INTERPRETATION OF

STATUTES
Presented By:
Meghana, Priti, Sanjay

Sampat & Mehta Adhyayan 2020 - The Dukes Retreat, Khandala - 6 to 8 Feb 2020
 Judicial System of India

India

Legislative Body Executive Body Judiciaries

To make Laws Execute/Implement the Interpretation
laws/legislation

President/Vice SC/HC/DC/
Parliament President/ Prime Subordinate
Minister/Council of
Ministers Courts
(Lok Sabha & Rajya Judges appointed by
Sabha) President
 Judicial System at State Level
e.g.
Maharashtra

Legislative Body Executive Body Judiciaries

To make Laws Execute/Implement the Interpretation
laws/legislation

State Assembly Governor / Chief HC/DC/Subordinate

Minister / Council of Courts
(Maharashtra Legislative Ministers
Council)
 Law making process

The Constitution of India

Law made by the Parliament or

State Legislature

Rules / Regulations made under the Act

Administrative Orders or Executive

Instructions
 MIMANSA PRINCIPLES
Laid down by Jaimini in his Sutras – written around 600 BC

Axioms ▪ Sarthakya – Every word and sentence must have some meaning and purpose
(Elementary
Principles) ▪ Laghava – Construction which makes the meaning simpler and shorter is to be
preferred

▪ Arthaikatva – To a word or sentence occurring at one and the same place a

double meaning should not be attached

▪ Gunapradhana – If a word or sentence purporting to express a subordinate

idea clashes with the principal idea, the former must be adjusted to the latter or
must be disregarded

▪ Samanjasya – all attempts should be made to reconcile apparrently conflicting

texts

▪ Vikalpa – Where there is a real contradiction, one of the contradiction matters

may be adopted at option
 MIMANSA PRINCIPLES
Golden Rules ▪ Sruti – When a Verb and the case governed by it have a self-evident
or General meaning and this form a complete and independence sentence, no
Rules of attempt should be made to strain or twist the meaning
Interpretation
▪ Linga – When the meaning of a word or express is not clear on the face
of it and its latent force or suggestive power has to be brought out by the
suggestive power of some other word or expression

▪ Vakya – Where what is apparently a complete sentence has, in order to

make out a satisfactory sentence, to be read as a part sentence
connecting it with some other clause
▪ Prakarana – When a sentence or clause by itself does not indicate its
purpose but its purpose becomes clear when read with some other text
belonging to any other topics discussed
 MIMANSA PRINCIPLES
General ▪ Distinguish between obligatory texts on the one hand and quasi-
Principles of obligatory and non-obligatory texts on the other
the Application
of Texts ▪ Adhikara Vidhis – Showing to whom Vidhi texts are applicable

▪ Krama – Order in which the texts are to be applied is determined

▪ Atidesha (reference) – Rules regarding one matter are made to bear on

another matter

▪ Uha (Adoption) – in the course of effecting an Atidesha, necessary

modifications are to be made to secure a proper adaption

▪ Badha (bar) – in the event of incongruence between one thing and

another, a sub-ordinate incongruent matter is barred

▪ Tantrata and Prasanga – Provide against unnecessary repetition of the

same act
 MIMANSA PRINCIPLES
Specific Rules ▪ Those that relate to the interpretation of words
– Nyasa
(Maxims) ▪ Those bearing on the rules relating to the construction of texts
regarding
Application of ▪ Those bearing on the rules of interpreting prohibitory and apparently
Texts conflicting texts

▪ Those of a miscellaneous character

 Interpretation and Construction
Interpretation
Understanding the words and true sense in
the provisions of the statutes
Construciton
Drawing conclusions, in relation to the case,
that lie beyond the outright expression of
the legal text

Helps in determining the real meaning and
intention of the legislature
All about exploring the written text
Used to ascertain the legal effect of the legal
text
When the literal meaning of the words used
in the legal text results in an ambiguity,
then construciton is opted, so as to decide
whether the case is covered by it or not

Interpretation and Construciton is used interchangeably with fine

line of difference
 Cardinal Rules of Interpretation

PRIMARY RULE Literal Interpretation

SECONDARY
Internal Aid External Aid
RULE

▪Preamble
▪Title
▪Headings
▪Marginal Notes
▪Definition
▪Sections
▪Clauses
▪Proviso
▪Explanation

FINAL RULE Harmonious Construction

 Preamble
▪ The Banning of Unregulated Deposits Scheme Act, 2019 - An Act to
provide for a comprehensive mechanism to ban the unregulated
deposit schemes, other than deposits taken in the ordinary course
of business, and to protect the interest of depositors and for
matters connected therewith or incidental thereto
 Definition
▪ Statement of the meaning of the word or phrase used in the
Statute
▪ Extensive Definition
▪ Restrictive Definition
▪ Adoptive Definition
▪ Exclusive Definition
▪ Not defined words
▪ Apply ordinary / natural meaning
▪ Definition given in other Statute can provide help
▪ Definition given in the General Clauses Act
 Includes
Explanation
▪ Enlarge the meaning of the words
or phrases occurring in the
statute
▪ Extension and Expansion to the
meaning and import of the
preceding words or expressions
▪ Shows intention of the legislature
to give extensive and enlarged
meaning to such expression
▪ Makes the definition enumerative
not exhaustive
▪ Context may suggest that
includes is used to mean “means”
Example
▪ Section 2(22) – Dividend
includes…
▪ Section 2(24) – Income includes
▪ Section 17(1) - Salary includes…
▪ Section 17(2) – Perquisites
includes….
▪ Section 2(31) – Deposit
includes….
▪ Section 2(40) – Financial
Statement in relation to a
Company includes….
▪ Section 7(1) – Supply includes…
 Means / Means and includes
Explanation Example
▪ Provides exhaustive ▪ Section 2(43) – Free reserves means
….
explanation of the meaning ▪ Section 2(57) – Net worth means….
▪ Section 2(76) – Related party with
reference to the Company means…
▪ Section 2(14) – Capital asset
means….
▪ Section 2(17) – Company means….
▪ Section 2(41) – Relative in relation
to individual means…
▪ Section 2(6) – Export of services
means…
▪ Section 2(52) – Goods means….
 Deemed to be
Explanation
▪ Fiction – Thing is treated to be that
which in fact it is not
▪ Created for specific purpose
▪ Cannot travel beyond the purpose for
which it was intended
▪ Deemed is apt to include the obvious,
the uncertain and the impossible.
▪ Legal fiction must be carried to its
logical conclusion
Example
▪ Section 9(1) - The following income
shall be deemed to accrue or arise in
India
▪ Section 50CA– Where consideration
received on transfer of shares of a
Company, other than quoted shares,…….
For the purposes of Section 48, be
deemed to be the full value….
▪ Explanation 2 – Section 10AA - …. On
site development of computer software
outside India shall be deemed to be the
profit and gains derived from export….
▪ Section 92(2) – For the purpose of ….
Two enterprises shall be deemed to be
AE…
▪ Section 45 – Any profits…. shall be
deemed to be the income of the year in
which transfer tool place
 Shall
Explanation
▪ Gives impression of being of
mandatory character
▪ Provision is considered
mandatory, prohibitory or
commanding a duty or
obligation
▪ To consider context, subject
matter and object in
determining whether the same
is mandatory or directory
Example
▪ Section 10AA - The following
deduciton shall be allowed…..
▪ Section 139(1) – Every
person….shall on or before due
date…
▪ Section 164(1) - …. Tax shall be
charged on relevant income as if…
▪ Section 7(2) - ….. Shall be treated
neither as a supply of goods nor
supply of services
▪ Section 185(1) – No Company, shall,
directly or indirectly
▪ Section 164(1) – A person shall not
be eligible for appointment as
Director
 May
Explanation
▪ Gives impression of being
discretionary or directory
nature
Example
▪ Section 23(4) – the provisions
of …..sub-section shall apply
only in respect of one of such
houses, which the assessee
may, at his option….
▪ Section 133 – Power to call for
information – AO may for the
purpose of this Act..
▪ Section 147 – AO has….
escaped assessment for any
year, he may, subject to the
provisions of section 148..
 And / Or
Explanation
▪ And is Conjunctive – connects
words, phrases, clauses in a
sentence
▪ And connects two or more
items and makes a cumulative
group
▪ Or is Disjunctive – Separates
words, phrases, clauses in a
sentence
▪ Or - Separates two or more
items and makes them
alternative to one another
Example
▪ CARO – Not applicable to Pvt
Co having paid up capital &
reserves of < INR 1 Cr and does
not have total borrowing from
banks < INR 1 Cr and does not
have revenue > INR 10 Cr
▪ Section 16(1) – Zero rated
supply means any of the …(a)
export of goods or services or
(b) supply of goods or services
to SEZ
 Proviso
Explanation
▪ Qualification or create exception
to the preceding enactment
▪ Normally does not travel beyond
the provision to which it is a
proviso
▪ Subordinate to the main section,
not an independent enaction
▪ Does not enlarge an enactment
except for compelling reasons
▪ Sometime Proviso is added out of
abundant caution
▪ Construction which brings into
general harmony with the terms
of section should prevail
Example
▪ Section 31 – Issue of tax invoice
Provided that the Govt may….
specify the categories…
▪ Section 73 – No Company shall
invite deposit from public Provided
that this section shall not apply to a
banking Co….
▪ Section 47(xiiib) – Conversion of Pvt
Co to LLP shall not be regarded as
transfer Provided (a) to (f) is
fulfilled
▪ Section 43B – Deduciton not
allowable for certain taxes /
government dues Provided that
deduciton shall be allowed if it is
paid on or before ….
 Explanation
Explanation
▪ Explain the meaning and intention of
the Act
▪ Where there is vagueness in the main
enactment, to clarify the same so as to
make it consistent with the dominant
object which it seems to serve
▪ Provide an additional support to the
dominant object of the Act
▪ Cannot interfere or change the
enactment
▪ Ordinarily does not enlarge the scope
of original section which it explains, but
only makes the meaning more clear
beyond dispute
▪ Normally clarificatory and
retrospective in operation
Example
▪ Section 56(2)(x) – Explanation – for
the purpose of this clause,
expression ‘assessee’, ‘fair value’,
‘Jewellery’, ‘property’, ‘relative’ shall
have the same meaning….
▪ Section 281 – Explanation – In this
section ‘assets’ means…
▪ Section 115JAA(7) – Explanation –
For the purpose of this section the
expressions ‘pvt co’ and ‘LLP’ shall
have the meaning respectively
assigned to them in LLP Act
▪ Section 186 – Explanation - for the
purpose of this section the
expression “investment company”
means..
 Non obstante Clause
Explanation
▪ In spite of, regardless of, irrespective of
▪ Begins with the phrase “notwithstanding
anything contained …
▪ Provides an overriding effect in case of conflict
between it and rest of the section
▪ If such phrase is used in more than one section /
Act then object and purpose of the two laws to
be considered
o Other test is later enactment must prevail
over the earlier one
▪ explains, but only makes the meaning more clear
beyond dispute
▪ Opposite – “Save as otherwise provided” – One
section is superseded by another section
Example
▪ Section 23 – Notwithstanding anything
contained in the Income tax Act, 1961, the
amount of interest payable or paid by the buyer,
under or in accordance with the provisions of
this Act, for the purpose of computation of
income under ITA, be allowed as a deduction
▪ Section 95 – Notwithstanding anything
contained in the Act, an arrangement entered
into by the assessee, may be declared
impermissible…
▪ Section 90(2A) – Notwithstanding anything
contained in sub-section (2), the provisions of
Chapter X-A of the Act shall apply to the assessee
even if such provisions are not beneficial to him
• Section 51(1) - The provisions of this Act shall
have effect notwithstanding anything
inconsistent therewith contained in any other
law for the time being in force or in any
instrument having effect by virtue of any law
other than this Act
 External Aid
▪ Used when internal aid is not available
▪ Statement of Objects and Reasons when the Bill was presented to the
Parliament
o What reasons induced the mover to introduce the Bill and what Object he sought
to achieve – However this is not a rule
▪ Report of the Committee, if any, preceded by the Bill
▪ Parliamentary debate, dictionary commentary
▪ Legislative history, other statute in pari materia (relates to same person
or thing)
▪ Official statement by the Government department administering an Act
or by any other authority concerned with the Act may be taken into
account as persuasive authority on the meaning of the provisions
 Retrospective / Prospective
▪ Unless explicitly stated, a piece of legislation is presumed not to be
intended to have a retrospective operation
▪ Legislation which modified the accrued rights or imposed
disabilities were to be treated as prospective in nature unless they
were accounting for an obvious omission, or explaining the former
legislation
 Rules
▪ Rules are made by the government department administering the
Act
▪ Act is enacted by the Legislature / Parliament
▪ Rules are subservient to the Act and cannot override the Act – it’s a
Subordinate legislation
▪ In case of conflict, Act prevails over the Rules
 Literal Interpretation
▪ Statute to be read as a whole and efforts should be to give effect to
all the provisions
▪ Legislature knows the law and does not use unwanted word,
phrase or punctuation mark
▪ Interpretation should not make any provision redundant or
nugatory
▪ There is no equity about tax
▪ If language is clear and unambiguous, the Court cannot discard the
plain meaning, even if it leads to injustice
▪ Specific provision override the general provision
▪ Court interpret the law and cannot legislate it
 Golden Rule – Purposive Construction
▪ Words of a statute must prima facie be given their ordinary
meaning
▪ Natural / ordinary meaning should not be departed from unless it
can be shown that legal context in which the words are used
requires a different meaning
▪ Limited application in taxing statutes due to doctrine of Literal
Rule
 Harmonious Construction
▪ Interpretation should be harmonious to the intention of the
Legislature and enactment
o Manjula Shah – Mumbai High Court

▪ Each provision cannot be read to negate other provisions

▪ In case of ambiguity head note, marginal notes, placement is
considered
 Reading Down
▪ Applied when reading literally offends the fundamental
rights or outside the scope of the Legislature

▪ Applied if statute is silent, ambiguous or allows more than

one interpretations
 Beneficial Construction
▪ Where two interpretation is possible, one which is beneficial to the
tax payer to be adopted
o Azadi Bachao Andolan
 Charging and Procedural Section
▪ Charging Section to be strictly construed while benevolent /
procedural section should be liberally construed
▪ Provisions with Relief, Deductions, Exemptions should be liberally
construed
▪ Used in interpreting the sections relating to incentives,
exemptions, deductions, for promotion of exports, earnings of
foreign exchange, industrialization, infrastructure development etc
▪ Pragmatic approach should be adopted so that object of insertion
of a particular provision could be achieved
▪ Provisions dealing with machinery of assessment and collection
should not be strictly construed but should be construed in a way
that makes machinery workable
 Construction of Penal Provisions
▪ Strict construction
▪ Prospective in operation (Article 20 of the Constitution)
▪ Presumption of mens rea (guilty intention to commit the crime)
unless the statue specifically provides for the absence of the same
o Concealment of income is presumed unless proved otherwise by the
taxpayer
▪ Section 276C
▪ Wilful imparts the concept of mens rea
 Purposive Construciton / Mischief Rule
(Hydon’s case)
▪ Canons of the Statutory interpretation
▪ Rarely used in taxing statutes
▪ Applied when material words are capable of bearing two or more
interpretation
o What was the common law prior to the enactment of the Statute
o What was the defect or mischief which the common law failed to rectify
o What remedy did the legislature provide by way of statute enacted
o What was the legislative intent behind such remedy
o Court will have to exhaust all other modes and aids to interpretation
before applying the mischief rule
 Doctrine of Stare Decisis
▪ To stand by decided cases or upheld precedents
▪ Article 141 of the Constitution of India – Judgment pronounced by the
Supreme Court has force of law and are binding on all the courts in
India
▪ Tribunals within the jurisdiction of High Court are bound to follow the
judgments as the High Court has the power of superintendence over
them under Article 227
▪ Res judicata : [Once the decision of HC comes then on that same point
again appeal cannot be made.] The issue of Law which has been already
decided shall not be pleaded for review
▪ If High Court orders are not followed in the pretext that appeal in SC is
pending then it amounts to guilty of committing contempt of the High
Court
 Ratio Decendi
▪ Decision on interpretation of one Statute can be followed while
interpreting another provided both the Statutes are pari materia
and they deal with identical scheme
▪ Definition of one Statute cannot be automatically applied in
another Statute whose object and purpose are entirely different
 Ejusdem generis or Noscitur a sociis
▪ Meaning of general words is restricted by the special words
appearing along with it
o If a man tells his wife to go to the market to buy vegetables, fruits,
groceries and anything else she needs, the ‘anything else’ would be taken
to mean food and grocery items due to the rule of ejusdem generis and not
cosmetics or other feminine accessories
o Section 2(22)(e) - … by way of advance or loan to a shareholder – Advance
can only means such advance which carries with it an obligation of
repayment. A trade advance, which is in nature of money transacted to
give effect to a commercial transaction, cannot be treated as deemed
divdend
 Generalia Specialibus Non Derogant
▪ General provisions must yield to the Special Provisions
▪ In case of conflict between two statutes
o Later Statute abrogates the earlier;
o General legislations do not derogate Special Legislations
 High Court Decision
▪ Different benches of the same High Court
o Single Judge or Division Bench order of High Court is binding on the Single
Judge of the same High Court
o Obligatory on the part of Division Bench to follow decision of another
Division Bench of equal strength or a Full Bench of the same High Court
o Single Judge to follow and apply earlier Division Bench judgment of the
same Court
o If Single Judge does not subscribe to the views expressed in Single Judge’s
order or Division Bench’s order he should make a request to the Chief
Justice to form larger Bench to examine the matter
o Division Bench differs from the view of the other Division Bench’s order
then matter should be referred to the larger Bench
▪ Decision of High Court has no force outside the State – it can have
a persuasive value
 SC Decisions not binding
▪ Obiter dicta not binding
o Obiter means “by the way”, “in passing”, “incidentally”
o It’s expression of opinion stated in the judgment on a question immaterial
to the ratio decidendi
▪ Decision that is not express, not founded on reasons, not
proceeded on consideration of issue
▪ Per incuriam – resulting from ignorance
▪ Sub-silentio – point of law was not consciously determined
▪ Decisions based on concessions
▪ SLP dismissed without giving any reasons
INTERPRETATION NORM
Constitutional
Social Justice, Equity
Provision

Penal
Provision
Strict Interpretation

Beneficial Liberal Interpretation

Provision (Labour Laws)

Taxing
Provision
Strict Construction
 Miscellaneous
▪ Tax is always charged, Interest is levied and Penalty is imposed
▪ Deductions are admissible, Relief is granted
▪ Return is always furnished, Assessment order is made / passed
▪ per incuriam - through carelessness, through inadvertence. A
decision of the court is not binding precedent if given per incuriam,
that is, without the court's attention having been drawn to the
relevant authorities or statutes