Law:

Section:

Section 54G of the Income-tax Act, 1961 read with section 24 of the General Clauses Act, 1897 - Capital gains - Exemption on transfer of asset in case of shifting of industrial undertaking from urban areas (Utilization of capital gains) - Assessee claimed exemption on entire capital gain earned by it from sale proceeds of its erstwhile industrial undertaking situated in Thane in view of advances so made being more than capital gain made by it - High Court denied exemption contained in section 54G to assessee on ground that notification declaring Thane to be an urban area stood repealed alongwith repeal of section guiding it - Whether on omission of section 280ZA and its re-enactment with modification in section 54G, section 24 of General Clauses Act would apply and Notification declaring Thane to be an urban area, would be continued under and for purposes of section 54G - Held, yes - Whether, assessee under section 54G, is given a period of three years after date on which transfer takes place to purchase new machinery or plant and acquire building or land or construct building for purpose of his business in said area - Held, yes - Whether thus advances so paid for purpose of purchase and/or acquisition of plant/machinery, and land/building would amount to utilization by assessee of capital gains made by him for purpose of purchasing and/or acquiring aforesaid assets - Held, yes [Paras 35, 36 & 38][In favour of assessee]FACTSâ–  The assessee, a private limited company sold its industrial unit at Majiwada, Thane (a notified urban area) for consideration of Rs. 1.2 crores and earned capital gain of Rs.1.08 crores.â–  As the assessee intended to shift its industrial undertaking from an urban area to a non-urban area, out of the capital gain so earned, the assessee paid by way of advances various amounts to different persons for purchase of land, plant and machinery, construction of factory building etc. The aggregate of advances amounted to Rs. 1.11 crores in the year1991-92 and assessee claimed exemption under section 54G on entire capital gain since the advances made were more than capital gains earned.â–  However, the Assessing Officer due…