# M/S. FIBRE BOARDS (P) LTD. BANGALORE v. COMMISSIONER OF INCOME TAX, BANGALORE

- **Citation:** [2015] 8 S.C.R. 906
- **Court:** Supreme Court of India
- **Decided:** 2015-08-11
- **Case number:** Civil Appeal Nos. 5525-5526 of 2005
- **Bench:** A. K. Sikri, R. F. Nariman
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-fibre-boards-p-ltd-bangalore-v-commissioner-of-income-tax-bangalore-30825
- **Pages:** 38

## Headnote

Income Tax Act, 1961- s. 54G - Exemption of capital
c gains on transfer of assets in cases of shifting of industrial
undertaking from urban area - Exemption u/s. 54G - Claim
of, by assessee - On the entire capital gain earned from the
sale proceeds of its erstwhile industrial undertaking situated
in notified urban area in view of the advances so made being
D more than the capital gain made by it- Held: Advances paid
for the purpose of purchase and/or acquisition of the said
assets amount to utilization·by the assessee of the capital
gains made by him for the purpose of purchasing·andlor
acquiring the said assets - Thus, assessee entitled to
E exemption uls. 54G.
General Clause Act, 1897 - s. 24 - Applicability ofTo omission of s. 280ZA and its re-enactment with
mocJification in s. 54G - Held: On omission of s. 280ZA and
F its re-enactment with modification in s. 54G, s. 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 s. 54G.
G
Allowing the appeals, the Court
HELD: 1.1 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
H omitting Section 280ZA and Introducing on the same date
906
M/S. FIBRE BOARDS (P) LTD. BANGALORE v. COMMNR. 907
OF INCOME TAX, BANGALORE
Section 54G of the Income Tax Act, 1961 was to do away A
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the repealed provision with the new scheme contained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 B
together with Section 280ZA. However, it. is agreed that
this would make no materi~I difference inasmuch as
Section 280Y(d) is a definition Section defining "urban
area" for the purpose of Section 280ZA only and for no
. other purpose. It is clear that once Section 280ZA is C
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 D
contained in Section 280Y(d) in the same terms. ·
Obviously, both provisions are not expected to be
applied simultaneously and it is clear that the
explanation to Section 54G(1) repeals by implication
Section 280Y(d). [Para 12] [924-H; 925-A-D]
E
1.2 From a reading of the notes on clauses and .
the Memorandum of the Finance Bill, 1990, it is clear that
Section 280Y(d) which was omi.tted with effect from
1.4.1990 was so omitted because it had become F
"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. Therefore, G
the High Court erred in not referring t_o Section 24 of the
General Clauses Act. [Para 15] [928-C-E]
1.3 On a reading of Section 24 together.with what
has been stated by this Court in Harnek Singh's case, it H
908
SUPREME COURT REPORTS
[2015] 8 S.C.R.
A cannot be said 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, schemes, rules etc. that
B are made under a Central Act which is repealed and reenacted 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
C and re-enacted with or without modification. It being clear
in the instant case that Section 280ZA which was
repealed by omission and re-enacted with modification.
in section 54G, the notification declaring Thane to be an
0 urban area dated 22.9.1967 woul

## Text

_Characters 0–39,979 of 67,634. This is a partial read: ask again with offset=39979 for what follows._

[2015) 8 S.C.R. 906
A
M/S. FIBRE BOARDS (P) LTD. BANGALORE
B
v.
COMMISSIONER OF INCOME TAX, BANGALORE
(Civil Appeal Nos. 5525-5526 of 2005)
AUGUST 11, 2015
[A. K. SIKRI AND R. F. NARIMAN, JJ.]
Income Tax Act, 1961- s. 54G - Exemption of capital
c gains on transfer of assets in cases of shifting of industrial
undertaking from urban area - Exemption u/s. 54G - Claim
of, by assessee - On the entire capital gain earned from the
sale proceeds of its erstwhile industrial undertaking situated
in notified urban area in view of the advances so made being
D more than the capital gain made by it- Held: Advances paid
for the purpose of purchase and/or acquisition of the said
assets amount to utilization·by the assessee of the capital
gains made by him for the purpose of purchasing·andlor
acquiring the said assets - Thus, assessee entitled to
E exemption uls. 54G.
General Clause Act, 1897 - s. 24 - Applicability ofTo omission of s. 280ZA and its re-enactment with
mocJification in s. 54G - Held: On omission of s. 280ZA and
F its re-enactment with modification in s. 54G, s. 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 s. 54G.
G
Allowing the appeals, the Court
HELD: 1.1 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
H omitting Section 280ZA and Introducing on the same date
906
M/S. FIBRE BOARDS (P) LTD. BANGALORE v. COMMNR. 907
OF INCOME TAX, BANGALORE
Section 54G of the Income Tax Act, 1961 was to do away A
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 B
together with Section 280ZA. However, it. is agreed that
this would make no materi~I difference inasmuch as
Section 280Y(d) is a definition Section defining "urban
area" for the purpose of Section 280ZA only and for no
. other purpose. It is clear that once Section 280ZA is C
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 D
contained in Section 280Y(d) in the same terms. ·
Obviously, both provisions are not expected to be
applied simultaneously and it is clear that the
explanation to Section 54G(1) repeals by implication
Section 280Y(d). [Para 12] [924-H; 925-A-D]
E
1.2 From a reading of the notes on clauses and .
the Memorandum of the Finance Bill, 1990, it is clear that
Section 280Y(d) which was omi.tted with effect from
1.4.1990 was so omitted because it had become F
"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. Therefore, G
the High Court erred in not referring t_o Section 24 of the
General Clauses Act. [Para 15] [928-C-E]
1.3 On a reading of Section 24 together.with what
has been stated by this Court in Harnek Singh's case, it H
908
SUPREME COURT REPORTS
[2015] 8 S.C.R.
A cannot be said 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, schemes, rules etc. that
B are made under a Central Act which is repealed and reenacted 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
C and re-enacted with or without modification. It being clear
in the instant case that Section 280ZA which was
repealed by omission and re-enacted with modification.
in section 54G, the notification declaring Thane to be an
0 urban area dated 22.9.1967 would continue under and
for the purposes of Section 54G. [Para 18] [932-A-D]
1.4 A reading of Section 6A of the General Clauses
Act would show that a repeal can be by way of an express
omission. This being the case, obviously the word
E "repeal" in both Section 6 and Section 24 would,
therefore, include repeals by express omission. [Para 29]
[937-8]
1.5 It Is clear that even an implied repeal of a statute
F would fall within the expression "repeal" in Section 6 of
the General Clauses Act. This is for the reason given by
the Constitution Bench in M.A. Tulloch & Co., that only
the form of repeal differs but there is no difference in
intent or substance. If even an Im piled repeal is covered
G by the expression "repeal", it is clear that repeals may
take any form and so long as a statute or part of it is
obliterated, such obliteration would be covered by the
expression "repeal" in Section 6 of the General Clauses
H Act. At this stage, it is important to note that a temporary
statute does not attract the provision of Section 6 of the
MIS. FIBRE.BOARDS (P) LTD. BANGALORE v. COMMNR. 909
OF INCOME TAX, BANGALORE
General Clauses Act only for the reason that the said A
statute expires by itself after the period for which it has
been promulgated ends. In such cases, therEiis no repeal
for the. reason that the legislature has not applied its mind
to a live statute and obliterated it. In all cases where a
temporary statute ·expires, the statute .expires of its own B
force without being obliterated by a subsequent
legislative .enactment. But even in this area, ifa 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. Therefore, on omission of C
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 0
purposes of Section 54A. [Paras 31,.33, 35) [938-F·G; 939C-E; 940-D·E]
1.6 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" E
new machinery or plant or "acquire" building or land.
The High Court completely missed the window of three
years given to the assessee to purchase or acquire
machinery and building or land.' This fs why the F
expression used in 54G(2) is "which is rrot utilized by
him for all or any of the purposes aforesaid .... ". It is clear
that for the assessment year in question~ all that is
required for the assessee to avail of the exemption
contained in the Section is to "utilize" fhe amount of G
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 H
building. [Para 36) [940-F-H; 941-A]
910
SUPREME COURT REPORTS
[2015) 8 S.C.R.
A
1.7 The.construction of Section 54G by the High
Court would render nugatory a vital part of the said
Section so fanrs 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
B 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,
C plant, land and building within the same assessment year
in which the transfer takes pla.ce. 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
gains made by the assessee should only be "utilized"
0
by him in the assessment year in question for all or any
of the purposes aforesaid, that is towards purchase and
acquisition of plant and machinery, and land and
building. Advances paid for the purpose of purchase
and/or acquisition of the aforesaid assets would certainly
E amount to utilization by the assessee of the capital gains
made by him for the purpose of purchasing and/or
acquiring the said assets. Thus, the assessee is liable
to succeed. The order passed by the High Court is set
F
G
H
aside. [Para 38] [942-D-H; 943-A]
State of Orissa and another v. Mis M.A. Tulloch and
Co., (1964) 4 SCR 461; Ratan Lal Adukia v. Union of
India 1989 (3) SCR 440: (1989) 3 sec 537;
Poonjabhai Vanma/idas v.Commissioner of Income
Tax, Ahmedabad 1990 (2) Suppl. SCR 206 : 1992
Supp. (1) SCC 182; State of Punjab v. Hamek Singh
2002 (1) SCR 1060: (2002) 3 sec 481; Raya/a
Corporation (P) Ltd. and M.R. Pratap v. Director of
Enforcement, New Delhi 1970 (1) SCR 639 : (1969) 2
SCC 412; Ko/hapur Canesugar Works Ltd. & Anr. v.
,.
M/S. FIBRE BOARDS (P) LTD. BANGALORE v. COMMNR. 911
OF INCOME TAX, BANGALORE
Union of/ndia & Ors. 2000 (1) SCR 518: (2000) 2 SCC
A
536; General Finance Company & Anr. v. Assistant
Commissioner of Income Tax, Punjab 2002"(2). Suppl.
SCR 106 : (2002) 7 SCC 1; Mamleshwar Prasad & Anr.
v. Kanahaiya Lal (dead) through LRs. (1975) 3 SCR
834; State of Punjab v. Mohar Singh (1955) 1 SCR 893;
B
CIT.v. Venkateswara Hatcheries (P) Ltd. 1999 (2) SCR
177 : (1999) 3 sec 632- referred to.
·:1~:
G.P. Singh's Principles of Statutory Interpretation 12th
Edn; Halsbury's Laws of England 4th Edn - referred to.
C
Case Law Reference
(1964) 4 SCR 461
. referred to. Para 13
1989 (3) SCR 440
referred to. Para 13
D
1990 (2) Suppl. SCR 206
referred to. Para 16
2002 (1) SCR 1060
referred to.· Para 17
1970 (1) SCR 639
referred to. Para 19,
21,27
E
2000 (1) SCR 518
referred to. Para 19,
22,23
2002 (2) Suppl. SCR 106
referred to. Para 24
(1975) 3 SCR 834
referred to. Para 29
(1955) 1 SCR 893
referred to. ,.,.Para 33
F
1999 (2) SCR 177
referred to. Para34.
~fl
CIVILAPPELLATE JURISDICTION: Civil Appeal Nos.
5525-5526 of 2005
,.
G
~~ f
From the Judgment and Order dated 26.05.2005 of the
High Court of Karnataka at Bangalore in l.T.R.C. bearing Nos ..
26 and 27 of 1997
·,"=. ~
Dhruv Mehta, A Kulkarni, Yashraj Singh Deora, Shreya H
912
SUPREME COURT REPORTS
[2015] 8 S.C.R.
A Agrawal, Mitter & Mitter Co. for the Appellant.
B
Arijit Prasad, Gargi Khanna, Anil Katiyar for the
Respondent.
The Judgment of the Court was delivered by
R. F. NARIMAN, J. 1. The assessee, a private limited
company, had an industrial unit at Majiwada, Thane, which was
a notified urban area. With a view to shift its industrial
undertaking from an urban area to a non-urban area at
C Kurukumbh Village, Pune District, Maharashtra, it sold its land,
building and plant and machinery situated at Majiwada, Thane
to Shree Vardhman Trust for a consideration of
Rs.1,20,00,000/-, and after deducting an amount of
0
Rs.11,62,956/-, had earned a capital gain of Rs.1,08,33,044/
-. Since it intended to shift its industrial undertaking from an
urban area to a non-urban area, out of the capital gain so
earned, the appellant paid by way of advances various amounts
to different persons for purchase of land, plant and machinery,
E construction of factory building etc. Such advances amounted
to Rs.1, 11,42,973/" In the year 1991-1992. The appellant
claimed exemption under Section 54G of the Income Tax Act
on the entire capital gain earned from the sale proceeds of its
erstwhile industrial undertaking situate in Thane in view of the
F advances so made being more than the capital gain made by
it.
2. By an or<;ler dated 31.3.1994, the Assessing Officer
imposed a tax on capital gains, refusing to grant exemption to
G the appellant under Section 54G. The reasons given were:
H
"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
M/S. FIBRE BOARDS (P) LTD. BANGALORE v: COMMNR. 913
OF INCOME TAX, BANGALORE [R. F. NARIMAN, J.]
a non urban area. The second point is regarding
A
utilization of capital gains. In this case, the assessee has
given advances to different persons. HoV:.ever, such
advance does not amount to utilization of capital gains.
The assessee is required to acquire the plant and
machinery within the time frame spelt out in sub-section
B
( 1) of Section 54G However, if it fails to acquire the plant
and machinery before one year of transfer or within the
period of filing return, it is supposed to deposit the capital
gains in the Capital Gains Deposit Scheme. It cannot be
c
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
D
u/s54G
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 iri the Capital Gains
E
Deposit Account, the assessee's claim is not applicable."
3. By its order dated 20.7.1995, the Commissioner,
Income Tax (Appeals) dismissed the appellant's appeal. By
its order dated 20.11.1995, the Income Tax Appellate Tribunal
allowed the assessee's appeal stating that even an agreement F
to purchase.is good enough and that the explanation to Section
54G being declaratory in nature would be retrospective.
4. By the impugned judgment dated 26.5.2005, the High
Court reversed the judgment of the Income Tax Appellate G
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 H
914
SUPREME COURT REPORTS
(2015] 8 S.C.R.
A
area. Further, the expression "purchase" in Section 54G cannot
be equated with the expression "towards purchase" and,
therefore, admittedly as land, plant and machinery had not been
purchased In the assessment year in question, the exemption
contained in Section 54G had to be denied. It is the correctness
B of this judgment that is assailed before us.
5. Shri Dhruv Mehta, learned senior advocate
appearing on behalf of the assessee argued before us and
pointed out that Chapter XXll-B of the Income Tax Act, prior to
C
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
D "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 XXI 1-B. He further contended that Section 54G was
inserted on 1.4.1988" at the same time that Section 280ZA
E was omitted and that therefore Section 24 of the General
Clauses Act would be attracted to the facts of this case. That
being so, the notification dated 22.9.1967 would enure to the
benefit of the appellant for the purpose of claiming exemption
F from capital gains under Section 54G. He also argued that
Section 280Y(d), which was omitted with effect from 1990, had
been so omitted because it had been rendered redundant with
the omission of Section 280ZA. Further, according to learned
counsel, on a correct interpretation of Section 54G, the
G assessee gets a period of three years after the date on which
the transfer has taken place to purchase new machinery and
plant, and acquire land or construct building. Further, in order
to avail the benefit of Section 54G all that the assessee has to
· do in the assessment year in question is to "utilize" the amount
H of capital gain for the purposes aforesaid before the date of
,
M/S. FIBRE BOARDS (P) LTD. BANGALORE v. COMMNR. 915
OF INCOME TAX, BANGALORE [R. F. NARIMAN, J.]
furnishing the return of income under Sectio1111139. If that is A
done, it is not necessary for the assessee to deposit before
furnishing such return, the amount in a Capital Gain Deposit
Scheme and utilize such proceeds in accordance with the
scheme which the Central Government may by notification
frame in this behalf. His further contention was that in any case B
the explanation added to Section 54G(1) being in the same
terms as Section 280Y(d) has repealed Section 280Y(d) by
implication.
. '
. 6. Learned counsel for the revenue, Shri Arijit Prasad C
supported the judgment of the High Court and argued that
Section 24 of the General Clauses Act had no application to
the facts of the present case as it only applied to 'repeals' and
not 'omissions', and also that it saved rights that were given
by subordinqte legislation, and as the notification dated
~
22.9.1967 did not by itself confer any right on the appellant,
Section 24 of the General ClausesAct w9uld not be attracted.
He further submitted that as no purchase of plant and machinery
and/or acquisition of land or building or construction of building
had actually taken place in the assessment year in question, · E
in any event the conditions precedent for the applicability of
Section 54G were not met. As was pointed out by the
assessee itself by a letter dated 25.11.1993, even till that date
land had not been acquired but only possession was taken
F
and a factory building had not yet been constructed. This being
so, according to him, the High Court's judgment needs no
interference:
.J ,-ic
7. We have heard learned counsel for t~.e parties. In
order to appreciate the submissions made by tioih sides, it is G
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, -
H
916
A
B
c
SUPREME COURT REPORTS
(a)
(b)
Xxx
Xxx
(c)
Xxx
[2015) 8 S.C.R.
(d) "urban area" means any area which the Central
Government may, having regard to the population,
concentration of industries, need for proper planning
of the area and other relevant factors, by general or
special order declare to be an urban area for the
purposes of this Chapter.
Section 280ZA as it stood before its amendment in
1988 read as follows:-
o
280ZA. Tax credit certificates for shifting of industrial
undertaking from urban area.- (1) If any company
owning an industrial undertaking situate in an urban
area shifts, with the prior approval of th~ Board, such
undertaking to any area (not being the area in which
E
such undertaking is situate), it shall be granted a tax
credit certificate.
(2) The tax credit certificate to be granted under subsection (1) shall be for an amount computed in the
F
following manner with reference to the amount of the
tax payabie 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
G
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:-
H
(a) the amount of expenditure incurred by the company
in-
M/S. FIBRE BOARDS (P) LTD. BANGALORE v. COMMNR. 917
·
OF INCOME TAX, BANGALORE [R. F. NARIMAN, J.]
(i) purchasing new machinery or plant forthe purposes
A
of the business of the company in the area to wliich
the undertaking is shifted;
(ii) acquiring lands or constructing buildings for the
purposes of its business in the said area; and
B
(iii) shifting its machinery or plant and other effects
and transferring its establishment to such area,
within a period of three years, from the date of the
approval referred to in sub-section ( 1 ), or such further
period as the Board may allow, shall first be
ascertained;
(b) the amount of the tax credit certificate shall bear to
the amount of tax payable by the company on its
income chargeable under the head "Capital 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.
c
D
E
(3)
The amount shown on a tax credit certificate
F
granted to a company under this section shall, on the
certificate being produced before the Income-tax
Officer, be adjusted against any liability of the company
under the Indian lncome-taxAct, 1922 (11of1922), or
this Act, existing on the date on Which the certificate
G
was produced before the Income-tax Officer and
where the amount of such certificate exceeds such
liability, or where there is no such liability, the exce.ss
or the whole of such amount, as the case may be, shall,
notwithstanding anything contained in Chapter XIX, be
H
918
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[2015] 8 S.C.R.
deemed, on the said date, to be refund due to the
company under that Chapter and the provisions of this
Act shall apply accordingly.
(4) Where a capital asset, being machinery or plant
purchased for the purposes of the busine~s of the
company in the area to which the undertaking is shifted
or building or land, or any right in building or land, .
acquired, or as the case may be, constructed in the
said area, is transferred by the company within a
period of five years from the date of purchase,
acquisition or, as the case may be, the date of
completion of construction to any person other than
the Government, a iocal authority, a corporation
established, by a Central, State or Provincial Act or a
Government company as defined in section 617 of
the Companies Act, 1956 (1 of 1956), an amount equal
to one-half of the amount for which a tax credit
certificate has been granted to the company under subsection (1) shall be deemed to be tax due from the
company on the thirtieth day following the date of
transfer under a notice of demand issued under
Section 156, and all the provisions of this Act shall
apply accordingly.
Explanation. - Any land or building used for the
residence of persons employed in the business of the
company or for the use of such persons as a hospital,
creche, 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
forthe purposes of the business of the company.
The notification dated 22.9.1967 issued under Section
280Y(d) reads as under:-
MIS. FIBRE BOARDS (P) LTD. BANGALORE v.COMMNR. 919
OF INCOME TAX, BANGALORE [R. F. NARIMAN, J.]
"In pursuance of clause (d) of section 280Y of the IncomeA
tax Act, 1961 (43 of 1961) the Central Government hereby
declares the areas shown in column (3) of the Schedule
hereto annexed and forming part of the territory of the
State or the Union territory, as the case may be, specified
in the corresponding entry in column (2) thereof to be
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"urban areas" for the purposes of Chapter XXll-B of the
said Act, namely:-·
SCHEDULE
Serial No.
Name of the State or
the Union territory
Details of the area C
(1)
(2)
(3)
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6. Maharashtra
(i)
BombayThanaArea.
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(ii)
Poona-Pimpri-Chinchwad
area.
.
(iii)
Khopoli area.
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(iv)
Areas within the limits of-
( a) Nagpur Municipal Corporation.
(b) Sholapur Municipal Corporation. H
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8. Section 54G of the Income Tax Act inserted by the
Finance Act, 1987 ~ith effect from 1.4.1988 reads as follows:
"54G. Exemption of capital gains on transfer of
assets in cases of shifting of industrial undertaking
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from urban area. (1) Subject to the provisions of subsection (2), where the capital gain arises from the transfer
of a capital asset, being machinery or plant or building
or land or any rights in building or land used for the
purposes of the business of an industrial undertaking
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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
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after the date on which the transfer took place,-
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(a) purchased new machinery or plantfor the purposes
of business of the industrial undertaking in the area to
which the said undertaking is shifted;
(b) acquired building or land or constructed building for
the purposes of his business in the said area;
(c) shifted the original asset and transferred the
establishment of such undertaking to such area; and
( d) incurred expenses on such other purpose as may be
specified in a scheme framed by the Central Government
for the purposes of this section,
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then, instead of the capital gain being charged to incometax 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,-
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(1) if the amount of the capital gain is greater than the
M/S. FIBRE BOARDS (P) LTD. BANGALORE v. COMMNR. 921
OF INCOME TAX, BANGALORE [R. F. NARIMAN, J.]
cost and expenses incurred in relation to all or any of the
purposes mentioned in clauses (a) to (d) (such cost and
expenses being hereafter in this section referred to as
the new asset), the difference between the amount of the
capital gain and the cost of the new asset shall be
charged under section 45 as the income of the previous
year; and for the purpose of computing in respect of the
new asset any capital gain arising from its transfer within
a period of three years of its being purchased, acquired,
constructed or transferred, as the case may be, the cost
shall be nil; or
(it) if the amount of the capital gain is equal to, or less
than, the cost of the new asset, the capital gain shall not
be charged under section 45; and for the purpose of
computing in respect of the new asset any capital gain
arising from its transfer within a period of three years of
its being purchased, acquired, constructed or transferred,
as the case may be, the cost shall be reduced by the
amount of the capital gain.
Explanation.-ln this sub-section, "urban area" means
any such area within the limits of a municipal corporation
or municipality as the Central Government may, having
regard to the population, concentration of industries, need
for proper planning of the area and other relevant factors,
by general or special order, declare to be an urban
area for the purposes of this sub-section.
(2) The amount of capital gain which is not appropriated
by the assessee towards the cost and expenses incurred
in relation to all or any of the purposes mentioned in
clauses (a) to (d) of sub-section (1) within one year before
the date on which the transfer of the original asset took
place, or which is not utilised by him for all or any of the
purposes aforesaid before the date of furnisning the return
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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 which the Central
Government may, by notification in the Official Gazette,
frame in this behalf and such return shall be accompanied
by proof of such deposit; and, for the purposes of subsection (1), the amount, if any, already utilised by the
assessee for all or any of the purposes aforesaid together
with the amount, so deposited shall be deemed to be
the cost of the new asset:
Provided that if the amount deposited under this subsection is not utilised wholly or partly for all or any of the
purposes mentioned in clauses (a) to (d) of sub-section
(1) within the period specified in that sub-section, then,-
(1) 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 from the same date i.e. 1.4.1988.
G We have been referred to the Budget Speech of the Minister
of Finance when he introduced the Finance Act, 1987. Among
other things, the learned Minister stated:-
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"83. Concentration of industries in many of our urban
areas poses serious problems of congestion, pollution
and hazards. In order to encourage industries to shift out
MIS. FIBRE BOARDS (P) LTD. BANGALORE v. COMMNR. 923
OF INCOME TAX, BANGALORE [R. F. NARIMAN, J.]
of such areas, I propose to exempt capital gains made
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on the sale of land and l:luildings in such areas provided
these are reinvested in approved relocation schemes."
10. Further, the notes on clauses for the Finance Bill,
1987 reads as under:-
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"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
andertaking shifting from urban area. Sub-section (1)
provides that if an assessee transfers a long-term capital
asset in the nature of machinery, plant, building or land
used for the purposes of the business of the industrial
undertaking situated in an urban area in connection with
the shifting of such undertaking to a non-urban area, and
within a period of one year before or three years after
the date of transfer, purchases new machinery or plant
and acquires land or building or constructs building for
the purposes of his business in the area to which the
undertaking is shifted or incurs expenses on shifting the
original asset and transferring the establishment of the
undertaking to such area and incurs expenses on such
other purposes as may be specified in a scheme framed
by the Central Government, the capital gain shall be
exempt to the extent such gain has been utilized for the
aforesaid purposes.
Explanation to sub-section (1) defines "urban area" on
the lines of the definition in section 280Y."
11. The relevant part of the memorandum explaining
the provisions in the Finance Bill, 1987 reads as under:
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"34. Under the existing provisions of section 2BOZA of
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the Income-tax Act, any company owning an industrial
undertaking situated in an urban area, is entitled for a
tax credit certificate with reference to the amount of the
tax payable on capital gains arising from the transfer of
its machinery, plant, etc., to any other area. These
provisions have not proved to be very effective.
With a view to promoting decongestion of urban areas
a11d balanced regional growth, the Bill seeks to exempt
capital gains arising on transfer of long-term capital
assets in the nature of machinery, plant, building or land
used for the purposes of the business of the industrial_
undertaking situated in an urban area in connection with
the shifting of such industrial undertaking from an urban
area to a non-urban area. Accordingly, capital gain_s
arising in such cases will be exempt to the extent they
are utilized within a period of one year before or three
years after the date of transfer, for the purchase of new
machinery or plant or acquiring land and building, etc.,
for the purpose of the business in the area to which the
undertaking is shifted or incurs expenses on shifting the
original asset and transferring the establishment of the
undertaking to such area and incurs expenses as may
be specified.
As a consequential measure. section 280ZA of the
Income-tax Act is proposed to be omitted.
These amendments will take effect from 1 "April, 1988,
and will, accordingly, apply in relation to the assessment
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year 1988-89 and subsequent years."
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12. On a conjoint reading of the aforesaid Budget
Speech, notes on clauses and memorandum explaining the
Finance Bill of 1987, it becomes clearthatthe idea of omitting
H Section 280ZA-and introducing on the same date Section 54G
M/S. FIBRE BOARDS (P) LTD. BANGALORE v. COMMNR. 925
OF INCOME TAX, BANGALORE [R. F. NARIMAN, J.]
was to do away with the tax credit certificate scheme together A
with the p.rior approval required by the Board and to substitute
the repealed provision with the new scheme contained in
Section 54G. It is true thatSection 280Y(d) was only omitted
by the Finance Act, 1990 and was not omitted together with
Section 280ZA. However, we-agree with learned counsel for B
the appellant that this would make no material difference
inasmuch as Section 280Y(d) is a definition Section defining
"urban area" for the purpose of Section 280ZA only and for no
other purpose .. It is clear that once Section 280ZA is omitted C
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 0
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 ofOrissa and another
v. M/s M.A. Tulloch and Co., (1964) 4 SCR 461, this Court. E
considered the question as to whether the expression "repeal"
in Section 6 of the General Clauses Act would be of sufficient
amplitude to cover cases of implied repeal. This Court stated:
"The next question is whether the application of that
principle could or ought to be limited to cases where a
particular form of words is used to indicate that the earlier
law has been repealed. The entire theory underlying
implied repeals Is that there is no need for the later
enactment to state in express terms that an earlier
enactment has been repealed by using any particular set
of words or form of drafting but that if the legislative intent
to supersede the earlier law is manifested by the
enactment of provisions as to effect such supersession,
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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, thi1; Court held that the substituted Section 80 of
B 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 Court stated:-
"The doctrine of implied repeal is based on the postulate
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that the legislature which is presumed to.know the existing
state of the law did not intend to create any confusion by
retaining conflicting provisions. Courts, in applying this
doctrine, are supposed merely to give effect to the
legislative intent by examining the object and scope of
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the two enactments. But in a conceivable case, the very
existence of two provisions may by itself, ar:ld without
more, lead to an. inference of mutual 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
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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
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distinguishable on the basis of their particular subject
matters." (at para 18)
14. Further, the Finance Act which omitted the whole of
Chapter XXll-B of which Section 280Y(d) is a part, in its notes
G on clauses stated:
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"Clause 46 seeks to omit Chapter XXll-B of the
Income-tax Act relating to tax credit certificates.
Under the provisions of this Chapter, which was
introduced with effect from 1 •1 April, 1965, tax credit
MIS. FIBRE BOARDS (P) LTD. BANGALORE v. COMMNR. 927
· OF INCOME TAX, BANGALORE [R. F. NARIMAN, J.]
certificates were granted to assessees fulfilling certain
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conditions. These certificates were to be utilized for the
adjustment of the tax liability or for refund or both. This
Chapter has now become virtually redundant and is.
therefore. being omitted. However, if a person still
possesses any tax credit certificates granted under
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section 280Z or section 280ZC, he shall be allowed to
utilize the same up to 31 '1 March, 1991 .
· '
This amendment will take effect from 1 '1 April, 1990."
Equally, the Memorandum explaining the provisions in
the Finance Bill also stated:-
"40. Chapter XXll-B of the Income-tax Act, contains
provisions relating to tax credit certificates. This was
introduced with effect from 1'1April, 1965, with various
objects, viz., providing an incentive to individuals and
Hindu undivided families for investing in newly-floated
equity shares of certain companies (section 280Z),
facilitating the shifting of industrial undertakings of public
companies from urban areas to new areas with a view to
relieving congestion in urban areas (section 280ZA),
providing. resources for purposes relevant to the
expansion of industry to companies engaged in important
industries and earning profits higher than in a "base year''
(section 280ZB), stimulating exports (section 280ZC) and
encouraging the production of certain goods liable to
central excise duty (section 280ZB). The provisions
dealing with tax credit certificates for shifting of industrial
undertakings from urban areas to new areas have
already been omitted with effect from 1 '1April, 1988. No
tax credit certificates can be granted at present under
the remaining provisions of this Chapter. thus. the
provisions contained in Chapter XXll-B. have become
virtually redundant. Therefore, as a mecasure of
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rationalization, it is proposed to delete the Chapter
containing these provisions with effect from the 1"' day
of April, 1990.
·The tax credit certificates granted under section 280Z or
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section 280ZC and not presented so far for payment or
adjustment of tax iiability can, however, be presented
before the Assessing Officer up to 31'1 day of March,
1991 , for the said purposes."
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15. From a reading of the notes on clauses and the
Memorandum of the Finance Bill, 1990, it is clear that Section
280Y(d) which was omitted with effect from 1.4.1990 was so
omitted because it had become "redundant''. It was redundant
because it had no independent existence, apart from providing
c 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
Section 24 of the General Clauses Act has fallen into error.
E Section 24 states:
"24. Continuation of orders, etc., issued under
enactments repealed and re-enacted. -Where
any 44[Central Act] or Regulation, is, after the
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commencement of this Act, repealed and re-enacted with
or without modification, then, unless it is otherwise
expressly provided any 45 [appointment notification,] order,
scheme, rule, form or bye-law, 45 [made or] issued under
the repealed Act or Regulation, shall, so far as it is not
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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•5 [appointment notification,] order,
scheme, rule, form or bye-law.