We, the people of India resolved to constitute India into a SOVEREIGN SOCIALIST SECULAR DEMOCRATIC REPUBLIC in order to secure to all our citizens: Justice, social, economic and political; Liberty of thought, expression, belief, faith and worship; Equality of status and of opportunity; and to promote among all of us Fraternity, assuring the dignity of the individual and the unity and integrity of the Nation.

To govern is the duty of the Executive, headed by the President. To legislate is the duty of the Parliament and State Legislatures. It is for the judiciary to keep a watch, visit and see that the freedom enshrined in the Constitution reach to every citizen and is not jeopardized or tinkered with or obstructed by the executive or any person in authority or otherwise.

languages and traditions. equity and good conscience which are indeed the hallmarks of the common law. reinforced by history and heritage inspired and strengthened by English Law guided and enriched by concepts and precepts of justice. fostered and sharpened by our genius and quest for social justice. It is rooted in our soil. . nurtured and nourished by our culture. THE INDIAN LEGAL SYSTEM The Indian legal system is the product of history.

. TAXATION Article 265 of the constitution mandates that no tax shall be levied or-collected except by the authority of law. It provides that not only levy but also the collection of a tax must be under the authority of some law.

The words and expressions used are not simple. THE TAX LAWS Tax laws are highly complex. . sub-clauses. sometimes more than one provisos and explanations meaning differently. Many deeming provisions have been inserted. complicated and beyond understanding of a taxpayer. Meaning of an expression is extended by way of Explanation and is curtailed by way of proviso. clauses. Many sections contain sub-sections.

A charging section has to be construed strictly. it must be shown that he falls within the ambit of the charging section by clear words used in the section. . CHARGING AND MACHINERY PROVISION The rule of construction of a charging section is that before taxing any person. No one can be taxed by implication.

Recourse to construction or interpretation of statute is necessary when there is ambiguity. then chapter by chapter. section by section and words by words. obscurity or inconsistency therein and not otherwise. . DIFFERENT CONSIDERATIONS It is the basic principle of construction of statute that the same should be ready as a whole.

. the court must ascertain the purpose for which the fiction is created and having done so. to assume all those facts and consequences which are incidental or inevitable corollaries to the giving effect to the fiction. DEEMING PROVISION It is well-settled that in interpreting a provision creating a legal fiction.

unless the Explanation purports to be a definition or a deeming clause. The Explanation does not enlarge or limit the provision. . EXPLANATION The normal principle in construing an Explanation is to understand it as explaining the meaning of the provision to which it is added.

 PROVISO A proviso qualifies the generality of the main enactment by providing an exception and taking out from the main provision. . but for the proviso would be part of the main provision. therefore. which. a portion. A proviso. must. be considered in relation to the principal matter to which it stands as a proviso.

retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. . unless the terms of a statute expressly so provided or necessarily require it. RETROSPECTIVE OR PROSPECTIVE Now. it is a well-settled rule of interpretation hallowed by time and sanctified by judicial decisions that.

and the consequences which would follow from construing it one way or the other. MANDATORY OR DIRECTORY The question as to whether a statute is mandatory or directory depends upon the intent of the Legislature and not upon the language in which the intent is clothed. . The meaning and intention of the Legislature must govern. and these are to be ascertained not only from the phraseology of the provision but also by considering its nature. its design.

. the courts cannot ignore the harm that is likely to happen by un-settling law that has once being settled. While reconsidering decisions rendered a long time back. STARE DECISIS It is a sound principle of law to follow a view which is operating for long interpretation of a provision rendered years back and accepted and acted upon should not be easily departed from.

an overriding effect over the Act or provision mentioned in the non obstante clause. When a clause begins with ³notwithstanding anything contained in the Act or in some particular provision/ provisions in the Act´. it is a legislative device to give such a clause an overriding effect over the law or provision that qualifies such clause. Ordinarily. it is with a view to give the enacting part of the section. NON OBSTANTE CLAUSE The principles governing any non obstante clause are well established. . in case of conflict.

To legislate is the prerogative of the Parliament or the State Legislature. . A casus omissus should not be readily inferred and for the purpose all the parts of the statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. CASUS OMISSUS The Court only interprets the law and cannot legislate.

 RATIO DECIDENDI AND THE WORDS It is well settled principles of law that the decision on an interpretation of one statute can be followed while interpreting another provided both the statutes are in parimateria and they deal with identical scheme. However. . the definition of an expression in one statute cannot be automatically applied to another statute whose object and purpose are entirely different.

category or genus are followed by general words. . The principle of ejusdem generis is applicable when particular words pertaining to a class. Similarly a word is to be interpreted after considering the other words used and in its context. EJUSDEM GENERIS A person is known by the company he keeps¶ Birds of same feather flock together.

 FINANCE MINISTER¶S SPEECH It is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted. .

Discretion should be exercised judiciously as a judicial authority well versed in law. . DISCRETION Many provisions confer discretion on the Court or the Authority.

 SUBSIDIARY RULES AND SPECIAL MAXIMS AIDING INTERPRETATION  Subsidiary rules a) Liberal Construction b) Harmonious Constructions c) Beneficial Constructions  Special maxims 1) 2) 3) 4) 5) Rule of Ejusdem Generis Reddendo Singula Singulis Contemporanea Expositio Casus Omissus Autrefois Acquit/Autrefois Convict .

 SUBSIDIARY RULES a) Liberal constructions The rule of liberal construction does not give a freehand to the Court to stretch and strain the statutory language to accord with abstract notions of justice and fair play (Prem Raj vs. If the statutory language is susceptible to two constructions the rule of liberal construction should incline the Court to prefer the one. which accomplishes the legislative purpose. . Ram Charan (1974) 2 SCC 1).

that effect can be given to both and that construction which renders either of them inoperative and useless should not be adopted except in the last resort [Bengal immunity Co. both of them cannot stand. . such that. State of Bihar (1955) 6 STC 446 (SC). they should if possible.b) Harmonious Constructions. It is a cardinal rule of construction that when there are in a statute two provisions which are in conflict with each other. vs.] This is what is known as the rule of harmonious construction. be so interpreted.

a more extended meaning may be attributed to them. if they are fairly susceptible to it.c) Beneficial Constructions The construction of a statute must not so strain the words as to include cases plainly omitted from the natural meaning of the language. This relaxation of strictly literal principles of interpretation is called as Beneficial Construction. where the usual meaning of the words falls short of the object of the legislature. However. .

the general words will be construed as being limited to persons or things of the same general kind or class as those enumerated by the specific words. this rule provides that where words of specific meaning are followed by general words. Rule of Ejusdem Generis (³of the same kind and nature´) Also known as Lord Tenderan¶s rule. . SPECIAL MAXIMS 1.

there is another rule that statutes which deal with persons or things of inferior rank are not extended to those of superior degree by introduction of general words and the general words following particular words will not cover anything of a class superior to those to which the particular words relate.Words of rank As an outcome of the rule of Ejusdem Generis. .

the sense produced by using the English word ³respectively´ whenever necessary. or ³a´ applicable. .‡ Reddendo Singula Singulis (Giving each to each) This high sounding phrase only means that words should be read distributively.

Contemporanea Exposito Contemporanea exposition est optima et fortissinia in lega: meaning Contemporaneous exposition is the best and strongest in law It is said that the best exposition of a statute or any other document is that which it has received from contemporary authority.3. .

Casus omissus ( already Dealt with) .4.

As per this doctrine a person cannot be prosecuted twice for the same offence.5. . Autrefois Acquit The principle of the doctrine of Autrefois Acquit is codified in section 300 of the Code of Criminal Procedure.

RULES FOR TAX LAWS Tax laws being part of statutory law. However. the general rules governing interpretation of statutes also govern interpretation of taxing statutes. there are certain particular rules which govern interpretation of a taxing statute. due to certain peculiar characteristics of taxing statutes. I will deal with only special rules of construction governing a tax statute .

. The subject is not to be taxed. The subject is not to be taxed without clear words for that purpose.(a) Rule of strict construction As tax laws impose liability on the subject they have to the strictly construed. unless the words of the taxing statute unambiguously impose the tax. If the person sought to be taxed comes within the letter of the law. he must be taxed however great the hardship may appear to the judicial mind.

the Courts have adopted what is known as ³Golden rule of Construction. if such construction leads to an absurd result of defeats the very purpose of the Act.(b) Golden rule of strict construction The Courts have disregarded the rule of strict and literal construction. In such cases.´ .

(c) Mischief rule In case of ambiguity in the matter of construction the literal rule of construction will also give way to mischief rule of construction. one has to consider the law before coming into force of the Act. what remedy had the legislature resolved and appointed to cure the disease and the true reason of the remedy. which is better known as Hyden¶s rule of construction. what was the mischief and defect for which the law did not provide. . As per this rule while construing a provision of a statute.

No person has a vested right in any course of procedure.(d) Statutes dealing with procedure In contrast to statutes dealing with substantive rights. there is no other right than to proceed according to the altered mode. . He has only the right of prosecution or defense in the manner prescribed for the time being by or for the Court in which the case is pending and if. by an Act of Parliament the mode of procedure is altered. statutes dealing with merely matters of procedure are presumed to be retrospective. unless such a construction is inadmissible.

.(e) Theory of form and substance The assesses under the Income-tax Act have legal right to plan the affairs in appropriate manner so as to attract least amount of tax. Tax planning is permissible and only tax avoidance/tax evasion is punishable under the Act.

it must be resolved in favour of the assessee. . the construction in favour of the assessee has to be accepted.(f) Construction in favour of the subject If two constructions of a provision of a statute are possible. If a section in a taxing statute is of doubtful and ambiguous meaning.

in order that the decree of the Court may be carried out. a thing judicially acted upon or decided. a thing or matter settled by the judicial decision. .(g) Res judicata Res judicata means a matter adjudged. that a time should come when litigation shall cease. The principle of res judicata is to bring finality to litigation.

The question would arise how far the promise given by the tax authorities would fall within doctrine of promissory estoppel. .(h) Estoppel For similar reasons the principle of estoppel strictly does not apply to income tax proceedings.

.(i) Construction against double taxation There is always presumption against double taxation. Broadly stated the principle of a taxing statute is to charge income or wealth only once in one hand. Accordingly such construction is preferred which avoids double taxation.

they will be taken and construed together as one system and explanatory to one another. .(j) Integrated scheme Where there are different statutes in pari material though made at different times.

. 1061 specifically empower the Central Board of Direct Taxes to issue general instructions for the general administration of the Act and such instructions issued are binding on the subordinate officers.(k) Circulars of the Department Section 119 of the Income-tax Act.

.(l) Penal statutes Penal statutes which create offences or which have the effect of increasing penalties for existing offence will only be prospective by reason of the constitutional restriction imposed by Article 20 of the Constitution.

Answer to this question depends on the proper interpretation of the provision in question. The question is whether the statute dispenses with mens rea and creates a strict liability. .(m) Mens rea When a statute creates an offence a normal question that arises is as to whether `mens rea¶ is a necessary element of such offence.

the Board is delegated with legislative power to make rules. the Central Board of Direct Taxes has been empowered to make proper rules for the purpose of administration of the various direct tax laws. . Accordingly.(n) Interpretation of rules Under the direct tax laws.

. there must be an intentional relinquishment of a known right or voluntary relinquishment or abandonment of a known existing legal right.(o) Doctrine of waiver A waiver is an intentional relinquishment of a known right. or conduct such as warrants an inference of the relinquishment of a known right or privilege. The generally accepted connotation is that to constitute ³waiver´.

. A proper hearing must always include a fair and adequate opportunity to those who are parties in the controversy for correcting and contradicting anything prejudicial to their view.(p) Rule of audi alteram partem Both parties should be heard before any decision. The right to fair hearing has been used by the Court as the base on which to build a kind of code for administrative procedure comparable with due process of law.

explaining or declaring the policy and purpose.AIDS TO INTERPRETATION (a) Preamble The preamble of a statute is a prefatory statement at its beginning. following the title and preceding the enacting clause. and the objects sought to be accomplished by the enactment of the statute. the reasons and motives for. The preamble is that part of a statute which contains the recital showing the reason for the Act. .

They cannot control the plain words or statutes. but they may explain ambiguous words. the headings certainly help the Court to resolve that doubt. If there is any doubt in the interpretation of the words of the section.(b) Headings The headings prefixed to a section or sets of section in some modern statutes are regarded as preamble to those sections. .

. unless they have been inserted with the assent of the legislature. however not to be referred to for the purpose of construction.(c) Marginal notes Although a marginal note cannot afford any legitimate aid to the construction of a section. it can however be relied upon as indicating the drift of the section. Marginal notes to the sections are.

do not make law. They are part of the statute. An illustration does not exhaust the full content of the section which it illustrates and equally it can neither curtail nor expand its ambit. They only exhibit the law in full action. The illustrations. .(d) Illustrations Illustrations in enactments provided by the legislature are valuable aids in understanding the real scope of the text thereof. however.

.(e) Definition sections It is quite common to find in a statute definitions of certain words and expressions used elsewhere in the body of the statute. The definition of a word in the definition section may either be restrictive of its ordinary meaning or it may be extensive of the same. The object of such a definition is to avoid the necessity of frequent repetitions in describing all the subjectmatter to which the word or expression so defined is intended to aid.

The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out. a proviso never destroys the section as a whole. . would fall within the main enactment. from the main enactment a portion which. but for the proviso. as it were.(f) Proviso A proviso merely craves our something from the section itself.

(g) Explanation An Explanation is at times appended to a section to explain the meaning of words contained in the section. It becomes a part and parcel of the enactment. The meaning to be given to an Explanation must depend upon its terms, and no theory of its purpose can be entertained, unless it is to be inferred from the language used.

(h) Schedules Schedules appended to statutes form part of the statute. They are added towards the end and their use is made to avoid encumbering the section in the statute with matters of excessive detail. They often contain details and forms for working out the policy underlying the sections of the statute.



In interpreting a legislation which is ambiguous the context has to be taken into account to deal with dubiousness. The context includes not only other enacting provisions of the same statute, but its preamble, the existing state of the law, other statutes in pari materia and the mischief which the statute, discerned from those and other legitimate means, was intended to remedy.

e. `within the four corners of the Act¶).(j) Other provisions of the same statute The rule of `ex visceribus actus¶ (i. as far as possible. to make a consistent enactment of the whole statue. and every provision in the statute must be construed with reference to the context and other clauses in the statute so as. lays down that a statute must be read as a whole. ..

(k) Amendments An amendment is a legislative act designed to change some prior and existing law by adding or taking from it some particular provision. Where the amendment alters the language of a provision the presumption is that it was deliberately done to change the law. For instance. Sometimes amendments are made to clarify the law and not to change it. . if the amendment only deletes some superfluous words it does not mean that the law has been altered.

the idea is to give the enacting or operative part of the section an overriding effect over the provisions of the Act found in the non obstante clause.(l) Non obstante clause The expression ³non obstante´ means ³notwithstanding´. . Sometimes a section commences with the clause stating that ³notwithstanding anything contained in this Act or any law for the time being in force´ and. in case of conflict.

as one system and as explanatory of each other. and not referring to each other. i. . or even expired.e. statutes dealing with the same subjectmatter of forming part of the same system. they shall be taken and construed together. Acts are regarded to be in pari materia when they deal with the same person or thing or class. Where there are different statutes in pari materia though made at different times. Extension of this rule of context permits reference to other statutes in pari materia.(m) Reference to other statutes (statues in pari materia) Statute must be read as a whole as words are to be understood in their context.

Also an interpretation of a provision in a taxing Act rendered years ago and accepted and acted upon by the Department should not be easily departed from.(n) Judicial decisions Questions of law settled by a long course of decisions should not ordinarily be disturbed. .

(o) Usage and practice Usage and practice developed under a statute is indicative of the meaning ascribed to its words by contemporary opinion and in case of an ancient statute is an admissible external aid to its construction. . The rule of contemporanea expositio is that the interpretation that a provision has received from contemporary authorities who are charged with executing the Act should be clearly wrong before it is overturned.

except where the statute itself so directs (e.g. . in the case of circulars of the Central Board of Direct Taxes under section 119 of the Income-tax Act. which are binding even if they deviate from the Act).(p) Construction put by executive As a general rule a construction placed by the executive cannot bind a judicial or quasijudicial authority. 1961.

(q) Dictionaries and text-books When a word is not defined in the statute a dictionary is often useful in ascertaining its meaning. such as Webster¶s or Oxford Dictionary. . Courts usually rely on standard dictionaries.

(a) .BINDING PRECEDENTS Supreme Court decisions ± Article 141 As mentioned earlier the Article 141 embodies the doctrine of precedent as law. The law as interpreted by the Supreme Court is binding on all Courts and Tribunals in India. The Article 141 of the Constitution of India provides that the law declared by the Supreme Court shall be binding on all the Courts in India.

It is in no-way binding on any Court but may receive attention as being an opinion of higher authority. and unnecessary for the decision of the particular case. Thus. . However.(b) Obiter dictum It is an expression of opinion by a Judge on a question immaterial to the ratio decidendi. obiter dicta of the Supreme Court are binding or are entitled to the highest respect. the observations made in a judgement which are not relevant to the ratio decidendi DO NOT HAVE ANY BINDING FORCE.

The law declared by the High Court is binding on all the Courts subordinate to it within its territorial jurisdiction. the latter decision should be followed. Where there are two decisions of the same High Court holding two different views.(c) High Court¶s judgement The doctrine of precedent is applicable to the decisions delivered by the High Court. .

 CONCLUSION General principles of interpretation of Law including the Tax Laws are to protect a citizen against the excesses of the Executive. . It is an aid to protect and uphold `enduring values¶ enshrined in the Constitution and Laws enacted by the Parliament/ Legislatures. Corrupt authority. erring individuals and the Legislature. Administration.