THE COMMISSIONER OF INCOMEE TAX-III vs. M/S.V.B.C.FERRO ALLOYS LTD

134111 IN THE HIGH COURT FOR THE STATE OF TELANGAN A AT HYDERABAD TUESDAY, THE FIFTEENTH DAY OF OCTOBER TWO THOUSAND AND TWENry FOUR PRESENT INCOME TAX TRIBUNAL APPEAL No: 506 of 2006 lncome Tax Tribunar Appear Under section 260 A of the rncome Tax Act 1961 against the order dated 1 5-09-2005 on the fire of the rncome Tax Appeilate Tribunal, Hyderabad Benches - B, Hyderabad in r.TA.No.r 132rHydl2o04 for Assessment Year 2001-2002 preferred against the order dated 06-10-2004 on the file of Commissioner of lncome Tax (Appeals)_lV, Hyderabad in Appeal No.'100/AC-3(4ycrr (A)-rv/04-05 preferred against the order dated 29-03-2004 passed in PANiGTR No.AAACB7258A / v-oo4 on the fire of the Assistant Commissioner of lncome-Tax, Circle-3(4), Hyderabad. Between: The Commissioner of lncome Tax-lll, Hyderabad ...Appellant AND THE HON'BLE SRI JUSTICE SUJOY PAUL THE HoN,BLE SRIJUSTICE #,Oo,o*o", RAJESHWAR RAo 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: JUDGMENT l I irtt l;rcxl,

o THE HONOURABLE SRI JUSTICE SUJOY PAUL AND THE HONOURABLE SRI JUSTICE NAMAVARAPU RAJESHWAR RAO INCOME TAX TRIBUNAL APPEAL 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 Chrome, agarnst the Order of the CIT (Appcals) lV, Hyderabad. dated 06.1O.20O4 for the Assessment Year 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 C hal].a Gunaranjan, learned counsel for the respondent' - ;fiEi ,--*ffi

I 2 J The following substar-rtia1 question of law is framed 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 Section 1O(23G) oJ the Income Tax Aet uithout due consideration of detailed reasoning gioen bg the ,{ssessing OlJicer and the related. Jacts on record., is sustainable in laut? 4. The learned counsel for the appellant submitted that the appellant rightly sustained the order of the Assessing Officer in bringing long term capital gains of Rs.31,43,80,59O/ earned by the Appellant on the sale of 26,80,000 shares of Andhra pradesh Gas power Corporation Ltd., to ta-x while computing the income under normal provisions of the Act and also under the Special provisions of section 1 15JB of the Act stating that the provision of section 1O(23G) do not apply to the respondent as the investment \ ,as made by the respondent prior to 01.O4.1998.

J 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 O1 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 t*r- * ,dt&+re. 4

i 4 consideration in Konaseema EPS Oakwell Power Limited, an industrial undertaking, with arr infrastructure facility for power generation and was also notified under sec 1O(23G) by Central Government. The respondent claimed that these long-term capital gains are exempted under sec. 1O(23G). The AO relied on the Memorandum explaining the provisions in Finance Bill (No.2), 1996, 22O ITR 257 (Statutes), as well as Circular No.772, dated 23-12-1998 explaining the provisions, and rejected the contentions of the respondent for the following reasons:- (1) The prouisions allou.ing exemption in respect of income of long-term capital gains arising as sale of inuestments are effectiue from 01.O4.997. Thus it is to be clearlg noted that long term capital gains arising in respect of inuestments made before O1.A4.1997 are not eligiblefor exemptionu/s 1AQ3G) of the I.T.Act. (2) At the tirne of introduction of the Section pou)er generation projects are not brought into tl'rc ambit of Section 1O(23G). (3) The scope of exemption u/s 10(23G) utas u.tidened and long term capital gains in respect of inuestments made in power generation projection tuere also brought 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. 1993 i-e. for commencing the project but the inuestment should be made only after 01.04.1997 and th,en onlg

{r 5 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 fund operating under a deed, registered undet the prouisioits of the Registratioft Act, 1908(16) of l90B), estctbli.s4ed to raise monies bg the trtrstees for iruuestm,zt'tt bg utag of acquiing shares or prouiding Iong-tenn finance to an enterprise carrying on the business of deueloping, maintaining and ope"ating infr a s tn u:tu r e f acilitg ; - i*ar*L _!xtq,; . ll&eil;-

6 (c) " infrastntcture facilitg assigned to it in clause section B0 1A. shall haue the rneaning k4 of sub-section (12) of II. Sec. 1O(23G) uas again amended bg Finance Act, 1997, as follolDs: - "(e) in clause (23G), (1 ) the uords, brackets, ftgures and letters, "uhich fulfils the conditions specified in sub-section ftA) of section B0-IA" shall be omitted; (ii) in the Explanation, for clause (c), tte following clause shall be substituted, namelg:-- (c) " infrastructure facilitg means (1) a road, hightuag, bridge, airport, porl, rail system or dnA other public facilitg of a similar nature as maA be notified bg the Board in this belulf in the Official Gazette; which fulfils the conditions speciJied in sub- sectiott (4A) of section B0-IA; (i) a uater supply project, irrigation project, sanitation and setuerage sgstem tuhich fulfils the conditions specified in sub-section (4A) of section BO IA; (ii| a project for generatioft or generation and distrtbution of electicitg or anA other form of power uthere such project starts generating poLDer on or after l't daA ofApil, 1993; (iu) a project for prouiding telecommunication seruices 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 as follows: ,:.

7 "(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 from inuestments 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 ,maintaining and oPerating anA 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 operating infra:;tntcture facilitg ; (b) " inJictsttttcture capttal fund" means such fund operuting under a trust deed, registered under the prouisions of the registrationAct ,1908(16 of 19OB) estttLtli.shed to raise monies bg the tntstees for inuestment 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 lor ang other public facilitg of a similar nattrre as maA be notified bg the Board in this behalf liru the official Gazette and tuhicLt fulfils the conditions specified in sub section (4A of section B0-1A ) ':..ri.l:. .-!',3tt|:,- **-""-,"*ffreL,i r1-,

8 (ii) a project for generation or generation and distnbution of electicitg or anA other form of power uhere such project starts generating power 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; (tu) a project for housing uhich fulfils the conditions specified in sub section(4F) of section BO- IA; (d) "long -tenn finance" shall haue ther meaning assigned to it in clause(Viii) of sub-section (1) of section 36, IV. Finance Act 1999 introduced the follouing fufther Explanation: " Explanation 2.- For the remoual of doubts, it is herebg declared that ang income bg uag of diuidends, interest or long-term capital gains of an infrastntcture capital fund or an infrastructure capital compang from inuestments made before the 7"t daA of June, 1998 bg utay of shares or long-terrn finance in ang enterprise carrying on th.e business of deueloping, maintaining and operating ang infrastructure facilitg shalL not be included and the prouisions of this clause as it stood immediately before its amendments bg the Finance (No. 2) Act, 1998 (21 of 1998) hall apply to such income" B. Learned counsel for the appellant submits that the investment date is importalt i.e. 04.12.1996. While dealing with the amendment, the Tribunal discussed with regard to investments, whether prospective Legislation or declaratory Legislation and, thus, has to be construed as retroactive. In this regard, the Tribunal has relied upon

9 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 ;&*i 11)

l0 in the interpretation of statutes. Usuallg, if not inuariablg, such an Act contains a preamble, aftd also the word "declared" as uell as the Luord "enacted". But the use of the u,nrds 'it is declared' is not conclusiue that the Act is declaratory for these u_tords mag, at times, be used to introduce new rules of lau and the Act in the latter case uLill onlg be amending the law and will not necessailg be retrospectiue. In detennining, therefore, tlrc nature of th-e Act, regard must be had to the substance rather than to the form. If a neu Act is 'to explain.' an earlier Act, it ulould be utithout object unless construed retrospectiue. An explanatory Act is generallA passed to supplg an obuious omission or to clear up doubts as to the meaning of the preuious Act. It is well settled that if a statute is curatiue or merelg declaratory of the preuious law retrospectiue operation is generally intended". 9. Learned counsel for the appellant relied upon the judgment of the Supreme Court in the case of Commissioner of Customs (Import), Murnbai Vs. M/s Dilip Kumar and. Compang & Others2 uith regord to paranneters of the exemptions . 10. Learned counsel for the appellant relied upon the judgment of the Supreme Court in the case of Principal Commissioner of Income-Tax and. another V. Wipyo ' ntR zors sc sooo '..

11 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 the respondent/ 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) 468 . . a;.t...' . - a'"-.,..rErrq;: - -,! I I I I

respondent's case and allowed the appeal in part, which needs no interference from this Court. 14. Learned counsel for the respondent relied upon the judgment of the Supreme Court in the case of Securities and Exchange Board of Indta Vs. Rajkumar Nagpal and. otherss wherein it was held retroactive application following the principles of statutory interpretation by Hon'ble Justice G.P.Sing (14tt' Edn.,2016 at P.583) 1O0. In Vineeta Sharrnrr o. Rqkesh Sho;nna 22, this Court descibed the nature of prospectiue, retrospectiue, and retroactiue lanus (SCC p. 53, para 61) 15. Learned counsei for the respondent brought to the notice of this Court Circular No. 772-Income Tax Dated 23/12/1998 with regard to Finance (No.2) Act ,1998 Rationalizations of clause (23G) of section 1O in particularly clause 10.3 and 10.4 16. While passing the order the Tribunal obsened that, the following facts and issues have not been disputed by the Revenue: : (a) That the gain in question is a long-term capital gain t2 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" envisaged 1N SCC 1o(23G), 17. It is further observed by the Tribunal that section 1O(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 ciipital fund 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'ith Explanation 2l mandates that income by way of long-terrrr capita-l gain ,rf al infrastructure capital Company from investments rnade before O 1.06. 1998, by way of "hrr-"" 'irt any enterprisr: r,,.hich is an infrastmcture facility, shall not 'a,i-- ' ;..1;;iit*t&!attit"ii;'*--***4,i,

t4 i I I be included in the total income i.e. it shal1 not form part of total income. Coming to the computation of book profits i.e. reduction of this long-term capital gain, which is. exempted under sec. 1O(23G), from the book profits of the Company under the special provisions of sec.11SJB, the Tribunal opined that the revenue authorities have committed an error, as the disallou,ance is in violation of sub-sec.(2) of sec. 1 1SJB, Explanation (ii), which reads as follow's: "The amount of income to tuhich ang of the prouisions of Section 1O of Section 10A or Section jOB or Section 11 or Section 12 applg, if any such amount is cred.ited to tLrc profit and loss account. " 18. This court while gone through tl-re judgments relied upon 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, under: u)e answer the reference holding as ( 1 ) Exemption notification stwuld be interpretbd stictlg; the burden of prouing appLicabilitg tuould be on the assessee to shou.t that his case comes tuithin

t5 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 ftuour of 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"ption infrastrttcture 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 for furnishi;t.c1 the declaration to the Assessing Officer and to be furnished before the due d.ate of fiIing the oiginal return of income under sub- sectiort (i ) of Section 739 are same/ similar. IL cannot ,btz disputed that in a taxing statute the prouisio,L.s are to be read as they are and they are 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 furnishihg the declaration to the Assessing Officer, which mu st be submitted be:fore the due date for filing the original return *;:ffii--'.-

r i j I I l6 of income under section 139(l).However, 1n the present case ,the question of the declaration does not arise due to the amendrnent, as the assessee is only seeking. exemption. Therefore ,the above case law is not applicable to the present case on this ground as weil. In another cq.se laut relied upon bg the appettant is that in Sree Sankaracharya tlniaersitg oJ Sanslcrit & Others V. Dr. Manu & Another (4th supra) . with regard to explanation/ clarification may not expand or alter the scope of the originai provision is explained as follows : iv) Merely because a provision described as a clarihcation/explanation, the Court is not bound by the said statement in the statute itself, but must proceed to analyse the nature of the amendment and then conclude u,'hether it is reali$r a clarificatory or declaratory provision or whether it is a substantive amendment which is intended to change the las, and which u,ould apply prospectively. t 19. In the present case there is no expansion of explaration or clarification once these two things are clear

17 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 SEBI 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 s not 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 I

i l8 5. "61. The prospectiue statute operates from the date of its eftactment conferring new rights. Tlte retrospectiue statute operates backutards and takes atuag or impairs uested rights acquired under existing lanas. A retroactiue statute is the one that does not operate retrospectiuelg. It operates in fufi-Lro. Hou.teuer, its operation is based upon the character or status that arose earlier. Characteristic or euent uthich ltappened in the pnst or requisites tuhich had beert dra u.tn from ante ce dent e u ent s. " 1O1. The terrns "retrospectiue" and "retroactiue" are ofien used interchangeably. Howeuer, their meanings are distinct. This Court succinctlg appreciated the diffetence bettueen these concepts in State Bank's Staff Union (Madras Circle) u. Union of India. ""Retroactiuitg" is a term ofien used bg lauLyers but rarelg defined. On analg sis it soon becomes apparent, moreouer, that it is used to couer at least ttuo distinct concepts. The fi.rst, uLhich mag be called "ttue retroactiuitg", consists in the application of a neu, rule of laut to an act or transaction uhich was compieted before the rule u.tas promulgated. The second concept, which uLill be refered to as "quasi-retroactiuity", occurs uLhen a neu.t rule of lau is applied to aft act or transaction in the process of completion.... The foundation 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 or impair uesied ights. In real terms, this i; the : definition of "retrospectiuitg" or "tn rc retroactiuitg". "Quasi-retroactiuity" or simplg "retroactiuitg" on the other hand is a latu uhich is applicable to on act or transaction thst is still a.r:

l9 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 certain circumstcnces 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 I .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) ,prior to its amendment by 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.{i*&!*;-...,68&&3&*** i \

)n 10.3 The amended prouisions utould. applg onlg in respect of inuestment made on or after 1 6-1998 . Doubts had been expressed in different quarters about -the continuance of exemption auailable under section 10 (23G) in respect of inuestments mad.e pior to 1-6-1998 ./or assessment Aear 1999-2000 and onuards. The Central Board of Direct Taxes haue claified bg uag of a press release that the exemption auailable under the prouisions of section 10 (23G). Prior to its amendment bg the Act, u.till continue to gouern the inuestments made prior to i-6 199B.The Rules and Forms ;in this regard haue since been notified uide Notifi.cation No.S.O.B97(E) dated t2rth October,799B. 22. When doubts arise about whether long-term capital gains exempt under section 10(23G) are available, the CBDT has clarified the issue through a press release, resoiving the matter. Therefore, the question of exemption under section 1O(23G) is no longer a concern, as correctly observed by the Income Tai Appellate Tribunal. 23. An infrastructure facility is created by purchasing shares, but this will not be considered income. It is soi,ely for the creation of infrastructure facilities. Once the shares are purchased on February 4, 1996, they are classified as

2l 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 Pcnding miscellaneous appiications, if any, shalJ stand closed Sd/- M. RAMANA KRISHNA DEPUTY REGISTRAR I I /,TRUE COPY// SECTION OFFICER 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' SC FOR INCOME TAX) [OPUCI 5. One CC to CKR Associates IOPUCI 6. Two CD CoPie To, k**r'*-.. '**,.- *r.'-*.. -'.. .-o :&;.@ffi8i \

HIGH COURT DATED:1511012024 JUDGMENT ITTA.No.506 of 2006 THE APPEAL IS DISMISSED k A SI € 1 0 iAri 2025 Joo ]t ,P,1T' 5t'! t 1 .-\ t) () t v4