1. This appeal by the assessee is against the order of the AAC, Calicut, dated 31-1-1981. In passing this order, the AAC was disposing of an appeal filed by the assessee against an order passed by the ITO under Section 154/155(10A) of the Income-tax Act, 1961 ('the Act,), dated 14-6-1979.
2. The assessee had sold certain immovable properties. This consisted of two pieces of lands and one residential house. We are not concerned in this appeal with the sale of the residential house. The total consideration for the sale of the lands was Rs. 67,000. The assessment year is 1977-78. The assessment itself was completed on 16-2-1979. The assessee had returned the capital gains on the sale of these properties. She had adopted the market value as on 1-1-1954 as the cost of acquisition. The ITO made the assessment making certain modifications in the cost of acquisition. There appears to have been no appeal filed against that order of the ITO. The assessee had invested the sale proceeds in two banks, namely, Calicut Co-operative Bank and the Calicut branch of the Syndicate Bank. The deposits were for a period of 61 months. The assessment order and the demand notice were served on the assessee on 12-3-1979. By a letter dated 20-3-1979, the assessee made a request for revision of the assessment. The revision asked for was two in number. The first request was that under Section 55(2)(i) of the Act, the fair market value of the asset as on 1-1-1964 may be taken, as the cost of acquisition and not the fair market value as on 1-1-1954. The second request was that since the assessee had invested the sale proceeds in specified assets within six months of the transfer of the capital asset, the capital gains should be totally excluded from the assessment in view of the provisions of Section 54E of the Act and the request was for the amendment of the assessment under Section 155(10A). The ITO rejected both the requests on the ground that the amendment of Section 55(2)(i) whereby the day 1-1-1954 was substituted by the date 1-1-1964 and the introduction of Section 54E was made by the Finance Act of 1977 with effect from 1-4-1978 and, therefore, these provisions would not be applicable for the assessment year 1977-78. The assessee filed an appeal to the AAC. The AAC without pronouncing anything on the legal issue raised by the assessee that the amended Section 55(2)(i) and the newly introduced Section 54E would apply to any assessment pending after such amendments/introduction came into force, held that these cannot be considered to be mistakes apparent from the records so as to bring into play Section 154 and Section 155(10A).
3. It is submitted, on behalf of the assessee, that these two provisions, viz., the amended Section 55(2)(i) and the newly introduced Section 54E, are measures intended to benefit the assessees and, therefore, should be considered to be retrospective in operation, so that all assessments made subsequent to these two provisions coming into force should be governed by these provisions. Reliance is placed in this regard on two decisions of the Madras High Court in the case of Addl. CIT v. Madura South India Corporation (P.) Ltd.  110 ITR 322 and Addl. CIT v. Rajah Sir M.A. Muthiah Chettiar  112 ITR 731 and one decision of the Jammu and Kashmir High Court in the case of Fairdeal Motors v. CIT  101 ITR 687. It is further pointed out that Section 155(10A) employs the words 'any year' and, therefore, there is no restriction as to the assessment year to which this provision would apply. A comparison is made with the provisions of Section 80CC introduced in the same Finance Act. It is also submitted that the clear language of a provision in a taxation statute should be given its meaning without any other restrictions and if such an interpretation is given the assessee is entitled to have the market value as on 1-1-1964 taken as the cost of acquisition and for the total exclusion of the capital gains by the application of Section 155(10A), read with Section 54E.4. On behalf of the department, it is submitted that it is clear that these provisions are not retrospective but only prospective. They had been introduced by the Finance Act, 1977 only with effect from 1-4-1978 and, therefore, would not be applicable to any assessment year commencing before 1-4-1978.
5. We have carefully considered these submissions. We are unable to agree with the assessee that the assessment in question, namely, the assessment to capital gains for the assessment year 1977-78 is to be made in accordance with the provisions of Section 55(2)0') as amended by the Finance Act, 1977 and Section 54E, read with Section 155(10A).
These changes on which the assessee relies have been introduced by the Finance Act, 1977. If these provisions were intended to be effective even for the assessment year 1977-78, there would have been no need for the Legislature to provide in the Finance Act itself that these changes, viz., the amended Section 55(2)(i) and the newly introduced Section 54E, would come into effect from 1-4-1978. It has been held in a number of cases that it is the law as at the commencement of the assessment year that would govern the assessment for that assessment year. This has been laid down first in the case of CIT v. Maharajah of Pithapuram  10 ITR 1 at page 6 by the Madras High Court and affirmed by the Privy Council in Maharajah of Pithapuram v. CIT  13 ITR 221. This has been reaffirmed in a number of decisions subsequently, notably in CIT v. Isthmian Steamship Lines  20 ITR 572 at page 577 by the Supreme Court and in Karimtharuvi Tea Estate Ltd. v. State of Kerala  60 ITR 262 at page 264 also by the Supreme Court. It is, of course, possible for the Legislature to provide for the retrospective operation of any change introduced in the existing one, but, unless the terms of a statute expressly so provide or unless there is a necessary implication, retrospective operation should not be given to the statute so as to affect, alter or destroy any right already acquired as laid down in J.P. Jani, ITO v. Induprasad Devshanker Bhatt  72 ITR 595 (SC). In respect of these two changes introduced by the Finance Act, 1977, it is clearly laid down in the Act introducing these changes that these changes shall come into effect only from 1-4-1978.
6. The assessee has relied upon two decisions of the Madras High Court viz., Madura South India (supra) and M.A. Muthiah (supra). In both these cases the question was as to the rate of interest that is to be allowed by the ITO on the refund due to the assessees. In Madura South India (supra) the question was regarding the liability to pay interest on the part of Government and the corresponding right of the assessee to receive interest under Section 214 of the Act. The High Court held that this arose only when the assessment is completed and not at the commencement of the assessment year. It is on this basis, that it was held that the assessee was entitled to receive interest at the increased rate which was in force at the time the assessment was completed.
The position in the other case, namely, M. A. Muthiah (supra), is also similar and related to the payment of interest under Section 244 of the Act. The liability for the department to pay interest on the refund arose at the time the refund became payable to the assessee and not at the commencement of the assessment year in question. We do not see how these two decisions support the contention of the assessee regarding the commencement of these changes introduced in Section 55(2)(i) and Section 54E. These two provisions are clearly substantive law since they deal with the right of the assessee to have the tax liability determined. As has been pointed out earlier such changes in substantive law can only by applied pros-pectively unless the Legislature intended that they are to come into force retrospectively. This position is, in fact, confirmed by the decision of the Jammu and Kashmir High Court in the case of Fairdeal Motors (supra) and the High Court has held that though Section 271(4A) of the Act came into force in 1965 after the close of the assessment year 1964-65, the Section would apply to the assessment year 1964-65 also because the amendment being a beneficial provision in a procedural law would apply to proceedings pending at the time the section came into force. It is clear, therefore, that it is only a beneficial procedural section that could be attributed retrospectivity without the Legislature itself giving retrospective operation to such beneficial procedural section. These provisions are not procedural provisions. In view of the above it must be held that, in fact, there has been no mistake in the order of the ITO either in the application of Section 55(2)(1) or in not applying Section 54E to the original assessment.
7. The assessee had laid emphasis on the words 'any year' appearing in Section 155(10A). But these words cannot be read in isolation. There is a specific reference in Section 155(10A) to Section 54E and Section 54E, as has been pointed out earlier, comes into force only on 1-4-1978- It follows that Section 155(10A) also would not apply for any assessment year earlier to 1978-79. These grounds of theare, therefore, rejected.
As the two items of property sold in this case were lands situated in the Tirur Municipality and used for agricultural purposes, the capital gains resulting from their sale would constitute agricultural income in the light of the Supreme Court decision in Shantilal Maneklal Shah v. CIT  68 ITR 503. The assessment has been made on the strength of Sub-clause (iii) of Clause 14 of Section 2 which has recently been declared partially ultra vires by the Bombay High Court in Manubhai A. Sheth v. N.D. Nirgudkar, ITO  128 ITR 87. According to their Lordships, these provisions could apply only if the lands are not used for agricultural purposes and as the appellant's lands are used for agricultural purposes, the appellant's capital gains are to be totally exempted from income-tax.
Reliance is placed in this regard in the ease of Manubhai A. Sheth v.N.D. Nirgudkar,  128 ITR 87 (Bom.). We are, however, unable to agree with the assessee that these grounds arise out of either the order of the ITO or the order of the AAC. This appeal has emanated from the order of the ITO refusing to accede to the request of the assessee for rectification of the assessment originally made under Section 154 and Section 155(10A). In these proceedings, the assessee has not raised the question that the capital gains are profits arising from the land and, therefore, it is agricultural income. In the absence of any such issue arising in these proceedings, from which this appeal has come up, it is difficult to accept that this additional ground can be considered in this appeal. This ground is, therefore, rejected.