University of Mumbai

Karnatak Lingayat Education Society(KLE)

(Navi Mumbai )

Research Paper Of Interpretation of statute

Prof. Mayuri Taware

INTERPRETATION OF TAXATION STATUTES

Name:- Prakash Vijay Kadam

TYLLB- 3yr (Roll No. 30 )
 INTERPRETATION OF TAXATION STATUTES

 ABSTRACT

Interpretation is a specialized branch of legal studies, where provisions under statutes are given a
meaning which is free from ambiguities. Taxation Statute is a fiscal statute imposing a pecuniary
burden on the mass population and thus the interpretation of the statutes must be made properly
without any scope of negligence becomes essential. Initially, Income Tax and Land Revenues were
the two main taxes which was paid to the State, but now taxes are imposed and paid for every activity
carried by the population, from holding of property to its selling, profits, and gains earned from
properties, and carrying down of businesses, etc. With the diversifying activities covered under the
ambit of taxation laws, the rules of interpretation are gradually gaining practical importance in the
taxing enactments. This article aims to answer the question: Which non-statutory principle of
interpretation is applicable for interpreting the Tax Statutes? And what are the other aids which Courts
can take into account while interpreting the Tax Statues? This study is qualitative. This study has been
made using secondary data, which have been collected from different blogs, articles, and books
discussing the same. Keywords: Interpretation of Statutes, Tax Statutes, Non- Statutory Sources of
Interpretation, Strict Construction, Literal Interpretation, Mischief Rule.

 INTRODUCTION

In its literal sense the term taxing statutes may be defined as those statutes that imposes tax on the
citizens. 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 tax proposed to be levied must be within the legislative competence of the
Legislature imposing the tax. The validity of the tax is to be determined with reference to the
competence of the Legislature at the time when the taxing law was enacted. The law must be validly
enacted i.e. by the proper body which has the legislative authority and in the manner required to give
its Acts, the force of law. The law must not be a colourable use of or a fraud upon the legislative
power to tax. The tax must not violate the conditions laid down in the constitution and must not also
contravene the specific provisions of the constitution. No tax can be imposed by any bye-law, rule or
regulation unless the ‘statute’ under which the subordinate legislation is made specifically authorises
the imposition and the authorisation must be express not implied. The procedure prescribed by the
statute must be followed. Tax is a compulsory exaction made under an enactment. The word tax, in its
wider sense includes all money raised by taxation including taxes levied by the Union and State
Legislatures; rates and other charges levied by local authorities under statutory powers. Tax includes
any ‘impost’ general, special or local. It would thus include duties, cesses or fees, surcharge,
administrative charges etc. A broad meaning has to be given to the word “tax.” Tax laws are highly
complex, complicated and beyond understanding of a tax-payer. The words and expressions used are
not simple. Many sections contain sub-sections, clauses, sub-clauses. Many deeming provisions have
been inserted. Meaning of an expression is extended by way of 2 Explanation and is curtailed by way
of proviso, sometimes more than one provisos and explanations meaning differently..
  PRINCIPLE OF INTERPRETATION OF TAXING STATUTE

• Literal construction – Intention of the legislation must be found in the words used by the
legislature itself
• Strict interpretation – Words to be construed strictly
• Contextual interpretation – Meaning of a term is understood with reference to the context or the
purpose for which the provision has been enacted
• Mischief rule – Mischief sought to be remedied by the amendment is seen to interpret the provision
• Harmonious construction – When the different provisions of the Act are harmonised or reconciled
in light of the object and purpose of the enactment in question
• Principle of Beneficial interpretation – Construction more favourable to the assessee in case of
any doubt
• The golden rule – Words should be given their ordinary sense unless that would lead to some
absurdity or inconsistency with the rest of the instrument. No hypothetical considerations though
Principles of Interpretation
• Liberal construction – Adopt the rule of liberal construction so as to give meaning to all parts of
the statute and to make the whole of it effective and operative if the literal construction make any part
of the statute ineffective and meaningless
• Ejusdem generis - As a rule, where in a statute there are general words following particular and
specific words, the general words must be confined to things of the same kind as those specified,
although this, as a rule of construction;, must be applied with caution, and subject to the primary rule
that statutes are to be construed in accordance with the intention of Parliament. For the ejusdem rule
to apply, the specific words must constitute a category , class or genus; if they do constitute such a
category, class or genus, then only things which belong to that category , class or genus fall within the
general words
• Casus Omissus – Matter which should have been but has not been provided by the statute, cannot
be supplied by the court. Courts depart from this principle in case of any construction leading into an
absurd result or to avoid any part of the statute becoming otiose.1

1
https://nja.gov.in
Porus F Kaka Senior Advocate
  CASE LAW

 Motipur Zamindari Company Private Limited v. State of Bihar (1953AIR 320 SCR 720)

The a question was whether sugarcane fell within the term green vegetables in Entry 6 of the Schedule
and as such no sales tax could be levied under the Bihar Sales Tax Act, 1947 on its sale. The Supreme
Court held that while dealing with a taxing statute the natural and ordinary meaning of a word should
be the correct meaning. In the present instance the word vegetables should be interpreted in its natural
and popular sense and that dictionary meaning is not of such help here. Vegetables as the normal
people mean by it are those which can be grown in a kitchen garden to be used for the table, that is to
say, to be eater during lunch or dinner. Sugarcane definitely does not fall under this category 2

 State of Uttar Pradesh v. Kores India Ltd. (AIR 1977 SC 132)

In this case, the issue was pertaining to inclusion of carbon paper in the definition of word “paper”. It
was held by the Hon’ble Supreme Court that in common parlance word paper is one which is used for
writing, packaging and printing whereas carbon paper is used entirely for different purpose.
Moreover, manufacturing process of carbon paper is entirely different and complicated from that of
normal paper. So, Court held carbon paper will not be included in normal paper so as to make it
subject to taxation. It was held that meaning of paper is quiet clear and there is no need to interpret it
so as to extend its meaning to include carbon paper. Thus, Courts are not required to extend the
meaning to cover the subjects which on the face cannot be included in common parlance. It is only
when specifically provided by statute then only it becomes subject to tax.

2
https://www.studocu.com/in/document/panjab-university
https://blog.ipleaders.in
Motipur Zamindari Company Private Limited v. State of Bihar
State of Uttar Pradesh v. Kores India Ltd. (AIR 1977 SC 132)
  TAX IN INDIA

To run a nation judiciously, the government needs to collect tax from the eligible citizens; paying
taxes to the local government is an integral part of everyone’s life, no matter where we live in the
world.Now, taxes can be collected in any form such as state taxes, central government taxes, direct
taxes, indirect taxes, and much more. For your ease, let’s divide the types of taxation in India into two
categories, viz. direct taxes and indirect taxes. This segregation is based on how the tax is being paid
to the government.

 Types of Taxes

Be it an individual or any business/organization, all have to pay the respective taxes in various forms.
These taxes are further subcategorized into direct and indirect taxes depending on the manner in
which they are paid to the taxation authorities.

Direct Tax

 The definition of direct tax is hidden in its name which implies that this tax is paid directly to
the government by the taxpayer
 The general examples of this type of tax in India are Income Tax and Wealth Tax.
 From the government’s perspective, estimating tax earnings from direct taxes is relatively
easy as it bears a direct correlation to the income or wealth of the registered taxpayers.

Indirect Tax

 Indirect taxes are slightly different from direct taxes and the collection method is also a bit
different. These taxes are consumption-based that are applied to goods or services when they
are bought and sold.
 The indirect tax payment is received by the government from the seller of goods/services.
 The seller, in turn, passes the tax on to the end-user i.e. buyer of the good/service.
 Thus the name indirect tax as the end-user of the good/service does not pay the tax directly to
the government.
 Some general examples of indirect tax include sales tax, Goods and Services Tax (GST),
Value Added Tax (VAT), etc.

3
https://groww.in/p/tax
Direct and indirect tax, tax structure of India
  CONSTITUTIONAL PROVISION RELATED TO TAXATION

The Constitution of India is the supreme law of the land and all laws in India must be consistent with
its provisions. The constitutional provisions relating to taxation in India are contained in Articles
265 to 289 of the Constitution of India. These articles outline the powers of the Union and the States
to levy taxes, as well as the procedures for assessing and collecting taxes.

Some of the key constitutional provisions relating to taxation include:

 Article 265: This article states that no tax can be levied or collected except by the authority of
law. This means that all taxes must be imposed by a valid law and that no tax can be levied or
collected without the authority of law.
 Articles 268 to 270: These articles deal with the levy of duties of customs, excise and other
taxes on goods imported into or exported out of India. These taxes are levied by the Union
government and the proceeds are shared between the Union and the States.
 Article 286: This article restricts the power of the States to levy taxes on goods and services
that are imported into or exported out of India. This is to prevent States from taxing goods
that are in transit between different States.
 Articles 276 and 277: These articles deal with taxes that can be levied by the States for the
benefit of the State or for the benefit of a municipality, district board or other local authority.
These taxes are known as “cess” taxes and they can be levied on a variety of subjects, such as
professions, trades, callings and employment.
 Articles 271 and 279: These articles deal with taxes that can be levied by the Union and the
States concurrently. This means that both the Union and the States can levy taxes on the same
subject, but the Union government has the power to override any State law that conflicts with
a Union law.
 Articles 273, 275, 274 and 282: These articles deal with grants-in-aid that can be given by
the Union government to the States. These grants are given to help the States meet their
financial needs and they can be used for a variety of purposes, such as education, health and
infrastructure development.

 Seventh schedule to constitution

Seventh schedule deals with division of subjects for powers and responsibilities in Union ,
State and Concurrent list. Seventh schedule has three types of list
 Union list [Article 246 (1)]
Under this list Parliament authorised to make laws as per list 1 of seventh schedule
 State list [ Article 246(3)]
Under this list state is authorised to make laws as per the list two of 7th schedule.
 Concurrent list
Under this list both Union and State are authorised to make law.
4

Concurrent list

4
https://www.legalserviceindia.com/legal/article
Constitutional provisional regarding taxation
ehis list both Union and State are authorised to make law.
 ANALYSIS OF INTERPRETATION OF TAXING STATUTE

In interpreting a taxing statute the court cannot proceed to make good the deficiencies, if there be any
in the statutes, it shall interpret the statute as it stands and in case of doubt, it shall interpret it in a
manner favourable to the tax payer. In a considering a taxing Act the word is justified in straining the
language in order to hold a subject liable to tax. In a Taxing Act one has to look nearly at what is
clearly said. There is no room for any intendment. There is no equity about a tax. There is no
presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at
the language used. In a case of reasonable doubt, the interpretation most beneficial to the subject is to
be adopted. But even so, the fundamental rule of interpretation is the same for all statutes, whether
fiscal or otherwise. The underlying principle is that the meaning and intention of a statute must be
collected from the plain and unambiguous expression used there in rather than from any motions
which may be entertained by the court as to what is just or expedient. The expressed intentions must
guide the court. The maxim "generalia speci alibus non derogent" means that where there is a conflict
between a general and a special provision, the later shall prevail. But this rule of interpretation is not
of universal application. It is subject to the condition that there is nothing in the general provision,
expressed or implied, indicating and intention to the contrary.

CANCLUSION :-
Tax is financial source for the development of country. country run because tax payer paid the tax.
That is why Interpretation of taxation statute is major role play in the Indian economy. This statute
passed either by the Parliament or the State Legislature. Interpretation helps to make proper law
which easily implementing in state .