1. For the purpose of Section 54G, Section 24 of the General Clauses Act would apply and the Notification of 1967 would continue
2. Assessee is given a window of three years to purchase or acquire machinery and building or land.
1. Assessee is a private limitec company having industrial unit at Majiwada, Thane, a notified urban area
2. Assessee shifted its undertaking from Urban area to Non Urban Area at Kurukumbh village, Pune (Maharashtra)
3. Assessee sold land, building, plant & machinery of Majiwada and made capital gains
4. Assessee claimed deduction u/s 54G for investment in new land, building and plant & machinery in non urban area
5. A.O. denied exemption u/s 54G on the ground that the non urban area is not delcared by the central govt and the capital gain is not utilsed within stipulated time
6. CIT(A) confirmed the assessment order.
7. Assessee went to Tribunal who allowed the assessee’s appeal stating that even an agreement to purchase is good enough and that the explanation to Section 54G being declaratory in nature would be retrospective
8. High Court reversed the ITAT's order
9. Assessee moved to the Supreme Court
10. Supreme Court decided in favour of the assessee
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.
A reading of Section 54G makes it clear that the assessee is given a window of three years after the date on which transfer has taken place to “purchase” new machinery or plant or “acquire” building or land. 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 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 building.
Cases Referred to
State of Orissa and another v. M/s M.A. Tulloch and Co., (1964) 4 SCR 461
Ratan Lal Adukia v. Union of India, (1989) 3 SCC 537
Poonjabhai Vanmalidas v. Commissioner of Income Tax, Ahmedabad, 1992 Supp. (1) SCC 182
State of Punjab v. Harnek Singh, (2002) 3 SCC 481
Rayala Corporation (P) Ltd. and M.R. Pratap v. Director of Enforcement, New Delhi, (1969) 2 SCC 412
Kolhapur Canesugar Works Ltd. & Anr. v. Union of India & Ors., (2000) 2 SCC 536
General Finance Company & Anr. v. Assistant Commissioner of Income Tax, Punjab, (2002) 7 SCC 1
State of Punjab v. Mohar Singh, (1955) 1 SCR 893
CIT v. Venkateswara Hatcheries (P) Ltd.,(1999) 3 SCC 632