[2020] 

117 taxmann.com 286 (Article)

Date of Publishing: June 23, 2020

“Whether debatable issue not to be decided in favour of assessee

anymore?”
Comments in the case of Ramnath & Co. v. CIT [2020] 116 taxmann.com 885 (SC)
image image

D.C. AGRAWAL Y.K GAIHA

Advocate Advocate

Introduction

1. There has been a consistent stand that wherever two views are possible on an issue, then the view
favourable to the assessee should be taken. Once, such possible view is adopted, then its revision/
overruling was not approved by the Courts 1. However, this approach is too generalized. There are
restrictions as to under what circumstances view favourable to the assessee can be adopted. When the
question relates to claiming exemption/ deduction from tax computation, the Courts have consistently
held that a strict interpretation of exemption provision should be carried out and if the provision is
capable of yielding two views, then the view favourable to the Revenue should be taken. However, in
some cases2, an opposite view has been taken. The controversy was settled by Hon'ble Apex Court in
Ramnath & Co. v. CIT3 holding that exemption provision should be interpreted strictly and if it is
capable of two views, then the view favourable to the Revenue should be taken. The facts of the case,
arguments of the parties, reasoning and decision of Hon'ble Apex Court and comments/ supplements
thereon are briefly given in this write up.

2. Facts of the case:

2.1 The case of the AO: The assessee was engaged in providing services to certain foreign buyers of
frozen seafood and/or marine products and had received service charges from such foreign
buyers/enterprises in foreign exchange. It claimed deduction of Rs. 22,39,825/- u/s 80-O of the Act on
foreign exchange receipt of Rs. 44,79,649/-. U/s 80-O deduction is allowed to the extent of 50% of
foreign exchange received for services, as described in the Section, rendered from India to foreign
enterprises. The AO denied the claim on the ground that services rendered by the assessee were the
'services rendered in India' and not the services rendered from India. As per the agreement with the
foreign buyers, the assessee was required (i) to locate reliable source of quality and assured supply of
frozen seafood for the purpose of import and communicate its expert opinion and advice in that regard;
(ii) to keep a close liaison with agencies concerned for bacteriological analysis and communicate the
result of inspection together with expert comments and advice; (iii) to make available full and detailed
analysis of seafood supply situation and prices; (iv) to advise and inform about the latest trends in
manufacturing and markets; and (v) to negotiate and finalise the prices for Indian exporters of frozen
marines products and communicate such other related information to the foreign enterprises. To the
queries raised by the AO, the assessee submitted that all the foreign buyers are located outside India.
They have not utilised services of the assessee in India, distribution and marketing of Indian sea foods
was carried out outside India. The AO rejected the contention of the assessee and held that the kind of
services provided by the assessee are services rendered in India and cannot be construed as services
rendered from India merely relying on the facts that the foreign principals are advised of the results and
that they are stationed outside India. Further, as per agreement the payment of commission is
conditional on the foreign enterprises finding the quality of goods satisfactory. Thus, the assessee is
only an agent of the foreign enterprises in the matter of procurement of marine products from India
and all the services envisaged in the agreement are incidental to the carrying out of the main function as
agent. He, accordingly, disallowed the claim of deduction u/s 80-O.

2.2 Decision by CIT(A): The CIT(A) allowed the claim of deduction on the ground that the assessee
supplying the information about market, Government policies, exchange fluctuations, banking Laws,
data about sea food to the foreign enterprises and also the assessee is bringing the foreign enterprises in
contact with the manufacturers or processors of shrimps, lobsters etc. and negotiating with the local
packers and is locating sources of frozen seafoods for the foreign enterprises. All the activities carried
out in India are carried out on behalf of foreign enterprises. The appellant has located reliable source of
quality and assured supply of frozen sea-food products to the various foreign enterprises and supplied
information with regard to sea-food processing and manufacturing details to the foreign enterprises.
These services are specialized and technical services. Thus, it can be said that the services are rendered
from India. The CIT(A) relied on the following decisions 4.

2.3 Decision by ITAT: The Tribunal confirmed the order of CIT(A) by holding that the assessee
supplied regular information to the foreign enterprises about market situations i.e. fishing situation,
prices paid by other markets, prices paid by French Competitors, business opportunities, monthly
supplies of seafood data etc.. This indicates that the assessee has to communicate the data it collected,
and on the basis of this, the foreign party acts either to purchase or not to purchase. Such services are
rendered to ensure highest standards of quality, hygiene and freshness of products including
supervision at various stages which help the foreign party to import marine products from India and
therefore they are specialised, and technical service entitled for deduction u/s 80-O. The ITAT relied on
the following decisions5 and held that (i) when the details supplied by the assessee are utilized either to
purchase or not to purchase from India, such services can be treated as "services rendered from India"
(ii) fees/commission received for giving of all marketing, industrial manufacturing, commercial and
scientific knowledge, experience and skill for the efficient working and management of the foreign
company could be treated as services rendered that make the assessee eligible for the benefit under
Section 80-O particularly on the ground that had the assessee not provided the information like
marketing, processing, quality control, etc. to the other party, the export would not have materialised.

2.4 Decision by Hon'ble Kerala High Court: Hon'ble Kerala High Court disagreed with the
Tribunal particularly on the finding that the appellant was merely a marine product procuring agent for
the foreign enterprises, without any claim for expertise capable of being used abroad rather than in
India. Hon'ble High Court analysed section 80-O of the Act with its Explanation (iii) and held that
deduction u/s 80-O is available only (i) when an assessee renders technical or professional services
from India to a foreign Government or enterprise outside India even though the foreign recipient
utilises the 'benefit of such services in India (ii) the services rendered by an Indian entity falls within the
sweep of the provision and (iii) such services should be used outside India. The deduction u/s 80-O is
not available to the assessee for mere asking; the records and materials must support the claim and the
benefit of the said Section cannot be claimed as a matter of right. The burden is on the assessee to prove
with cogent material that the commission is for the services it rendered falling within the scope of the
section. Neither of the facts-- the existence of the contract and the receipt of convertible foreign
exchange-leads to a presumption that the commission is deductible as provided in Section 80-O of the
Act. Hon'ble High Court summed up the decision that (i) mere transmission of the information to a
foreign enterprise, abroad does not go to show that it is a service rendered from India, but not in India
(ii) if merely interaction and sending information even relating to technical know how qualify for
deduction without reference to the services rendered from India, then the very expression in
Explanation (iii) will become otiose. Further, assessee failed to place any material on record so as to
know whether they have rendered certain services which qualify for deduction.

Arguments of the parties:

3. The appellant and the Revenue made following submissions before Hon'ble Apex Court-

3.1 Submissions of the assessee:

(i)   As per section 80-O and Circular No. 700 dated 23-09-1995, Section 80-O covered
not only the services rendered outside India but also the services rendered from
India to a party outside India.
(ii)   Appellant furnished information from India to its customers abroad regarding its
industrial and commercial knowledge and skill, and such information was utilized
abroad by the said foreign customers and the appellant's commission was remitted
to India in convertible foreign exchange.
(iii)   Since, the assessee had supplied information about sea food quality, market
conditions, availability of market in India for acquiring quality sea food, and such
information was utilized by the foreign enterprise to make or not to make purchases,
the commission received by the assessee in foreign exchange would be entitled for
deduction u/s 80-O.
(iv)   The decision given by Hon'ble High Court is contrary to the decision of Hon'ble
Apex Court in J. B. Boda & Co. Pvt. Ltd v. CBDT [1997] 223 ITR 271 (SC). The
reliance was also placed on the following judgements6.

3.2 Submissions of the Revenue:

(i)   The intention of legislature behind introducing Section 80- O was to provide
deductions only for that income which is received through intellectual
activity/intellectual endeavours; and simple trading activity, though may require
certain commercial or industrial information, cannot be said to be covered by this
provision.
(ii)   The main part of Section 80-O specifically states that it covers the services rendered
"outside India" and the explanation clarifies that the services rendered or agreed to
be rendered outside India shall include services rendered from India but shall not
include services rendered in India.
(iii)   The activities alleged to be rendered by the appellant to foreign entities as per the
respective agreements were not of technical or professional services so as to be
covered by the main part of the provision; and further, they are excluded by virtue of
Explanation (iii) to Section 80-O, for having been rendered "in India" and not "from
India".
(iv)   The payment of commission to the assessee was based on invoice amount; and not
 based of any specialised commercial or technical knowledge given to the foreign
entity.
(v)   As per Article 3 of the agreement if the quality or packaging of the goods was found
to be unsatisfactory after inspection in France, the foreign company had no liability
to pay the agent's fee.
(vi)   The activities in respect of which the agreements were entered into by the appellant
were only that of a 'buying or procuring agent' and do not fall within the ambit of
Section 80-O of the Act.
(vii)   Circular No. 700 dated 23-03-1995 only clarifies that the foreign recipient of the
services may utilise the benefit of such services in India whereas in the present case,
the appellant merely rendered services in India and only as an agent.
(viii)   The reliance was placed on the following decisions7 and on the Circulars No. 187
dated 23.12.1975 and Circular No. 253 dated 30.04.1979, which clarified that that
trade enquires will not qualify for deduction under Section 80-O as also technical
services rendered in India.

Reasoning and decision by Hon'ble Apex Court:

4. Hon'ble Apex Court upheld the decision of Hon'ble Kerala High Court by observing/ holding as
under-

(i)   The Constitution Bench in Dilip Kumar & Company (Supra) has held that the
exemption notification (and so also the exemption provisions in tax statute) has to
be interpreted strictly; the burden of proving its applicability is on the assessee; and
in case of any ambiguity, the benefit thereof cannot be claimed by the
subject/assessee, rather it would be interpreted in favour of the revenue.
(ii)   Therefore, generalised proposition given in Sun Export Corporation (Supra) that in
the matters of taxation, when two views are possible, the one favourable to assessee
has to be preferred, stands specifically disapproved. That is that a tax incentive
provision must receive liberal interpretation, cannot be considered to be a sound
statement of law.
(iii)   The Law declared by the Constitution Bench in Dilip Kumar & Co.'s case (supra) will
apply in the taxing statutes for exemption, deduction, rebate et al., which all are
essentially the form of tax incentives given by the Government to incite or encourage
or support any particular activity.
(iv)   At and until the stage of finding out eligibility to claim deduction, the ambit and
scope of the provision for the purpose of its applicability cannot be expanded or
widened and remains subject to strict interpretation but, once eligibility is decided in
favour of the person claiming such deduction, it could be construed liberally in
regard to other requirements, which may be formal or directory in nature.
(v)   For the purpose of eligibility, for claiming deduction u/s 80-O, the service or activity
has to precisely conform to what has been envisaged by the provision read with its
explanation and of requirement of receiving convertible foreign exchange. Once this
stage is crossed, then the provision will apply with full force and may be given liberal
application. At stage of inquiry as to whether the suggested activity of appellant had
been of rendering such service from India to its principals in foreign country which
answers to the description provided by the provision, no liberal approach is
envisaged. The activity must strictly conform to the requirements of Section 80-O of
the Act.
(vi)   In the process of comprehension of a statutory provision, the meaning of any word
or phrase used therein has to be understood in its natural, ordinary or grammatical
meaning unless that leads to some absurdity or unless the object of the statute
suggests to the contrary8. In the context of taxing statute, the requirement of looking
plainly at the language is more pronounced with no room for intendment or
 presumption9.
(vii)   For claiming deduction u/s 80-O Foreign exchange receipts must be for
consideration attributable to information and service contemplated by Section 80-O
and in case of a contract involving multiple or manifold activities and obligations,
every consideration received therein in foreign exchange will not ipso facto fall
within the ambit of Section 80-O. Each activity and obligation must confirm the
information or services contemplated by Section 80-O. Such inquiry has to be
carried out by the AO and assessee has to provide requisite material to correlate
foreign exchange receipts with the information/ services referable u/s 80-O.
(viii)   The appellant in the present case as per facts was required "to locate the source of
supply of the referred merchandise and inform the principals; to keep liaison with
the agencies carrying out organoleptic/bacteriological analysis and communicate
the result of inspection; to make available to the foreign principals the analysis of
seafood supply situation and prices; and to keep the foreign principals informed of
the latest trends in the market and also to negotiate and finalise the prices. As per
the agreements, in lieu of such services, the appellant was to receive the agreed
commission on the invoice amounts". Therefore, the services of the appellant were
nothing but of an agent, who was procuring the merchandise for its principals; and
such services by the appellant, as agent, were rendered in India. Even if certain
information was sent by the assessee to the principals, the information did not fall in
the category of such professional services or information which could justify its
claim for deduction under Section 80-O of the Act. Further, the case of the appellant
is demolished by the provision in the agreement with the foreign buyers, which
provided for no payment to the appellant in case of principal being dissatisfied with
goods.

5. Comments:-

5.1 Analysis of section 80-O as it stood at the relevant time:

Deduction u/s 80-O is available to resident Indians @ 50% of convertible foreign exchange received as
royalty, commission, fees, or any similar payment, from the Government of a foreign State or a foreign
enterprise-

(i)   as a consideration for the use outside India of any patent, invention, model,
design, secret formula or process, or similar property right, or information
concerning industrial, commercial or scientific knowledge, experience or skill made
available or provided or agreed to be made available or provided to Foreign
Government/ foreign enterprise; or
(ii)   in consideration of technical or professional services rendered or agreed to be
rendered outside India to such Government or enterprise by the assessee.
(iii)   as per Explanation (iii) "services rendered or agreed to be rendered outside
India" shall include services rendered from India but shall not include services
rendered in India.

5.2 Two limbs of the Sections: It may be seen that there are two limbs/ conditions of availing
deduction u/s 80-O. First limb is where Indian resident provides, or makes available, to the foreign
enterprise, any patent, model, design, secret formula or process or information concerning industrial/
commercial or scientific knowledge, experience, or skill.

Second limb is where Indian resident renders, outside India, technical or professional services, to the
foreign Govt. or foreign enterprise.
Providing market information about sea food or to keep liaison with the agencies carrying out
organoleptic/bacteriological analysis and communicate the result of inspection or to negotiate price of
seafood for export to foreign enterprise will fall in the category of information concerning industrial,
commercial or scientific knowledge, experience or skill. Such information has to be used outside
India.

5.3 Explanation (iii) would be applicable to second limb which provide that technical or professional
services rendered or agreed to be rendered outside India. It clearly excludes services of technical or
professional nature if rendered in India. Explanation (iii) thus would not be applicable to first limb.
Thus, kind of information provided by appellant in this case should only be used outside India. Even
Circular No.700 issued on 23-3-1995 which clarifies that "as long as the technical and professional
services are rendered from India and are received by a foreign Government or enterprise outside
India, deduction under Section 80-O would be available to the person rendering the services even if
the foreign recipient of the services utilises the benefit of such services in India" would be applicable to
second limb. Therefore, for getting deduction u/s 80-O information concerning industrial/ commercial
or scientific knowledge, experience, or skill must only be used outside India. The applicability of
Explanation (iii) to second limb only seems to have not argued or considered by the Judicial Authorities
in this case.

5.4 Exemption provision should be interpreted strictly:

A provision conferring exemption from tax must be construed in a strict manner and the person who
claims the exemption must fall within the four corners of the exemption provision. For example-

(i)   For claiming exemption u/s 194A(3)(iii)(a), for getting interest income without
deduction of tax, the deposits have to be made by the cooperative societies with
cooperative banks. On strict interpretation no such exemption would be available on
the deposits made with the treasury10.
(ii)   The doctrine of mutuality bestows a special status to qualify for exemption from tax
liability. It is a settled proposition of law that exemptions are to be put to strict
interpretation. If the assessee fails to fulfil the stipulations and to prove the existence
of mutuality, no exemption would be available. Therefore, where contributions were
accepted both from members as well as non-members, benefit of mutuality will not
be available11.
(iii)   As per clause (ii) of Explanation 1(b) to section 2(ea)(v), of Wealth Tax Act benefit of
exemption in respect of urban vacant land is available only when building is fully
constructed with approval of appropriate authority and not when construction
activity has merely started. As per strict interpretation of the provision the
exemption would be available only when following conditions are satisfied- (a) The
land is occupied by any building; (b) Such a building has been constructed; (c) The
construction is done with the approval of the appropriate authority12.
(iv)   "Truly, speaking liberal and strict constructions of an exemption provisions are to be
invoked at different stages of interpreting it. When the question is whether a subject
falls in the notification or in the exemption clause then it being in nature of
exception is to be construed strictly and against the subject but once ambiguity or
doubt about applicability is lifted and the subject falls in the notification then full
play should be given to it and it calls for a wider and liberal construction" 13.
(v)   Where assessee, an educational institution, made investment in a chit fund company
during the financial years 2003-04 and 2004-05, which was certainly not in
accordance with the provision of section 11(5) and, thus, it violated the conditions
 stipulated for availing of exemption under section 10(23C)(vi ). It was held that
"thus, while interpreting the exemption clause of a taxing statute, utmost care
should be taken to give appropriate meaning to words of the statute and the same
should be construed strictly"14.
(vi)   Exemption u/s 10 (26) is available to members of Scheduled Tribe only under article
366 of Constitution of India. Such exemption will not be available to a firm whose
partners belonged to Khasi Schedules Tribe. On strict interpretation of the provision
it was held that a partnership firm cannot be accepted as member of Scheduled Tribe
and therefore, is not entitled to exemption15.

5.5 The judgement in Dilip Kumar & Co.'s case: It is held in this case that that taxing statutes are
subject to the rule of strict interpretation, leaving no room for any intendment; and the benefit of
ambiguity in case of an exemption notification or an exemption clause must go in favour of the revenue,
as exemptions from taxation have a tendency to increase the burden on the unexempted class of tax
payers. In brief, the ratio decidendi was summed up as under:

66.1. Exemption notification should be interpreted strictly; the burden of proving applicability would
be on the assessee to show that his case comes within the parameters of the exemption clause or
exemption notification.

66.2. When there is ambiguity in exemption notification which is subject to strict interpretation, the
benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in
favour of the Revenue.

66.3. The ratio in Sun Export case is not correct and all the decisions which took similar view as in
Sun Export case stand overruled."

This judgement was explained in Ramnath's case by holding that "the burden of proving its
applicability is on the assessee; and in case of any ambiguity, the benefit thereof cannot be claimed by
the subject/assessee, rather it would be interpreted in favour of the revenue".

In Dilip Kumar's case it appeared that even if any provision gave rise to two views on its interpretation,
still the benefit will go to the revenue. This is doubt is clarified in the present case., The scope of
ambiguity in the provision was restricted to its applicability and fulfilment of conditions laid down in
the provision relating to claim of exemption or deduction. If there is any lacuna in the provision or the
provision does not cover any specific circumstance, i.e. where applicability of exemption / deduction
provision is doubtful, because of legislative gap, the ratio in Dilip Kumar's case would not be applicable
and therefore benefit of such legislative gap would go to the taxpayer. When the competent
legislature mandates taxing certain person/certain objects in certain circumstances, it
cannot be expanded/interpreted to include those, which were not intended by the
legislature16. Object will be achieved through making it in favour of the revenue

5.6 Ambiguity v. lacuna: Ambiguity means that the provision is capable of giving two views on its
interpretation like in the present case i.e. whether services rendered from India can also mean services
used in India in addition to the view that services rendered from India would only mean services used
outside India. The strict interpretation would lead to the view that services used in India
would not be covered in the expression services rendered from India. Thus, the gist of the
judgement of Hon'ble Apex Court in this case is that for claiming exemption or deduction under any
provision of the Act, the burden is on the assessee to prove that it squarely falls within the exemption/
deduction provision and it satisfies all the conditions laid down in the provision. Where a doubt arises
on the interpretation of conditions for claiming exemption / deduction, then such doubt should be
resolved in favour of Revenue. In Section 80-O for claiming deduction, the assessee must render the
kind of services provided in the provision. If the provision provides that the services should be rendered
to a foreign enterprise, then rendering services to non-foreign enterprise will not enable the assessee to
claim deduction. Similarly, if it is provided in the provision that services have to be rendered from India
and they have to be used outside India, then there rendering or their use in India will not satisfy the
condition (except where it is covered by circular no. 700 of 23-03-1995). However, in cases where
there is lacuna in the provision itself and there is no legislative or judicial clarification,
then such lacuna should be resolved in favour of assessee. Hon'ble Apex Court in this
case does not lay down the proposition that legislative gaps should also be filled up
through strict interpretation.

Therefore, the authorities which lay down the proposition that ambiguity arising due to legislative
lacuna should be resolved in favour of assessee still hold the field. Some of them are as under-

(i)   For claiming deduction u/s 54/54F what is necessary is that the construction of new
asset (house property) should be completed within the specified period. The
condition that construction of new asset should also commence after sale of old asset
is not provided and hence deduction u/s 54/54F would be available even if
construction is started before sale of old asset17.
(ii)   Once certificate of classification of hotel as Four-Star category is granted by the
Government for claiming deduction u/s 35AD which does not provide that the
certificate would be effective from any specific date, then deduction would be
available for the assessment year whose assessment is pending on the date when
such certificate was granted. No ambiguity can be seen in the provision and therefore
the ratio of Hon'ble Apex Court in the Commissioner of Customs (Import)
Mumbai v. Dilip Kumar18 (para 16) will not be applicable19.
(iii)   In order to claim exemption from payment of tax on the presidential palace of the
ruler under section 10(19A), it is necessary for the ruler to satisfy that first, he owns
the palace as his ancestral property; second, such palace is in his occupation as his
residence; and third, the palace is declared exempt from payment of tax under
Paragraph 15(iii) of the Order, 1950 by the Central Government. Once these
conditions are satisfied than merely because a part of the palace is given on rent
exemption cannot be denied. There is no condition that the ex-ruler should occupy
whole of palace or exemption would be available on split basis 20.
(iv)   In section 153C, before the amendment by Finance Act 2017 w.e.f. 01-06-2017, the
date of handing over of books by the AO of the person searched to the AO of the
other person was treated as date of the search for the purposes of counting six years
for the other person. It resulted in quashing of certain assessments done u/s 143(3)
by holding that they should be done u/s 153(c) The legislative lacuna was removed
by the above amendment which made the counting of six years common/same for
both person searched and other person.
(v)   Section 40A(3) as it stood at the relevant time, says that the amount exceeding Rs.
2,500 should not be paid except by way of cheque drawn on a bank or by a crossed
bank draft and if it exceeds this amount, then such expenditure shall not be allowed
as deduction. Section 40A(3) does not say that the aggregate of the amount should
not exceed Rs. 2,500. The words used are 'in a sum 'that is single sum. Therefore,
irrespective of any number of transactions when the amount does not exceed Rs.
 2,500 in each transaction, the rigours of section 40A(3) will not apply. This is a
technical lacuna in the provision21.

5.7 Whether this judgement would be applicable in all cases where two views are
possible-

After the decision in the present case, it is apprehended that wherever two views appear on the
interpretation of Tax Statute, then they should always be decided in favour of Revenue. In our view such
inference is not justified. The strict interpretation is required only when a taxpayer wants to get
exemption or deduction from payment of tax. On the other hand, where an item of receipt is sought to
be brought within tax net, the burden would be on the AO to prove that item of receipt is taxable. Where
item of receipt does not squarely fall within the taxing provision, it cannot be taxed as income. Also,
legislative lacuna or loopholes cannot be filled up by resorting to strict interpretation. If assessee gets
exemption because of legislative gap he cannot be denied. Where because of differing judgements of
High Courts two views appear on an issue, the benefit of taking the view in favour of the assessee cannot
be denied. The decision in Vegetable product's case has not been overruled. The application of this
decision is limited to interpretation of exemption/ deduction provisions and no more. Even before this
decision there were umpteen number of cases where it has been held that exemption provision should
be interpreted strictly22. However, in our view the ratio of the decisions in cases where interpretation of
Statute other than exemption provision are involved will still hold the field 23.

There is another point which requires clarification. In Dilip Kumar's case Hon'ble Apex Court held as
under-

"66.3. The ratio in Sun Export case is not correct and all the decisions which took similar view as in
Sun Export case stand overruled".

Where two views emerge on interpretation of tax provisions other than exemption/deduction
provisions, whether, following above decision, the view favourable to the Revenue is to be taken. In our
considered view, it is only in the cases of those provisions where the burden is on the assessee to prove
its case to take benefit, or to escape tax liability, the view favourable to the Revenue may be taken. But
where burden is on the Revenue to make out its case, as cast by any provision in the tax Statute, the
benefit of doubtful interpretation should go to the assessee. Similarly, where there is legislative lacuna,
the benefit has to be given to the assessee of doubtful interpretation. Therefore, only those decisions
which have followed Sun Export's case, and which relate to claim of exemption/ deduction are
overruled. The other cases which do not relate to claim of exemption/ deduction continue to create a
binding precedence.

Conclusion:

6. The provisions which provide exemption from taxation should be interpreted strictly. There is no
scope of any intendment or filing of the gap for taking a view in favour of the assessee. It is because
exemption from payment of tax put the burden on the other similarly placed taxpayers who are not
entitled for such exemption. Any ambiguity arising from interpretation of the exemption
provision should be resolved in favour of Revenue. The burden is on the taxpayer who
wants to claim exemption from taxation to satisfy the Authorities that it fulfils all the
conditions laid down in the provision. However, once such conditions are satisfied, then
application of exemption provision should be carried out liberally. In simple words, entire controversy
is centred on two questions, one- when should assessee get exemption, to answer this question,
strict interpretation of the provision is required i.e. only when he satisfies all the conditions laid down
in the sections; second- on what he should get exemption, for this a liberal interpretation is
required. The scope of items for exemption may be widened provided they are intimately connected
with the main items which satisfy the conditions for exemption. Further, ambiguity in tax provision
should not be mixed up with legislative lacuna. That is where certain circumstances are not covered for
denying exemption, then on the existence of those circumstances, exemption cannot be denied. For
example, expression "a residential house" would cover more than one house as section 54 connotes
abstract plurality24. The present decision has to some extent clarified or rather restricted the wide view
held in Dilip Kumar & Co.'s case. Where two views appear on interpretation of exemption provision,
then the view in favour of the Revenue may be taken but legislative lacuna cannot be filled by strict
interpretation and exemption available to the taxpayer cannot be denied. Also, where two views are
possible due to different court decisions, then the view favourable to the assessee cannot be denied. The
decision in Vegetable products' s case is not overruled.

■■

1. CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC); Manish Maheshwari v. Asst. CIT
(2007) 289 ITR 341 (SC); Mysore Minerals Ltd. v. CIT (1999) 239 ITR 775 (SC); CIT v.
Podar Cement Pvt. Ltd. (1997) 226 ITR 625 (SC); CIT v. Madho Pd. Jatia (1976) 105 ITR
179 (SC)
2. Sun Export Corpn. v. Collector of Customs: [1997] 6 SCC 564 and similar other cases
3. [2020] 116 taxmann.com 885 (SC)
4. E.P.W. De Costa & Another v. Union of India [1980] 121 ITR 751 (Delhi); Capt. K. C.
Saigal v. ITO [1995] 54 ITD 488 (Delhi)/[1995] 53 TTJ 564 (Delhi)
5. Godrej & Boyce Mfg. Co. Ltd. v. S.B. Potnis, Chief Commissioner [1993] 203 ITR 947
(Bom); DCIT v. Mittal Corporation [2001] 77 ITD 270 (Delhi)/[2001] 73 TTJ 835 (Delhi)
6. Abhiram Singh v. C.D. Commachen (Dead) by LRs. and Ors.: 2017(2) SCC 629; CIT v.
Baby Marine Exports, Kollam: [2007] 290 ITR 323 (SC); CIT v. B. Suresh: [2009] 313 ITR
149 (SC); K. Ravindranathan Nair v. CIT [2001] 247 ITR 178 (SC); Sun Export Corpn. v.
Collector of Customs: [1997] 6 SCC 564, and decision of Hon'ble Delhi High Court in
E.P.W. Da Costa (supra).
7. Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Co. and Ors: [2018] 9 SCC
1; B.L. Passi v. CIT: 2018 (404) ITR 19 (SC); CIT v. Thomas Kurian (Dead) through LR
Smt. Primari C. Thomas, since reported as [2012] 72 DTR (Ker)
8. Principles of Statutory Interpretation by Justice G.P. Singh (14th edn.at p. 91)
9. CIT v. Yokogawa India Ltd.: [2017] 391 ITR 274 (SC)
10. Chirayinkeezhu Service Co-operative Bank Ltd. v. CBDT [2019] 112 taxmann.com 272
(Kerala)
11. Yum Restaurants (Marketing) (P.) Ltd. v. CIT [2020] 116 taxmann.com 374 (SC)
12. Giridhar G. Yadalam v. CWT [2016] 65 taxmann.com 148 (SC)
13. Union of India v. Wood Papers Ltd. AIR 1991 SC 2049
14. Rabindranath Educational Trust v. UOI [2010] 191 Taxman 379 (Orissa)
15. Hotel Centre Point v. ITO [2019] 109 taxmann.com 223 (Guwahati - Trib.)
16. CIT v. Reham Foundation LKO. [2019] 111 taxmann.com 379 (Allahabad)
17. CIT v. Bharti Mishra [2014] 41 taxmann.com 50/222 Taxman 2 (Del).; CIT v. H.K. Kapoor
 [1998] 234 ITR 753 (All.) ; CIT v. J.R. Subramanya Bhat [1987] 165 ITR 571/[1986] 28
Taxman 578 (Kar)
18. [2016] 69 taxmann.com 206 (SC)
19. Benares Hotels Ltd. v. DCIT [2020] 115 taxmann.com 39 (ITAT varanasi)
20. Maharao Bhim Singh of Kota v. CIT [2016] 76 taxmann.com 274 (SC)
21. CIT v. Triveniprasad Pannalal [1997] 94 TAXMAN 381 (MP)
22. H.H. Lakshmi Bai v. CIT [1994] 72 TAXMAN 435 (SC); New Okhla Industrial
Development Authority (NOIDA) v. CCIT [2018] 95 taxmann.com 58 (SC); Vidarbha Co-
operative Marketing Society Ltd. v. CIT (1985) 156 ITR 422 (Bomb); CGT v. Fernandez
(U.S.M.) (1989) 178 ITR 577 (Ker); CWT v. Tulsi Dass (2002) 256 ITR 73 (Raj)
23. Manish Maheshwari v. Asst. CIT (2007) 289 ITR 341 (SC); Mysore Minerals Ltd. v. CIT
(1999) 239 ITR 775 (SC); CIT v. Podar Cement Pvt. Ltd. (1997) 226 ITR 625 (SC); CIT v.
Madho Pd. Jatia (1976) 105 ITR 179 (SC); CED v. Kanakasabai (1973) 89 ITR 251 (SC);
CIT v. Kulu Valley Transport Co. P. Ltd. (1970) 77 ITR 518 (SC); CIT v. Gwalior Rayon Silk
Manufacturing Co. Ltd. (1992) 96 ITR149 (SC); CIT v. Naga Hills Tea Co. Ltd. (1973) 89
ITR 236 (SC)
24. Tilokchand & Sons v. ITO [2019] 105 taxmann.com 151 (Madras)