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Interpretation of tax statues

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

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

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Art of correct interpretation
Depends upon :-
1.) What is stated in plain language
2.) Read between the lines
3.) Read ‘th...

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Interpretation of tax statues

  1. 1. Interpretation of tax statues CA. DHRUV SETH DS@SETHSPRO.COM
  2. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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)

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