1. Interpretation of
tax statues
CA. DHRUV SETH
DS@SETHSPRO.COM

2. We are not always right BUT we are
final and because we are final we
would always be right…..
Hon’ble Supreme Court

3. Art of correct interpretation
Depends upon :-
1.) What is stated in plain language
2.) Read between the lines
3.) Read ‘through’ the provisions
4.) Examine the intent of legislature
5.) Call upon case laws

4. Cardinal Rules
Literal Interpretation
Court cannot discard the plain meaning even
if it leads to injustice
CIT v. TV Sundaram [1975] 101 ITR 764 (SC)
Nothing is to read in, nothing to be implied.
One can only look at the language
CIT v. Ajax Products [1965] 55 ITR 741 (SC)

5. Cardinal Rules
Purposive Construction
To be applied in case literal construction
leads to injustice and miscarriage of justice
Grey v. Pearson [1875] 6 HL Cas 61.

6. Cardinal Rules
Harmonious Construction
When any provision of a taxing statute is
interpreted, it must be so constructed that
the meaning of such provision must
harmonise with the intention of the
Legislature behind the provision in particular
and the enactment in general
CIT v. Chandanben Maganlal [2002] 120 Taxmann 38 (Guj.)

7. Cardinal Rules
Doctrine of ‘Reading Down’
The legislature is presumed to be aware of its
limitation and is also attributed an intention
not to overstep its limit.
Kedar nath Singh v. State of Bihar AIR 1962 SC 955

8. Cardinal Rules
Beneficial Construction
An assesse may arrange his affairs within the
bound of the law so as to minimize the
incidence of tax
IRC v. Duke of Westminster 1936 AC 1
If the interpretation of a fiscal enactment is
open to doubt, the construction most
beneficial to the subject should be adopted.
CIT v. Naga Hills Tea Co Ltd. 89 ITR 236, 240 (SC)

9. Cardinal Rules
Charging section – Strictly Construed
Benefical sections – Liberally construed
Those sections which impose the charge or
levy should be strictly construed; but those
which deal merely with the machinery of
assessment and collection should not be
subjected to a rigorous construction but
should be construed in a way that makes the
machinery workable.
Gurusahai Saigal v. CIT 48 ITR 1 (SC)
Bajaj Tempo Limited 196 ITR 188 (SC)

10. Cardinal Rules
Construction of Penal Provisions
a.) Strict Construction
b.) Prospective in operations
c.) Presence of Mens rea
CIT v. Ram Rup Kishan [1992] 193 ITR 129 (P&H)
J.M. Shah v. ITO [1996] 218 ITR 38 (Mad)

11. Ancillary Rules
a.) Ejusdem Generis or Noscitur a sociis
b.) Expressio unuin est exclusion alterius
c.) Special provisions overrule general
d.) Later enactment prevails
e.) Rules are sub servant the act
Hukumchand Mills v. State of MP 52 ITR 583 (SC)

12. Ancillary Rules
f.) Undefined words – Commercial sense
g.) Deeming fiction
Fiction operates only within the field
of the definitive purpose for which it
was created. CIT v. Vadilal 86 ITR 211 (SC)
h.) Retrospective effect of rules
i.) Obiter Dicta

13. Jurisdictional territory
High Court
“Law declared by the highest court in the State is
binding on authorities or Tribunals under its
superintendence, and they cannot ignore it.”
East India Commercial v. Collector of customs AIR 1962 SC 1893
High Court decision would be binding in the
State in which the Court has jurisdiction but do
not have binding force outside that State.
Benoy Kumar Sahas Roy 32 ITR 466 (SC)