Itta/506/2006 Of The Commissioner Of Incomee Tax-Iii v. M/S.v.b.c.ferro Alloys Ltd

IN THE HIGH COURT FOR THE STATE OF TELANGAN AAT HYDERABAD TUESDAY, THE FIFTEENTH DAY OF OCTOBERTWO THOUSAND AND TWENry FOUR PRESENT THE HON'BLE SRI JUSTICE SUJOY PAULTHE HoN,BLE SRIJUSTICE #,Oo,o*o", RAJESHWAR RAo INCOME TAX TRIBUNAL APPEAL No: 506 of 2006 lncome Tax Tribunar Appear Under section 260 A of the rncome Tax Act1961 against the order dated 1 5-09-2005 on the fire of the rncome Tax AppeilateTribunal, Hyderabad Benches - B, Hyderabad in r.TA.No.r 132rHydl2o04 forAssessment Year 2001-2002 preferred against the order dated 06-10-2004 onthe file of Commissioner of lncome Tax (Appeals)_lV, Hyderabad in AppealNo.'100/AC-3(4ycrr (A)-rv/04-05 preferred against the order dated 29-03-2004passed in PANiGTR No.AAACB7258A / v-oo4 on the fire of the AssistantCommissioner of lncome-Tax, Circle-3(4), Hyderabad. Between: The Commissioner of lncome Tax-lll, Hyderabad ...Appellant AND M/s.V.B.C.Ferro Alloys Ltd, 6-2-gj 3/914, 3d Floor, progressive Towers,Khairatabad, Hydera6ad -500 004 [-'' ][-] ...Respondent Counsel for the Appellant: Sri J.V. prasad (Sr. SC FOR TNCOME TAX)Counsel forthe Respondent: Sri Challa Gunaranjan :The Court delivered the following: JUDGMENTThe Court delivered the following: JUDGMENT o THE HONOURABLE AND THE HONOURABLE INCOME TAX [ NO.506 ][0F ][2006] JUDGMENT: ftier [Hon'ble ][Sri ][Justice ][Nannauarapu ][RqieshttcLr ][l?ao)]The presr:nt appeal [has been ][filed ][under ][section ][i260-]A of the Income [Tax ][Act, ][196 ][1 ][(for ][short ][the ]["Act")]aggrieved by [t ]he order [passed ][by ][Income ][Tax ][Appellate]Tribunal, Bench B, [Hyderabad ][(for ][short ]["Tribunal") in]I.T.A. No.1132/Hydl2AO4, [dated ][15'09 ][2005 ][for ][the]Asse ssment Ye:ar [2OO1 ][2OO2.] I.T.A. Nc,.ll32lHydl2004 [is ][arr ][appeal ][liled ][b1 ][the]Assessee, i.e. Pubiic [Limited ][Company lt is ][ir-r ][the]business of manufacture [of ][Ferro ][Silicon ][and ][iierro]the [Order ][of the ] [(Appcals) ][lV,]Chrome, agarnst dated [06.1O.20O4 ][for ][the ][Assessment ][Year]Hyderabad. 2OOl 2OO2 - ['lhe ][said appeal ][is ][allou'ed ][in ][part'] 2. We have heard Sri J.V. [Prasad, ][learned ][Senior]Standing counsel for [the ][Income ][Ta-x ][and ][Sri ] [hal].a]Gunaranjan, [learned counsel ][for the respondent'] ,--*ffi - ;fiEi JThe following substar-rtia1 question of law is framedin the present appeal:in the present appeal: Whether the Jinding of the Ttibunat that the Assessee is entttled to claim exemption in regard.to capital gq.ins in question ln terrns of Section1O(23G) oJ the Income Tax Aet uithout dueto capital gq.ins in question ln terrns of Section1O(23G) oJ the Income Tax Aet uithout dueconsideration of detailed reasoning gioen bg the,{ssessing OlJicer and the related. Jacts onrecord., is sustainable in laut? 4. The learned counsel for the appellant submitted thatthe appellant rightly sustained the order of the AssessingOfficer in bringing long term capital gains ofRs.31,43,80,59O/ earned by the Appellant on the sale of26,80,000 shares of Andhra pradesh Gas powerCorporation Ltd., to ta-x while computing the income undernormal provisions of the Act and also under the Specialprovisions of section 1 15JB of the Act stating that theprovision of section 1O(23G) do not apply to therespondent as the investment \ ,as made by the respondentprior to 01.O4.1998. 4. The learned counsel for the appellant submitted thatthe appellant rightly sustained the order of the AssessingOfficer in bringing long term capital gains ofRs.31,43,80,59O/ earned by the Appellant on the sale of26,80,000 shares of Andhra pradesh Gas powerCorporation Ltd., to ta-x while computing the income undernormal provisions of the Act and also under the Specialprovisions of section 1 15JB of the Act stating that theprovision of section 1O(23G) do not apply to therespondent as the investment \ ,as made by the respondentprior to 01.O4.1998. 5. The learned [counsel ][for the ][Appeliant ][further]submitterl that the [appellant ][rightly ][did not ][take ][into]consideration the [explanation ][2 to ][clan.rse ][(23G) of ][Scction]10 of the Act, [u,hich ][says ][that ][income ][by ][way ][of ][iong ][term]capitai gains from [investment ][made ][prior ][to ] [06'1998 ][by]way of shares in aly [enterprise carrying on ][the ][business]of developing, [maintaining ][and ][operating ][any]infrastructure facility, [shall ][not ][be ][included ][in ][computing]the total incorne [and ][rightty ][held ][that the ][long ][term ][capital]gains Investrnents made [prior ][to ][l ][-4.7998 ][is ][not ][cligible]for exemption. 6. A perus:r.l of the [record ][goes ][to ][show ][that ][the]responclet-it, cir,Lring [the financial ][year ][2000-2001 ][, sold ][the]rights share [purchased ][on ][04-12 ][1996 ][numl'rertng]26,80,000 tc Hindustan [Zinc ][Limited, ][Udaipur, ][for ][a]consideration of Rs.40 crores. [The ][date ][of ][sa'ie ][rn'as ][03- ][1 ][1 ][-]2000. The respondent [claimed ][that ][the ][cost ][of ][the ][shares]u,as Rs.6,'13,20,OOOl at [a ][vaiue of ][Rs.24 ]l- [per ][share' ][The]capital gain '"vas Rs.31,56,8O,000/-. [After ][indexation, lhe]long-term capital gain arrived at Rs.31,43,80,590/ [. ][The]respondent c laimed to have invested the amount [c'f ][sale] consideration in Konaseema EPS Oakwell Power Limited,an industrial undertaking, with arr infrastructure facilityfor power generation and was also notified under sec1O(23G) by Central Government. The respondent claimedthat these long-term capital gains are exempted under sec.1O(23G). The AO relied on the Memorandum explainingthe provisions in Finance Bill (No.2), 1996, 22O ITR 257(Statutes), as well as Circular No.772, dated 23-12-1998explaining the provisions, and rejected the contentions ofthe respondent for the following reasons:- (1) The prouisions allou.ing exemption in respect ofincome of long-term capital gains arising as sale ofinuestments are effectiue from 01.O4.997. Thus it is tobe clearlg noted that long term capital gains arising inrespect of inuestments made before O1.A4.1997 arenot eligiblefor exemptionu/s 1AQ3G) of the I.T.Act. (2) At the tirne of introduction of the Section pou)ergeneration projects are not brought into tl'rc ambit ofSection 1O(23G). (3) The scope of exemption u/s 10(23G) utas u.tidenedand long term capital gains in respect of inuestmentsmade in power generation projection tuere alsobrought into the ambit of 1O(23G) u.e.f. 01.04.1998. ft) [The ][cutoff date ][rnentioned ][in ][respect ][o7 po,-Le,]generation praject in that sub-section utas O 1 .O4. 1993i-e. for commencing the project but the inuestmentshould be made only after 01.04.1997 and th,en onlg lhe assesse e tuould [be ][etigible ]for [exemption ][u/ ][s]1O(2sG). 7. The learned counsel [for the ][appellant ][brought to ][the]notice of this [(lourt ]that [Section ][1O(23G) ][hou' ][many ][times]it u'as amended and also it [is ][require ][to ][reproduce ][the]same for the [benefit ][of ][to ][settle ][the present ][case ]['] I Finance [(No.2)Act, 1996 ], [introduced ][Sec '10(23G) t'r'hich]reads as follov.s: ft) [The ][cutoff date ][rnentioned ][in ][respect ][o7 po,-Le,]generation praject in that sub-section utas O 1 .O4. 1993i-e. for commencing the project but the inuestmentshould be made only after 01.04.1997 and th,en onlg lhe assesse e tuould [be ][etigible ]for [exemption ][u/ ][s]1O(2sG). 7. The learned counsel [for the ][appellant ][brought to ][the]notice of this [(lourt ]that [Section ][1O(23G) ][hou' ][many ][times]it u'as amended and also it [is ][require ][to ][reproduce ][the]same for the [benefit ][of ][to ][settle ][the present ][case ]['] I Finance [(No.2)Act, 1996 ], [introduced ][Sec '10(23G) t'r'hich]reads as follov.s: "(23C) aa11 income bg [tuag ][diuidends, interest or ][long]term cap,ilal gains of [an infrastructure ][capital ]fund [or]an infrostntcture capital [companA ]from [inuestrnents]mad.e bll utag of [shares ][of ][long-terrn ]finance [itt ][anA]enterpn:;e carryirug on [tLrc ][bzzsiness ][oJ ][deueloping,]maintair'.ing and operating [ang ][infrastructure ]facilitg,rahich fitlfils the conditions [specified ][in ][sub ][srzction](4A) of se<:tion B0-lA. Explanation. For the [purposes ][o/ ][this ][clause,] (a) ["inJi'a.structure ]capital compana" [means ][sucl ][t]companll as has made [inuestments ][bg ][tuctg ][of]acquirinq shares [or ][prouiding ][long-term ]finance [to an]enierprt,;e carrying on [the ][business ][of ][deuelopittg ]'maintairing and operating [infrastructure ]facility ; (b) "infrasttttcture capital fund" means [such ]fundoperating under a deed, [registered ][undet ][the]prouisioits of the Registratioft Act, [1908(16) ][of ][l90B),]estctbli.s4ed to raise monies bg [the ][trtrstees ]foriruuestm,zt'tt bg utag of acquiing shares [or prouiding]Iong-tenn finance to an enterprise carrying on [the]business of deueloping, maintaining and ope"atinginfr a s tn u:tu r e f acilitg ; - [i*ar*L]_!xtq,;. ll&eil;- (c) " infrastntcture facilitgshall haue the rneaningassigned to it in clausek4 [of ][sub-section (12) ][of]section B0 1A.section B0 1A. II. Sec. 1O(23G) uas again amended bg Finance Act, 1997,as follolDs: [-]as follolDs: [-] "(e) in clause (23G), (1 ) the uords, brackets, ftgures and letters, "uhichfulfils [the ][conditions specified ][in ][sub-section ]ftA) [of]section B0-IA" shall be omitted; (ii) in the Explanation, for clause (c), tte followingclause shall be substituted, namelg:-- (c) [" ]infrastructure facilitg means (1) a road, hightuag, bridge, airport, porl, rail systemor dnA other public facilitg of a similar nature as maAbe notified bg the Board in this belulf in the OfficialGazette; which fulfils the conditions speciJied in sub-sectiott (4A) of section B0-IA; (i) a uater supply project, irrigation project, sanitationand setuerage sgstem tuhich fulfils the conditionsspecified in sub-section (4A) of section BO IA;and setuerage sgstem tuhich fulfils the conditionsspecified in sub-section (4A) of section BO IA; (ii| a project for generatioft or generation anddistrtbution of electicitg or anA other form of poweruthere such project starts generating poLDer on or afterl't daA ofApil, 1993; (iu) a project for prouiding telecommunication seruiceson or aff.er the 1"t daA of April, 1995;"on or aff.er the 1"t daA of April, 1995;" m. Again, vide Finance (No.2) Act, 1998, some more vltal conditions were introduced in Sec.10(23G), which read asfollows: ,:. r1-, "(h) Jor c'lause [(23G),the ]follouing [clause ][shall ][be]substitut.ed, namely: "(23G) nrtg income bg [wag of ][diuidends, other than] diuidends referced to in [section ][1 ][1 ][5-]O,inerest or long ;tenn capital [gains ][of an]infrastructure capital [companA ]frominuestments made [on ]or [after ][the ][l't ][dctA]of June,l999,bg uag of [shares ][or ][lorug]tenn firuance in any enterpise [uthollg]engaged in the business of [deueloping]anAoPerating ,maintaining [and ]infrastntcture facilitg and which [has ][been]approued by eh Central [Gouernment ][orL ][an]application made bg it ;in [accordan.ce' ][tuitLt]the ntles made in tltis behalf [and ][uthich]sotisfes the prescribed conditions. conditions were introduced in Sec.10(23G), which read asfollows: ,:. r1-, "(h) Jor c'lause [(23G),the ]follouing [clause ][shall ][be]substitut.ed, namely: "(23G) nrtg income bg [wag of ][diuidends, other than] diuidends referced to in [section ][1 ][1 ][5-]O,inerest or long ;tenn capital [gains ][of an]infrastructure capital [companA ]frominuestments made [on ]or [after ][the ][l't ][dctA]of June,l999,bg uag of [shares ][or ][lorug]tenn firuance in any enterpise [uthollg]engaged in the business of [deueloping]anAoPerating ,maintaining [and ]infrastntcture facilitg and which [has ][been]approued by eh Central [Gouernment ][orL ][an]application made bg it ;in [accordan.ce' ][tuitLt]the ntles made in tltis behalf [and ][uthich]sotisfes the prescribed conditions. Explanatton, For the [purposes o/ ][this ][clasue,] (a) " Infrctstrttcture capital compang" means [such]compaftA as has made inuestments [bg ][tuag ][of]acqultl.ing shares or prouiding [long-term ]finance [to]an e nf.erpnse ulholly engaged in [the ][businerss ][o.;[]deueioping ,maintaining and operatinginfra:;tntcture facilitg ; (b) " inJictsttttcture capttal fund" means such fundoperuting under a trust deed, [registered ][under ][the]prouisions of the registrationAct ,1908(16 of [19OB)]estttLtli.shed to raise monies bg [the ][tntstees ]forinuestment bg uay of acquiring [shares ][or ][pro ][uiding]long te:rm finance to an enterprise [tuhollg ][engaged]in tL,,e business o..f deueloping ,maintaining1 [and]operoting infrastructure facility. (c) " inJiastructure facilitg: means (i) a road, highutag, bridge, airport , [poft, ][rail]:;gstem, a uLater supplg [project, itigation]project, sanitation and setaerage [sAstem ]lorang other public facilitg of a similar [nattrre]as maA be notified bg the Board in thisbehalf liru the official Gazette and tuhicLtfulfils [the conditions ][specified ][in ][sub ][section](4A of section B0-1A ':..ri.l:. (ii) a project for generation or generation anddistnbution of electicitg or anA other form ofpower uhere such project starts generatingpower on or afier the 1d dag of Aperild,1993,distnbution of electicitg or anA other form ofpower uhere such project starts generatingpower on or afier the 1d dag of Aperild,1993,(iiil a project for prouiding telecommunication' seruices in or afier the 1"t daA of April,1995;' seruices in or afier the 1"t daA of April,1995;(tu) a project for housing uhich fulfils the conditionsspecified in sub section(4F) of section BO- IA;specified in sub section(4F) of section BO- IA;(d) "long -tenn finance" shall haue ther meaningassigned to it in clause(Viii) of sub-section (1) ofsection 36,assigned to it in clause(Viii) of sub-section (1) ofsection 36, IV. Finance Act 1999 introduced the follouing fuftherExplanation: " Explanation 2.- For the remoual of doubts, it is herebgdeclared that ang income bg uag of diuidends,interest or long-term capital gains of an infrastntcturedeclared that ang income bg uag of diuidends,interest or long-term capital gains of an infrastntcturecapital fund or an infrastructure capital compang frominuestments made before the 7"t daA of June, 1998 bginuestments made before the 7"t daA of June, 1998 bgutay of shares or long-terrn finance in ang enterprisecarrying on th.e business of deueloping, maintainingand operating ang infrastructure facilitg shalL not beincluded and the prouisions of this clause as it stoodcarrying on th.e business of deueloping, maintainingand operating ang infrastructure facilitg shalL not beincluded and the prouisions of this clause as it stoodimmediately before its amendments bg the Finance(No. 2) Act, 1998 (21 of 1998) hall apply to suchincome"income" B. Learned counsel for the appellant submits that the B. Learned counsel for the appellant submits that the investment date is importalt i.e. 04.12.1996. Whiledealing with the amendment, the Tribunal discussed withregard to investments, whether prospective Legislation ordeclaratory Legislation and, thus, has to be construed asdealing with the amendment, the Tribunal discussed withregard to investments, whether prospective Legislation ordeclaratory Legislation and, thus, has to be construed asretroactive. In this regard, the Tribunal has relied upon 11) the Full Bench ol [Supreme ][Court ][of ][India ], [in ][the ][case ][of] Shgam Sunder Vs, [Rann ][KumarT ][held ][has ][follou's:] 39. Lastlg, it uas contended [on behalf ][of ][the]appellants that the amending [Act ][u.therebg ][netu]Section 1.5 of the Act has [been ][substituted ][is]declaratory and, therefore, [hc-s ][retroactiue]operatiort. Ordinarilg uhen [drl ][enactment]d.eclares the preuious [la ][u.t, ]it [requires to ][be ][giuen]retroacti,:t<z effect. The function [of ][a ][declaratory]statute is to supply an [omission ][or to ][explain ][a]preuious statute and uthen such [an Act ][is]passec)., it comes into effect uhen [the ][preuious]enactment was [passed. ][The legislatiue ][pooer ][to]enact laut includes the [potuer ][to ][declare ][what]u)as thz preuious lau and [u.then ][such ][a]declarcttorg Act is passed, inuariablg [has ][been]held to be retrospectiue. [Mere ][absence ][of ][use ][oJ']the utorcl ["declaration" in an Act ][explaining ][uthat]was the lau.t before mag [not ][appear ][to ][be ][a]declaratcry Act but if [the ][court ]finds [an ][Act ][as]declarotory or explanatory, it has [to ][be]construe'ri. as retrospectiue. Conuerselg [tuhere ][a]statute 'tses the tuord ["declaratory", ][the ][tuords]so used tnag not be sufficient [to ][hold ][that ][the]statute is a declctratory Act [as ][u.tords ][may ][be]used in crder to bing into effect [neu law."] With rel1ard to the same, G.P. [Singh ][on ][Pnnciples ][of] Statutory Interpretation [quoting ]Craies [stated ][thus:] "For m<tclern purposes a declaratory Act mag [be]definecl a.s an Act to remoue doubts [existing ][as ][to ][the]common. !.anu, or the meaning or [effect ]of [ang ][statute-]Such Ar:ts are usuallg held to be [retrospectiuet. ][The]usual r<:ason for passing a declaratory Act is [to set]aside u h.at Parliament deems to haue been a [ju.dicial]error, u,hetLer it the statement of the common l.atu or '1zoor1s [scc ][+9] in the interpretation of statutes. Usuallg, if notinuariablg, such an Act contains a preamble, aftd alsothe word "declared" as uell as the Luord "enacted".But the use of the u,nrds 'it is declared' is notconclusiue that the Act is declaratory for these u_tordsmag, at times, be used to introduce new rules of lauand the Act in the latter case uLill onlg be amendingthe law and will not necessailg be retrospectiue. Indetennining, therefore, tlrc nature of th-e Act, regardmust be had to the substance rather than to the form. If a neu Act is 'to explain.' an earlier Act, it ulould beutithout object unless construed retrospectiue. Anexplanatory Act is generallA passed to supplg anobuious omission or to clear up doubts as to themeaning of the preuious Act. It is well settled that if astatute is curatiue or merelg declaratory of thepreuious law retrospectiue operation is generallyintended". 9. Learned counsel for the appellant relied upon thejudgment of the Supreme Court in the case ofCommissioner of Customs (Import), Murnbai Vs. M/sDilip Kumar and. Compang & Others2 uith regord toparanneters of the exemptions . 10. Learned counsel for the appellant relied upon thejudgment of the Supreme Court in the case of PrincipalCommissioner of Income-Tax and. another V. Wipyo '.. Ltd,,3 whereir: Lt is observed [that ][mandatory ][of ][declaration]for exemptton [.] 9. Learned counsel for the appellant relied upon thejudgment of the Supreme Court in the case ofCommissioner of Customs (Import), Murnbai Vs. M/sDilip Kumar and. Compang & Others2 uith regord toparanneters of the exemptions . 10. Learned counsel for the appellant relied upon thejudgment of the Supreme Court in the case of PrincipalCommissioner of Income-Tax and. another V. Wipyo '.. Ltd,,3 whereir: Lt is observed [that ][mandatory ][of ][declaration]for exemptton [.] 1 1. Learned t:ounsel for the [appellant relied ][upon ][the]judgment of the Supreme Court in the [ca ][se ]of [Sree]Sankorrrzcharya tlniuersitg of [Sanskrit ][& ][Others ][V. ][Dr.]Manu & Anothef in this the [Hon'ble apex ][court]obseraed that explanatiodclariJication [mdg ][not]expand or alter the scope of [the original ][prouision.] 12. Learned counsel for the appellant [submits ][that ][in]vieu, of the above observation, the [Income ][Ta-x ][Tribunal]wrongly cc,nsidered the contentions of therespondent/ assessee and al1orT,ed in [part, ][rn'hich ][are]against the p,rinciples laid down by [the ][Income ][Tax ][Act]and prayed tc allow the appeal. 13. Per contra, learned counsel for [the ][respondent]submits that r.r,,hatever the amounts the [respondent ][seeks]exemption, those amounts will not [come ]under [the ][total]income. The Tribunal has rightly considered [the] ' lzozzlaao [rrn ][t ]1sc1 4 2023 LiveLaw (SC) 4682023 LiveLaw (SC) 468 . . a;.t...' [.] - [a'"-.,..rErrq;: ][- ][-,!] respondent's case and allowed the appeal in part, whichneeds no interference from this Court. 14. Learned counsel for the respondent relied upon thejudgment of the Supreme Court in the case of Securitiesand Exchange Board of Indta Vs. Rajkumar Nagpaland. otherss wherein it was held retroactive applicationfollowing the principles of statutory interpretation byHon'ble Justice G.P.Sing (14tt' Edn.,2016 at P.583) 1O0. In Vineeta Sharrnrr o. Rqkesh Sho;nna22, this Court descibed the nature ofprospectiue, retrospectiue, and retroactiue lanus(SCC p. 53, para 61) 15. Learned counsei for the respondent brought to thenotice of this Court Circular No. 772-Income Tax Dated23/12/1998 with regard to Finance (No.2) Act ,1998Rationalizations of clause (23G) of section 1O inparticularly clause 10.3 and 10.4 16. While passing the order the Tribunal obsened that,the following facts and issues have not been disputed bythe Revenue: : (a) That the gain in question is a long-term capital gain t lzoz:1a scc zza a: r li (b) That the company, Andhra Pradesh Gas [Power]Corporation Ltd., is an infrastmcture facility [rvithir-r ][the]meaning of sr-ttr clause (H) of clause [(b) ]of [trxpianation ][to]Sec.10(23G), as Central Government had [notified ][that]undertaking as an infrastructure facility and [as ]it [had]started generation of [power ]..after [1 ]April [1993.] (c) That the compary fa1ls within the definition of"Infrastructure Capital Company" envisaged1N SCC1o(23G), 17. It is further observed by the Tribunal that section1O(23G) as it existed immediately before amendment [by]Finance (No.2) Act, 1998, clearly states that an1, income [by]way of long-tt:rm capital gain of an rnfrastructure ciipitalfund is exempt under sec. 1O(23G). That the capital [gain]in question is exempted from tax under section [10(23G) as]per the provisions of the statute existing in 1997 read ',r'ithExplanation 2l mandates that income by way of long-terrrrcapita-l gain [,rf ]al infrastructure capital Company from'irtinvestments rnade before O 1.06. 1998, by way of "hrr-"" any enterprisr: r,,.hich is an infrastmcture facility, shall not 'a,i-- ' (c) That the compary fa1ls within the definition of"Infrastructure Capital Company" envisaged1N SCC1o(23G), 17. It is further observed by the Tribunal that section1O(23G) as it existed immediately before amendment [by]Finance (No.2) Act, 1998, clearly states that an1, income [by]way of long-tt:rm capital gain of an rnfrastructure ciipitalfund is exempt under sec. 1O(23G). That the capital [gain]in question is exempted from tax under section [10(23G) as]per the provisions of the statute existing in 1997 read ',r'ithExplanation 2l mandates that income by way of long-terrrrcapita-l gain [,rf ]al infrastructure capital Company from'irtinvestments rnade before O 1.06. 1998, by way of "hrr-"" any enterprisr: r,,.hich is an infrastmcture facility, shall not 'a,i-- ' be included in the total income i.e. it shal1 not form part oftotal income. Coming to the computation of book profitsi.e. reduction of this long-term capital gain, which is.i.e. reduction of this long-term capital gain, which is.exempted under sec. 1O(23G), from the book profits of theCompany under the special provisions of sec.11SJB, theTribunal opined that the revenue authorities haveTribunal opined that the revenue authorities havecommitted an error, as the disallou,ance is in violation ofsub-sec.(2) of sec. 1 1SJB, Explanation (ii), which reads asfollow's:follow's: "The amount of income to tuhich ang of the prouisionsof Section 1O of Section 10A or Section jOB or Section11 or Section 12 applg, if any such amount is cred.itedto tLrc profit and loss account. " 18. This court while gone through tl-re judgments reliedupon by both counsels. In Commissioner of Customs (Import), Mumbai Vs. M/s Dilip Kumar and Compang & Others (2"d supra) it is held as urtder : 52. to sum up,u)e answer the reference holding asunder: ( 1 ) Exemption notification stwuld be interpretbdstictlg; the burden of prouing appLicabilitg tuould beon the assessee to shou.t that his case comes tuithinstictlg; the burden of prouing appLicabilitg tuould beon the assessee to shou.t that his case comes tuithin the paranrcters of the exemption [clause or ][exemption]notificatton. (2) When there is ambiguitg in exemption [notifrcation]tthich is subject to strict intetpretation, [the ][benrfit ][of]sucLr ctmbiguity cannot be claimed [bg ][the]subjecT/ assessee and it [must ][be ][interpreted ][in ]ftuourof the reuenue. The case on. hand differs from the [aboue obseruqtion ][in]thaL in the present case, there is [no exemption ][notification]associated u.tith the amendment of [section ][1O ][(23G) ][nf ][the]Income Tax Act ,u,thich grants exemption [rights ][as ][amended]from [time ][to ][time. One ][of the ][amendments ][under]consideration inuolues the assesses seeking exen"ptioninfrastrttcture facilitg related to [pou)er ][generation.]Accordinglg, the aboue case [la ][u.t ]is [not ][applicable ][to ][the]present case. In alother case Principal Commissioner [of]Income-Tax and another V. Wipro Ltd [the ][apex ][court]observed that " It cannot be said that one of [the]condi.tions would be mandatory and the [other]would be directory, where the tLtords [used ]forfurnishi;t.c1 [the ][declaration ][to the ][Assessing]Officer and to be furnished before the due [d.ate]of the oiginal return of income under [sub-]fiIing sectiort (i ) of Section 739 are same/ similar. cannot ,btz disputed that in a taxing statute [the]prouisio,L.s are to be read as they are and theyare to be literallg construed, more [particularly, ][in]a case c'f exemption sought bg an [assessee."] In the above case law, the Apex Court discusse,d [the]terms "mandtrtory" and "directory" in relation to furnishihgthe declaration to the Assessing Officer, which mu st besubmitted be:fore the due date for filing the original return " It cannot be said that one of [the]condi.tions would be mandatory and the [other]would be directory, where the tLtords [used ]forfurnishi;t.c1 [the ][declaration ][to the ][Assessing]Officer and to be furnished before the due [d.ate]of the oiginal return of income under [sub-]fiIing sectiort (i ) of Section 739 are same/ similar. cannot ,btz disputed that in a taxing statute [the]prouisio,L.s are to be read as they are and theyare to be literallg construed, more [particularly, ][in]a case c'f exemption sought bg an [assessee."] In the above case law, the Apex Court discusse,d [the]terms "mandtrtory" and "directory" in relation to furnishihgthe declaration to the Assessing Officer, which mu st besubmitted be:fore the due date for filing the original return of income under section 139(l).However,1n the presentcase ,the question of the declaration does not arise due tothe amendrnent, as the assessee is only seeking.exemption. Therefore ,the above case law is not applicableto the present case on this ground as weil. In another cq.se laut relied upon bg the appettantis that in Sree Sankaracharya tlniaersitg oJ Sanslcrit& Others V. Dr. Manu & Another (4th supra) . with regardto explanation/ clarification may not expand or alter thescope of the originai provision is explained as follows : iv) Merely because a provision described as aclarihcation/explanation, the Court is not bound by thesaid statement in the statute itself, but must proceed toanalyse the nature of the amendment and then concludeu,'hether it is reali$r a clarificatory or declaratory provisionor whether it is a substantive amendment which isintended to change the las, and which u,ould applyprospectively. t 19. In the present case there is no expansion ofexplaration or clarification once these two things are clear there is no qltestion of alter the [scope ][of provision. ][In ][the]present case assessee seeking under [the ][nervly ][amended]provision rvhtch u,as later incorporated in [the ][section']1O(23G) initially it [was ][part ][of ][the sectron. ][The exemption]relates to po$'er [generation ]under [the ][long ][term ][capital]gains, u,hich include infrastructure [facilities. ][In ][the ][said]circumstalces. if Assesment [Officer ][exempted ][the]assessee and no [provision was altered. ][Hence, ][this ][is ][also]not applicabie to [present ]case. 20. Learned counsel for [the respondent relied ][upon ][case]of Securities and Exchange Board [of India ][Vs.]Rajkumar Nagpal dnd others [(sth ][supra) ][in ][this ][case] 4. "99. We are of the opinion that [the ] Circular has retroactiue application. [In ][Principles]of Statututry Interpretation bg [Justice ][G.P. ][Singh.](14th Edn., 2016 at p. 583), it is stated that: "The rule against retrospectiue constru.ction snot apStli.cable to a statute merelg [because ][" ][a]part of |.h-e requisites for its action is [dratun ]from.a tinte antecedent to its passing". [If ][th.at ][were:]not so, euery statute tttill be [presumed to apply]onlg to .Dersons born and [things ][tuhich ][come ][intc,,]existen<:et afier its operation and the [nlle ][mau]utell re:;tLlt in Oirtual nullification [of ][most ][of ][tlut]statute:;. ["] . .-:... ' [--i&jr] 5. "61. The prospectiue statute operates from thedate of its eftactment conferring new rights. Tlteretrospectiue statute operates backutards andtakes atuag or impairs uested rights acquiredunder existing lanas. A retroactiue statute is theone that does not operate retrospectiuelg. Itoperates in fufi-Lro. Hou.teuer, its operation isbased upon the character or status that aroseearlier. Characteristic or euent uthich ltappenedin the pnst or requisites tuhich had beert dra u.tnfrom [ante ][ce ][dent ][e ][u ][ent ][s. ]["] 1O1. The terrns "retrospectiue" and "retroactiue"are ofien used interchangeably. Howeuer, theirmeanings are distinct. This Court succinctlgappreciated the diffetence bettueen theseconcepts in State Bank's Staff Union (MadrasCircle) u. Union of India. . .-:... ' [--i&jr] 5. "61. The prospectiue statute operates from thedate of its eftactment conferring new rights. Tlteretrospectiue statute operates backutards andtakes atuag or impairs uested rights acquiredunder existing lanas. A retroactiue statute is theone that does not operate retrospectiuelg. Itoperates in fufi-Lro. Hou.teuer, its operation isbased upon the character or status that aroseearlier. Characteristic or euent uthich ltappenedin the pnst or requisites tuhich had beert dra u.tnfrom [ante ][ce ][dent ][e ][u ][ent ][s. ]["] 1O1. The terrns "retrospectiue" and "retroactiue"are ofien used interchangeably. Howeuer, theirmeanings are distinct. This Court succinctlgappreciated the diffetence bettueen theseconcepts in State Bank's Staff Union (MadrasCircle) u. Union of India. ""Retroactiuitg" is a term ofien used bg lauLyersbut rarelg defined. On analg sis it soon becomesbut rarelg defined. On analg sis it soon becomesapparent, moreouer, that it is used to couer atleast ttuo distinct concepts. The fi.rst, uLhich magleast ttuo distinct concepts. The fi.rst, uLhich magbe called "ttue retroactiuitg", consists in theapplication of a neu, rule of laut to an act orapplication of a neu, rule of laut to an act ortransaction uhich was compieted before the ruleu.tas promulgated. The second concept, whichu.tas promulgated. The second concept, whichuLill be refered to as "quasi-retroactiuity", occursuLhen a neu.t rule of lau is applied to aft act ortransaction in the process of completion.... Thefoundation [of ][these ][concepts ][is ][the ][distinction]b etu.t e e n co mplete d and p e nd.ing tr an s actio ns.. . . ["][7.C. [Hartleg, The ][Foundations ][of ][European]Communitg Laul 129 (1981).1transaction in the process of completion.... Thefoundation [of ][these ][concepts ][is ][the ][distinction]b etu.t e e n co mplete d and p e nd.ing tr an s actio ns.. . . ["][7.C. [Hartleg, The ][Foundations ][of ][European]Communitg Laul 129 (1981).1 1O2. Mang decisions of this Cour-t define"retroactiuitg" to mean lauts which destrog orimpair uesied ights. In real terms, this i; the [:]definition of "retrospectiuitg" or "tn rcretroactiuitg". "Quasi-retroactiuity" or simplg"retroactiuitg" on the other hand is a latu uhichis applicable to on act or transaction thst is still undeta)at.lJ. Such an act or transaction [has ][noL]been cc'mpleted and is irt [thLe ][process ][of]completiort. Retroactiue [lanus ][also ][applg ][where]the status or character of a [thing ][or ][situation]arose ptic;r to the passage [of ][tlrc ][latt. ][Merelg]beca.use a laut operates on certaincircumstcnces tuhich are [antecedent ][to ][its]passing does not mean that it [is ][retro ][spectiue.] The mzrin issue involved in [the ][above]discussed case is that the [retroactive ][larvs ][also]apply where the status or character [of ][a ][thing]or situation arose prior to the [passage ][of ][the]1aw. In the present case, appeliant [raised ][the]objectror-r rvith regard to exemption, [stating ][that]the provr sion itself was not [exist ][for ][those]previousr years, so, the question of [allorving]exempti,rrr under sec. 1O(23G)prior [to ] [.4.7997]does noI arise. The contention [of ][the ][appellant]counsel is incorrect. Subsequently [after]amendnrt:nt the Central Board of [direct ][Taxes]have clztnfied by way of [press ][release ][that ][the]exemptions availabie under the [provisions of]se cretio n 10 [(23G) ]to its [amendment by],prior the Act, ',vi11 continue to [govern ][the investments]made prior to 1.6.1998. 21 . At this J uncture, it is [very ]essential [to ][refer ][the]clause 10.3 of circular NO.772- Income Tax, [Dated]23.12.,1998 is; as foilows i\ 21 . At this J uncture, it is [very ]essential [to ][refer ][the]clause 10.3 of circular NO.772- Income Tax, [Dated]23.12.,1998 is; as foilows i\ 10.3 The amended prouisions utould. applg onlg inrespect of inuestment made on or after 1 6-1998 .Doubts had been expressed in different quartersabout -the continuance of exemption auailable undersection 10 (23G) in respect of inuestments mad.e piorto 1-6-1998 ./or assessment Aear 1999-2000 andonuards. The Central Board of Direct Taxes haueclaified bg uag of a press release that the exemptionauailable under the prouisions of section 10 (23G).Prior to its amendment bg the Act, u.till continue togouern the inuestments made prior to i-6 199B.TheRules and Forms ;in this regard haue since beennotified uide Notifi.cation No.S.O.B97(E) dated t2rthOctober,799B. 22. When doubts arise about whether long-term capitalgains exempt under section 10(23G) are available, theCBDT has clarified the issue through a press release,resoiving the matter. Therefore, the question of exemptionunder section 1O(23G) is no longer a concern, as correctlyobserved by the Income Tai Appellate Tribunal. 23. An infrastructure facility is created by purchasingshares, but this will not be considered income. It is soi,elyfor the creation of infrastructure facilities. Once the sharesare purchased on February 4, 1996, they are classified as a creation of rr-r infrastructure faciiity, [not ][as ][income. ][In]the present [,lase, ]as per Explanatron [2 ],[prior ][to ][its]amendment, the capital expenditure [for ][purchasing ][shares]falls under tht: category of infrastructure [facilities ][and]shall not be included in total income. This is [because]mereiy purchasing shares does not contribute to [the]income of the respondent/ assessee. Since it [does ][not]count as incorne, no amount needs to be [paid ]in [taxes.] 24. For all 1.he reasons stated above, [we. ]firmly [believe]that the queslion of 1aw framed by the Court [while]admitting the appeal should be decided in the [negative.]Therefore, the :rppeal is dismissed, thereby confirming [the]impugned order of the Tribunal. There will be no order [as]to costs I I if shalJPcnding miscellaneous appiications, any, stand closed Sd/- M. RAMANA DEPUTY REGISTRAR \ /,TRUE SECTION \ To, 1. The lncome [Tax Appellate ][Tribunal' ][Hyderabad Benches - ][B' ][Hyderabad] 2. The Commissicner [of lncome ][Tax ][(Appeals)-lV' ][Hyderabad] 3. The [Assistant ][Commissioner ][of lncome-Tax' Circle-3(4)' Hyderabad'] 4 One CC to [Sr ][.i.V ][Prasad ][(Sr' ] [TAX) ][ 5. One [to CKR Associates ] 6. Two CD [CoPie] :&;.@ffi8i k**r'*-.. '**,.- *r.'-*.. -'.. .-o HIGH COURT DATED:1511012024 JUDGMENTITTA.No.506 of 20061A SI€kJo1 0 iAri 2025o().-\tt),P,1T' 5t'!]tTHE APPEAL ISDISMISSEDtv4