken place to purchase new machinery or plant or acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r such payment of advance amount, it has taken possession of land and building, plant and machinery. In our view, if the argument of the learned Senior Counsel for the assessee is accepted, it would defeat the very purpose and object of the Section itself. By merely paying some amount by way of advance towards the cost of acquisition of land for shifting its industrial unit from urban area to non-urban area, an assessee cannot claim exemption from payment of tax on capital gains. This cannot be the intention of the Legislature and an interpretation, which would defeat the very purpose, and the object of the Act requires to be avoided. (at para 31 of the impugned judgment) 38. We are of the view that the aforesaid construction of Section 54G would render nugatory a vital part of the said Section so far as the assessee is concerned. Under subsection (1), the assessee is given a period of three years after the date on which the transfer takes place to purchase new machinery or plant and acquire building or land or construct building for the purpose of his business in the said area. If the High Court is right, the assessee has to purchase and/or acquire machinery, plant, land an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simultaneously reenacts a new provision which substantially covers the field occupied by the repealed provision with certain modification, in that event such re-enactment is regarded having force continuously and the modification or changes are treated as amendment coming into force with effect from the date of enforcement of the re-enacted provision. 19. Now, we shall address the third grievance of ld DR which is thatthe judgments of Hon`ble Supreme Court, which were relied by the assessee in its favour, in the case of Kolhapur Canesugar Works Ltd. V Union of India (2002) 2 SCC 536 and in Rayala Corporation P. Ltd. V Director of Enforcement (1969) 2 SCC 412 and in the case of General Finance Co. Vs. Asstt CIT (2002) 257 ITR 338 (SC) were overruled by the Hon`ble Supreme Court by its subsequent judgments in the case of M/s. Shree Bhagwati Steel Rolling Mills vs. C.I.T. Excise Others - 2015(326) ELT 209(S.C.), and M/s. Fibre Boards 62 Taxmann.com 135 (S.C.), therefore, the assessee can not use them in his favour. We do not agree with such contention of ld DR, rather, we have noticed after going through the subsequent judgments of Hon`ble Supreme Court in the case of M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id and binding agreement. Thus, the Saving clause means a clause which denotes a reservation or exception. As per Find Law Legal dictionary, saving clause means a clause in a statute exempting something from statute s operation. Having discussed the meaning of saving clause, it has become quite clear that at the time of omission of clause (i) of section 92BA with effect from 01.04.2017 the Legislature did not mention any terms and conditions to the effect that after omission of clause (i) of section 92BA, pending proceedings/penalties etc, till the date of omission (01.04.2017) will survive. That is, the Legislature did not insert new section in the Income Tax Act to the effect that pending proceedings/penalties etc in relation to clause (i) of section 92BA will survive even after omission, (that is, after 01.04.2017). Hence, we note that these terms and conditions, as discussed above, are absent in case of omitted clause (i) of section 92BA of the Act, therefore as per the law laid down by the Hon ble Supreme Court in the case of Rayala Corporation (supra) and Kohlapur Cane Sugar (supra), it will be presumed that clause (i) of section 92BA never existed in the Statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of a statute is unconditionally omitted without a saving Clause in favour of pending proceedings, all actions must stop where the omission finds them, and if final relief has not been granted before the omission goes into effect, it cannot be granted afterwards. Savings of the nature contained in Section 6 of General Clauses Act or in special Acts may modify the position. Thus, the operation of repeal or deletion as to the future and the past largely depends on the savings applicable. In a case where a particular provision in a statute is omitted and in its place another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings then it can be reasonably inferred that the intention of the legislature is that the pending proceeding shall not continue but a fresh proceeding for the same purpose may be initiated under the new provision. In this case, Clause (i) of section 92BA was omitted w.e.f 01.04.2017, and after its omission the ld. PCIT passed order u/s. 263 on 28.03.2019. Since clause (i) of section 92BA was unconditionally omitted without a saving clause in favour of Pending Proceedings therefore ld. PCIT o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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