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acts: the various finance acts, the sales tax act Then the rules, which are delegated legislations Notifications ( these are the ones creating all kinds of confusion with exemptions and levys.. thus this is where the lawyers come in use) Circulars
There are certain technical rules regarding all kinds of tax laws.. this is because they are to be interpreted strictly ( give no more room for extortion than there already is) Acc to him, the general rule of thumb for tax law statutes is, interpret it diametrically opposite as you would a normal statute. There are some questions which need to be asked whenever you see a tax statute Who is being taxed? On what? How? How much?
Once you decide what the levy of the tax is on, then the person paying is not important, excise is on manufacturing, sales tax on sales, service tax on services... The basic canon of interpretation would be to not supply any words more than those given in the statute Interpretation vs. Construction : interpretation would be gleaning the intention of the legislators while giving effect to anything, but when you know that the legislation did not intend something, say new developments, (internet related laws), when you are imputing intention, then there would be construction.. Excise is a tax on manufacturing... as something comes out of the factory, the manufacturer has to pay tax dependant on the tariff rates, subject to certain exemptions.. Taxation and exemption can play an important part in the development process of a state or a region. Eg: after the Kucch earthquake, excise duty was exempted.. so as to encourage investment Same was done to himachal and uttarakhand.. An example provision General order “ 10% excise” Exemption “new industrial units set up in areas mentioned in Annexure 1, which have commenced commercial production on or after 7th jan 2003 but not later than 31st day of march 2010” also the exemption would apply for ten years from the date of commencement of production...
cos industrialists and all ask for ‘coal’ even when they mean charcoal..... where the SC said that charcoal would be included in coal. Unit/ new industrial unit . and it is going against the intention of the legislature. however when unfairness is being caused by this. but this rule has diluted to day cos these days you have to rely more and more on punctuation. it should be interpreted as commercial men would’ (he gave a coal and charcoal example. It meant the condition or the status just before the commencement of commercial production. ( 2. So the plain meaning should be provided..... the same meaning as defined by the court last time would be used. so merely because of a bureaucratic delay. There is some decision which quotes this “rules are valuable servants but dangerous masters” thus the intention needs to be looked at.. then? The plain meaning would say that the ‘set up’ would mean with all the requisite licenses and all. the legal sense would be this. cos the production and the consumption is at the same time.. This would be the legal meaning “set up” was interpreted by the High Courts and SC in at least ten cases.. cos the drafting is just not good enough to interpret without punctuation.. and then they are again used in statutes in similar context.. a huge benefit such as this should not be denied. Is trial production commercial production or not? Sc hasn’t held it to be commercial production in the general sense. but trial produce which is thereafter sold is commercial production. 4. cos the punctuation was put in by the scribes after the passing of the act. but then the license for the factory was obtained only on 10th of April. 3.. Suppose the production started on 29th march 2010. and justice don’t to the statute. so acc to the plain meaning the client would not get the exemption The beneficial statute interpretation rule is that they should be construed in a liberal manner so as to give most qualifying units the benefit.. This is another canon of interpretation ‘when a word is used in a statute meant for use by commercial men.FACTS: 1..) The primary rule regarding punctuation was that it is not to be considered an aid of construction..... Another important canon “legal sense of the word” When a plain word in a statute is interpreted in a certain way by the court. If a BPO is set up: service industry would not be a part of this. then the benefit should not be denied on technical grounds.
saying the rest of the act doesn’t give any indication of intention to tax any sale outside of the state. then any aspect of the same can be taxed Then a later SC decision interpreted sale to be in the context of the transfer of property only and not when entering in to the contract for sale. and this is the only way you can harmoniously construct it with the rest of the statute. so that there wasn’t multiple taxation . The circular is supposed to be binding on the department.. and not just a class involved in the trade. An independent integrated setup which can manufacture something identifiable. Therefore a production line would also be a new unit. there is a supreme court decision on this the citation of which will be given tomorrow) Here the ‘industrial unit’ has been derived from the ‘industrial undertaking’ as has been used by the income tax jurisprudence for long..) ‘unit’ was first used in litigation cos people started claiming that a production line is a unit. Sales Tax now I944 case called something. The rest of the statute was looked at. sales w. and would only tax things when the property is transferred in Madras... Some circular said that a production like is a new unit.When a term hasn’t been provided in a statute. cos it reflects the intention of the department. there is some ambiguity in this matter... . its some entity which is manufacturing something at an industrial scale. Harmonious interpretation need be given. and that is the highest authority on tax matters in that area.. notification or anywhere for that matter. this can be a part of the factory. when a transaction is taxable for sales tax. but need not be a factory( This the SC has said specifically..r.t to madras sales tax act would mean this... where do you find the meaning? a) Trade usage (understood by the trade as a whole..
. The construction of the definition shows that the cured/uncured tobacco was a category.. or rather a an ingredient of perfumes. The counter argument that it is attached to the earth was also ignored. Now a person manufacturing tobacco seed cake is also being affected although he is not dealing with any form of tobacco. TAJ MAHAL HOTEL Plant includes ‘Vehicles. whether cured or uncured and whether manufactured or not. Plant and machinery is meant for depreciation of plant and machinery as understood in the industrial sense.. missed an hour Mahalakshmi Mills case Tobacco means any form of tobacco.. which do not contain any ‘tobacco’ anyway. and are not included in the list of things included. sanitary wear and the rest would be necessary for the hoteling industry.. The purpose and the kind of words used would lead to the conclusion that tobacco and the tobacco seed oil are not a part of this definition. surgical instruments for hospitals and all. in which leaf stem and all were specifically included but seeds left out..Second class. tobacco oil is also used as a perfume.” These people bought some pipe fittings and sanitary items. IMPORT: with its grammatical variations and cognate expressions means bringing into India from a place outside India. seeds are not cured. tobacco raw.. stalks and stems of the tobacco plant..’ the definition intends to provide for all the capital which might be needed for a particular industry to grow. books. and includes the leaf. they are used as manure and cattle feed and that has absolutely no relation to the traditional tobacco use. The SC held that ‘books for profession. Thus everything which might be necessary for the running of a hotel would be deductible from the income of the hotel.. there is an IT provision which allows for deduction for plant and machinery out of the income tax. The Supreme Court in this case agreed that tobacco seed cake and oil are definitely not included in this definition... but does not include any part of the tobacco plant while still attached to the earth.. this means that the seeds.. are not covered by the definition. Tobacco seedcakes have no nicotine content.. IT fellows said..... INDIA includes the territorial waters of India .. cigarettes and their derivatives. pipe fitting and sanitary wear would not be included in plant and machinery in any sense. scientific apparatus and surgical instrument purchased for the purpose of the business. This legislation is meant to capture tobacco used for its specific purpose for smoking. profession or vocation.
based on the expected annual rent... but the charging happens only when they are ready for consumption in India..A ship is coming in to India and has come into the territorial waters.. Construction of a proviso . be open to the possibility that it may apply to the whole of the main provision too. as in the application leads to absurd results. Example : there was in madras a municipal levy on the annual value of the building or the property. the computation of duty is the operative step. Had the main provision included the specific way in which the annual rent is calculated. This has been a source of debate between the various high courts. So whenever you see a proviso. but at the same time the proviso can't be taken away from the main provision. Since the proviso does not restrict. then it wouldn’t have been a classical proviso. Thus merely import is not enough. has there been any import in this case? And how many times. it generally provides for a special case. therefore the 6% is already covered by the main clause. offload some fruits there and then come back to Bombay to offload a second load of goods and docks there. the SC said its allowed. The charging happens as soon as they are brought into India. This in the language of Venn diagrams. main would be a big circle in . A proviso does not restrict but provides for a special way or manner for a specific class of people in the main class. there is a main clause and the exception restricts its application to a particular type of thing or manner. you can very well apply it to all. provided that it is also applied to the special case it was meant for. why? The annual rent is a fictitious concept.. then there is an exception. Savings clause is merely to preserve old rights and not to create new ones.. and this would not have been allowed.. but turns to go to Karachi. exception and the savings clause When you want to restrict something... Proviso said. the proviso doesnt limit the main provision . Assume the import duty in this case is 100% When the implication of law Is an absurdity. There might be goods not meant for india Sometime the vessels just enter and go out of the territorial waters inadvertently There might also be a distinction between the charging and the computation provisions. it could be six percnt of the capital (for some specific building of course) Madras people began to apply the 6% rule as it was easier to calculate. Bombay didn’t hold the distinction while the Madras and the Andhra High court did.
. Conflict between the main and the proviso which cannot be resolved. even though it may be at the end of the section Bengal Immunity vs.. along with the proviso... Chelsea Waterworks. so you cannot object if the proviso is actually used as the main thing. 26th July . Sundaram Pillai condenses the law on the positions of explanations. for what reason it cannot be decided. Dominion Engineering When two provisos are conflicting.. cos it is the last thing which the legislature has put in . rule of thumb taken for convenience. not all of it... Attorney General Vs. The big circle can contain a ton of other things too.. There is nothing logical about it.which there is a small circle of the proviso. then what will come about? The later proviso will apply An Explanation applies to a portion of the section. this was the English case which gave effect to proviso over the main one. the last word should be given effect to. then which should prevail? The proviso would prevail...
.. cos if you read the rest of the statute and come to the conclusion that the fee is to be in the nature of the sales tax. you will have to search for the section to which it applies Explanation : there are no special rules as such for this one. But then the proviso clarifies the fee is in the nature of a tax and not a cess or a license. but then you understand that the fee is in the character of a sales tax This would not be a restriction on the meaning of the word fee.. discretionary... ASK : what if there is a power. without the proviso... but what if the proviso is enacted as a section itself? The whole chapter Anything at all. and the power can be exercised in 3 ways... has a life of its own Applies to all of the statute. license fee. you come to a conclusion about the main provision using various interpretative tools..Rogue proviso: Justice Bhagwati Just because there is a proviso which is disconnected with the rest of the main proviso.. cos you have to read it all harmoniously Ans: there is no rule of thumb which will decide to what all it would apply.. then you look at the proviso and use it for the restrictive purpose it was meant for. This is a classic case of the exception. here is an example of the proviso which is an exemption. then can one insist that the authorities use one way and not the other? Cos using on e way thel tax is lesser A proviso only applies to a section which it is appended to. So first. Only in the position when the main situation is unclear and the proviso is not. education fee. but then you cannot give the main provision some meaning coloured or expanded to suit the proviso. this is an actual proviso which applies to all of the main class. but also assists interpretation Main: State government can levy a fee provided Dealers in Solan region are exempted from the sales tax Here an exception has been carved out. this kind or reliance generally does not happen. Eg: Main provision : state government can levy a fee provided it applies to income tax Here... ... sales tax cess. the fee can be either kind of fee.. then only can the proviso be used to interpret the main provision.
... you have to see which one applies to that case and choose. collected from the tyre manufacturers. INTERNAL AIDS OF CONSTRUCTION Assume there is an act without a preamble. which is later inserted retrospectively from the date the act has come into force..There are two rules in conflict which each other. Tax law is form over substance Every progressive regime recognises that a tax is a burden on the subject. it is not headed towards a particular cause A fee is charged for a specific service. but if these guiding rules are ever in conflict. Is this a good aid for construction? What is the difference between a tax and a fee? Tax is a public welfare fee... the judges would be more inclined to read a tax law in the favour of the assesses . and for the welfare of the rubber plantation workers AIR 1994 SC 1648 : Dhankamal (the difference between a fee and cess) Of course there is a difference between a license fee. say rubber cess. HE(higher education) cess. the latter will apply I don’t see how they are in conflict. SHE cess are taxes. they are not fees as in license fee Substance over form principle : some English fellow said that to look just at the form is just to see the skin and miss the soul. The main provision is quite clear and there is a classic proviso (adding something to the main provision) There are two provisos.. for aiding construction.
cos there will always be clients who will not pay you... the IT defined the total income to be a combination of all the sources.. United Comemrcial Bank. then what would be the recourse Once you fall under the words... Although cash based is not progressive. then he got put on the bench. 1st principle: Each source of income is mutually exclusive.. its best to pay the taxes and get refund... case on income tax... all the law firms apparently follow the cash system... in the year in which the person has received the money. and one leads to double taxation.. there is an overlap.. thus there isn’t supposed to be an overlap... some client paid him after he became the judge Do the amount you got later. it would not have been an income from the profession.. then that one would be avoided. whatever be the hardship to the person In these cases.. you have to pay the tax... but then the substance did not mean to cover it. ASK how?? When there are two interpretations. would that be taxable? Profits and gain s from income and the other sources of income.. Charging section and the computation section In cash based accounting you usually pay the taxes at the time you receive them. other sources being residuary. but judges are not supposed to practice. For the person. which can be a problem.But what if someone is clearly covered by the words.... accrual based system is more popular these days CASE: there was a successful lawyer who followed the cash based accounting system..... which head would it be taxable? Apparently it is not taxable at all. If one falls in two categories. then . 2nd Unless something falls within one of the categories in that accounting year. then you cannot tax it.
... would then it be taxable? 4th day Retrospectivity ... his receipts in the hands of his heir.. ( he died.. or put it into the residuary category 4th Charging and the computation sections should be seen as integrated code Computation section does not provide for the levy. is it to be charged as his income? SC said no. and a particular type of income falls within one category. Case: Amarchand Shroff’s case. but for some reason it doesnt. thus you cannot charge it in the charging section. section24 B of the income tax act.3rd: Where enteries are mutually exclusive... then you cannot change it later. Assume in this case. the judge got the payment in cash and did not even let it appear in the balance sheet..
The implication of this. Commencement of the Act: When does an act come into existence? In some cases the act comes into existence the very day the bill is tabled. prior to the presidential assent.. 34 (1)(b) before finance act 1956..as the collection points are based on convenience Basically. but the computation section allowed the collection of the professional tax only in the year in which he received the money.. SS Gadgill vs. Say.. like the tobacco dealer may be charged excise tax.Once the chargeable activity has occurred.e. For taxation purposes. It is said that the computation and the charging section form an integrated code. Thus it is important that some crucial provision come into effect immediately and not wait for the presidential assent. that year he hadn’t been acting in his professional capacity. BC Srinivasan case: computation and the charging section form an integrated code. so for the collection of excise. the charging section and the collection/computation may be different times.. whether or not to tax something can be inferred from the charging or the computation section. the intention. the government is free to collect the taxes in any manner.. if some manufacture is chargable. i. the finance act provisions which are in effect on the very first day of the financial year will be used for the assessment of the previous year.. but then they have to be read in a coterminous manner.. the charging section allowed charging of tax. Lal AIR 1965 SC 171 s.as in both the activities have to take place. when the manufactured product is removed. the professional tax thing.. the manufacture and the removal from the factory should have taken place.. There is a decision of Pieco Electronics 1994: on the day the finance bill is tabled certain provisions as declared in the 31 act will come into effect. Provisional Collection of Taxes act 1931 It deemed that certain sections of the finance bill which are declared in the act will come into effect the day the bill was tabled. also the person you is taxed may be different from the person who has triggered the taxation. came into effect on 1st april 1956 . the exemption in either of the sections would be applicable In yesterdays example.. which usually takes about 3 months.
. there is a provision for an Indian to be an agent of a non resident and can pay the income tax for that non resident. the presumption favours retrospectivity. say succession of some inheritance Existing: say. if person deemed to be an agent of non resident under section 43. assessment year ending March 31 1955.. then there will be no tax at all. the law prohibits retrospectively changing the vested right. the presumption is against retrospectivity. . Where the provisions affect procedural issues. your uncle has his only heir in you. serve on the assessee a notice under subsection (2) of section 22 and may proceed to assess or reassess such income Provided Where assessment made or to be made on a person deemed to be an agent of non-resident. You are presumed to have rights relating to prosecution and defence. For 1954-55..“he may in cases falling under clause (a) at any time within 8 years and in cases falling under clause (b) at any time within 4 years.. He issued a notice for enhancing income on March 27. Can he issue a notice after all this time? If one year the finance act does get tabled. but the manner in which they are conducted are not a subject matter of the rights. Where a provision affects substantive rights... A provision shall apply retrospectively even to a vested right if it says so expressly or as a necessary implication. the IT officer wanted to reassess his income deeming him an agent of the non resident.. 1957 (Before 2 years from the expiry of the assessment year ending 1955). The Supreme Court in this case held that the notice was not valid The first principal for retrospectivity: 1.. this section shall have effect as if for period of 8 years and 4 years.” Facts: Lal and company has business connections with a variety of non residents. Vested: which has crystallised in the past as a right. There are vested rights and existing substantive rights. 2. 1 year was substituting Post finance act 1956 “Provided further that Income Tax officer shall not issue notice under this subsection for any year after the expiry of two years after that year. and there is income from all of them. then you have a legitimate existing right.
there is a concept in the American law. Because then the statute of limitation will not be acting in a procedural way. there is a cardinal principal of interpretation which says that while pending actions and proceeding will apply/be regulated by the new law even if it is arising from the old act. which says that where an act has been taken away and re-enacted supposedly applying to the same people and substantially the same thing... the new act will apply to the whole time period.. this is a substitution of the act. but pending actions which are time barred or have hit the limitation cannot be revived by a procedural statute. First Argument The revenue officer’s first argument was. in some cases.. thus the new law would apply for the existing actions. but will be changing vested rights.... when the right from an old statute extinguishes... in this case there has been no break between the two acts.. Second argument: This is not really a repeal and a new act. some of the limitations can be substantive rights. therefore there is a continuity.. then the Statutes of limitation are procedural in nature any you have to look at existing rights. it cannot be revived by another statute.A provision is retrospective by necessary implication if under no reasonable interpretation of the same it can apply prospectively In The statute of limitation is generally procedural limitation It is incorrect to categorise a statute(say the limitation act) as being wholly procedural/substantive in nature. prospectively or retrospectively The SC dismissed all the arguments. The issue of substitution does not have any claim in the Indian context. even for a fraction of a second. as in prospectively too.. as in this.... There is no of continuity. AIR 1965 SC 1970 Vested rights New opportunity Or new disability with relation to the part transactions are all covered .
) .. it can apply retrospectively also. some formalities need to be completed under the old law.. cos then the retrospectivity is not against the public policy...r.. Acts applying for new formalities can't be applied retrospectively either. The transfer is a done thing. GP Singh : contract law area which is interesting Transfers: generally beneficial provisions can apply retrospectively.General rule is this: Where the act tries to confer benefits. there are some transfers under the old act which are defective. no right is vested. you cannot go back and clean up the defects in the past.. w. they will only be prospective. transfer of property.. but a pending transfer will be affected by the new right.t. which have been done away with under the new law. therefore the provisions which do away with formalities will not make good past defective transactions. due to the change in the law would they be rendered proper? Where a transfer is defective. you cannot have something go back and vest the right.. thus the new act wont change the fact of a past transfer Last class (sigh...
in this ordinance.. you have to validate it too. and there is a valid validating clause. in the intervening period. If there is no validating provision then the previous judgments can't be rendered ineffective PC Mills judgment: Separation of powers under the constitution says that the legislature can't invalidate judgments... (as in to invalidate a judgment a judgment against them) has bullied the legislature into passing a retrospective law and a validating amendment which invalidates that decision (or maybe all the decisions in the past year).. you better pay the owners the amount you received from the stock.. saying we deem that whatever the petty amount was paid would include the amount of stock lying with you.. (only the mgmt was vested in the government)... 1994 4 SCC 429 Bhuvaneshwar singh filed a petition saying the mgmt should pay him the amount due to him by way of stock. This decision said that. 30/4/1972 brought about the coking coal nationalisation act. this owner of the mine was some guy. for his/her own interest. The government has been directed to make payment already by the SC which is absolutely enforceable on anyone. provided the mgmt of all the coking coal mines vested with the government. The earlier decision was held unenforceable It is not enough to retrospectively change the law. they put in another clause which said... They paid some petty amount for buying out the huge reserves. the same law would need to be changed to remove the defect. as has been decided by a constitutional bench of the supreme court.. some nationalisation amendment ordinance. Then what would be the import of this retrospectively enacted law? The earlier decision of the supreme court would be stand. for the period they were in mgmt. they had the owners bear the expenses.Been discussing the vodaphone case Bhuvaneshwar Singh 1994 6 SCC 77 Coking coal mines emergency provision ordinance. but the earlier judgment needs to be enforced.. all the mines are vested in the central government without any encumbrances.. the HC and SC both ruled in favour of the petitioner. this decision says that merely passing the validating law would not be enough.... where there is a valid retrospective amendment.. an in the basis in law for the decision would need to be changed for the retrospectivity to be effective.. then that is not an encroachment of the judicial powers by the legislature Suppose some power-wielding authority. . all judgment decrees and all passed in any case are rendered ineffective. but did not attribute them the value of the stocks lying with them. effective from 1/5/1972 Another petition: the retrospectivity is valid. 1986.
.. but it is still a vested right for that time period. can the person who has lost the appeal make use of this? NO.. it may be for a limited time period.. as in the manufacturers There was a retrocpective lapsing of the accumulated cenvat credit with the manufacturers. someone loses the case after that appeal. There is a law in which you have one right of appeal. you may or may not make use of it.e. the claim dead.. and tax credit Credit structure of a commodity is positive. the case is final. had the appeal been pending the same would have applied to the woman. the duty paid on the output is always more than the input Cenvat credit on tractors and some other vehicles was inverted. the SC gave it in their favour But then the government enacted something giving retrospective power to enact such a rule which lapses the credit(?). i.Some pending Delhi HC matter of his: Cascading of taxes. then gave a validating provision Another writ petition against it: then what? APPEALS The right to appeal is a vested right.e. as in you can file an appeal against the decision of the lower court only. which was done with a rule This was challenged saying delegated legislation was not empowered by the primary legislation to retrospectively change the law. some new right cannot revive a dead claim or change a final order (although had there been a validating provision it would have been revived) Hussain Qasam dada AIR 1953 SC 221 Delhi cloth Mills AIR 1927 Privy council 242 (this was the case which had the right to second appeal conferred) ... the output having smaller tax liability The credit accumulated. i. but then the legislature confers a second right of appeal..