The Study of the Scope of Interpretation of Taxation Statutes with special reference to Direct Tax Laws

PROJECT FOR

INTERPRETATION OF STATUTE

SUBMITTED BY
Sandeep Bansiwal (08BAL004) Semester VII B.A.LL.B. (Hons.)

UNDER THE GUIDANCE OF

Mrs. Parna Mukherjee Asst. Prof., ILNU

Submitted to:

INSTITUTE OF LAW, NIRMA UNIVERSITY AHMEDABAD ACADEMIC YEAR (2011-12)

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Chapter I
INTRODUCTION-IOS 1.1 1.2 1.3 1.4 1.5 Research Methodology Interpretation of statute as a Branch of Law Definitions and Conceptual Aspects Interpretation versus Construction Rules of Interpretation

Chapter II CORE ASPECTS OF INTERPRETATION OF STATUTES 2.1 2.2 2.3 2.4 Principles of Interpretation of Other Laws Applicable to Direct Tax Laws Object of Interpretation Basic Rules of Construction Subsidiary Rules Chapter -III JUDICIAL TREND 3.1 Case Laws

Conclusion Bibliography

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CHAPTER-I INTRODUCTION Hypothesis

Whether the External or Internal Aids plays dynamic role to construe any statute? Whether the Principles of Interpretation of Other Laws Applicable to Direct Tax Laws are different from other Laws? Whether the Interpretation fluctuates from case to case?

1.2 Interpretation of Statute as a Branch of Law Interpretation is the method by which the true sense or the meaning of the word is understood.1 The meaning of an ordinary word of the English Language is not a question of law. The proper construction of a statute is a question of law.2 1.3. Definitions According to Gray,3 the process by which a judge (or indeed any person, lawyer or layman, who has occasion to search for the meaning of a statute) constructs from the words of a statute book, a meaning which he either believes to be that of the legislature, or which he proposes to attribute to it, is called interpretation.4 Salmond describes interpretation or construction as the process by which courts seeks to ascertain the meaning of the legislature through the medium of authoritative forms in which it is expressed. According to Allen,5 the operation of statute is not automatic, and can never be so. Like all legal rules, it has to operate through application- in other words, through the interpretation of the courts. The art of interpretation is the art of proliferating a purpose. The interpretation

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State of Jammu and Kashmir v Thankur Ganga Singh [1960] 2 SCR 346 Brutus v Cozens (1972) 3 WLR 521 3 Gray, Nature and Sources of the Law, 2nd edn, p.176-78 4 Salmond, Interpretation of Statutes, eleventh edn, p 152 5 Law in Making, p 396-97 4|Page

of statutes is a science by itself. A statute is an edict of the legislature6 and the way of interpreting or construing it is to seek the intention of its maker. Keeton has observed:7 The function of the judges, in interpreting statutes is twofold. In the first place they must decide upon the exact meaning of what the legislature has actually said, and, in the second place, they must consider what the legislature intended to have said, or ought to the have said, but did not, either because it never visualised such a set of circumstances arising as that before the court, or because of some other reason. A legislative provision is to be construed according to the intent of author that makes it.8 In Francis Bennions Statutory Interpretation, it is put down thus: In interpreting an Act of Parliament it is not, in general, a true line of construction to decide according to the strict letter of the Act but the courts will rather consider what its fair meaning is and well expound it differently from the letter in order to preserve the intent.9 According to Gray:10 Interpretation is generally spoken of as if its chief function was to discover what the meaning of the legislature really was. It is the duty of the judicature to act upon the true intention of the legislature. But when a legislature has had a real intention, one way or another, on a point it is not once in a hundred times that any doubt arises as to what its intention was. If that were all that judge had to do with a statute, interpretation of statutes, instead of being one of the most difficult of a judges duties, would be extremely easy. The fact is that the difficulties of so-called interpretation arise when the legislature has had no meaning at all; when the question which is raised on the statute never occurred to it; when what the judges have to do is not to determine what the legislature did mean on a point not present to its mind, if the point had been present. The function of the court is only to expound and not to legislate, in accordance with the settled rules of construction. The courts cannot adorn the mantle of the legislature. 11 The
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Padma Sundra Rao (Deceased) & Ors v State of Tamil Nadu & Ors (2002) 3 SCC 533 Keeton, Jurisprudence, 1949, p 89 8 District Mining Officer & Ors v Tata Iron Steel Co & Anr (2001) 7 SCC 358 9 Ashok Ambu Parmar v Commr of Police, Vadodara AIR 1987 Guj 147 10 Nature and Sources of Law, second edn, 1921 p 172-73 11 Bharathidasan Uiversity v all India Council for Technical Education (2001) 8 SCC 676 5|Page

judicial function is confined to applying what the legislature has enacted after ascertaining what it is that legislature has enacted. However, such ascertainment, that is, construing legislation, is nothing like a mechanical endeavour. It could not be accomplished by the subtlest of modern brain machines. Because of the infirmities of language and the limited scope of science in legislative drafting, inevitably there enters into the construction od statutes, the play of judicial judgement within the limits of the relevant legislative materials. Law is, however, not an exercise in linguistic discipline. It is emerging as an important therapy in disorder of social metabolism. It is a complex process, and can be fully understood only by an attentive regard to its therapeutic function and its synthesis. There is accordingly, growing recognition by courts that a statute should be construed, rather than interpreted with due regard to its avowed object and to its character. In the words of a learned judge, the art of interpretation is the art of proliferating a purpose. In relation to the interpretation of statutes, courts have a positive role to play. If a section yields two different interpretations, that which leads to an arbitrary or shockingly unreasonable result has to be eschewed. If an interpretation is such that it will expose the enactment to a distinct peril of invalidation as offending a constitutional provision, the courts would be fully justified in reading down the provision and giving it an interpretation consistent with its constitutionality. Even the courts, without much of enthusiastic exuberance of judicial activism, can bring about just results by a meaningful interpretation. 1.4 Interpretation Versus Construction: Truly and literally speaking, interpretation differs from construction.12 According to Cooley, interpretation differs from construction in that the former is the art of finding out the true sense of any form of words; construction, on the other hand, is the drawing of conclusions respecting subjects that are beyond the direct expression of the text; conclusions which are in the spirit, though not within the letter of the law. Interpretation is the act of making intelligible what was before, not understood, ambiguous, or not obvious. It is the method by which the meaning of the language is ascertained. The word construction, on the other hand, means to determine from its known elements its true meaning or the interest of its framers and the people who have adopted it, in application of its provisions to cases or emergencies arising and not specifically provided for in the text of the instrument, but drawing conclusions beyond direct expressions used in the text. Construction of a statute is

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an effort to draw conclusions which are in the spirit though not within the letter of the law.13 Thus, when the court goes beyond the language of statute and seeks the assistance of extrinsic aids in order to determine whether a given case falls within the statute, it resorts to construction. Construction therefore, is the means of interpretation and interpretation is the end. The distinction, however, between the two processes is of no great consequence, as the dominant propose in each case is to ascertain the intent of the legislature. In all cases, the object is to see what is the intention expressed by the words used. Fredrick J De Sloovere says:14 Interpretation may be defined as the process of reducing the statute applicable to a single sensible meaning- The making of a choice from several possible meanings. Application, on the other hand, is the process of determining whether the facts of the case came within the meaning so chosen. In reality, all law relevant to a case is applied to it, not merely the particular statute involvedApplication of a statute from another angle is often misunderstood. The meaning of a statute is not doubtful, merely because its application in a particular case is doubtful. Even though the statute is so plain and explicit as to susceptible only one sensible meaning, and even though in many cases the problem of application is clearly solved when a single meaning is ascertained as a matter of interpretation, it often remains in doubt whether the facts are within or outside the penumbra of the single meaning. To determine this question, then, is what is meant by application. 1.5. Basic rules of Interpretation Interpretation is of two kinds- grammatical and logical. Grammatical interpretation is arrived at by reference to the laws of speech to the words used in statute; in other words, it regards only the verbal expressions of the legislature. Logical interpretation gives effect to the intention of the legislature by taking into account other circumstances permissible according to the rules settled in this behalf. Proper construction is not satisfied by taking the words as if they were self-contained phrases. So considered, the words do not yield the meaning of a statute. According to Gray,15 grammatical interpretation is the application to a statute of the laws of speech; logical interpretation calls for the comparison of the statute with other statutes and
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Ibid The Function of Judge and Jury in the Interpretation of Statutes, Harvard Law Review, vol 46, p 1086-1110 15 Nature and Sources of the Law, second edn, 1911 pp 176-78 7|Page

with the whole system of law, and for the consideration of the time and circumstances in which the statutes was passed. It is the duty of judicature to ascertain the true legal meaning of the words used by the legislature. A statute is the will of the legislature and the fundamental rule of interpretation, to which all others are subordinate, and that a statute is to be expounded, according to the intent of them that made it. 16 The object of interpretation is to find out the intention of the legislature.

AIDS 1. INTERNAL AIDS 2. EXTERNAL AIDS Internal Aids a) Title b) Preamble c) Heading d) Marginal Notes e) Punctuation f) Illustration g) Definition Clause h) Proviso i) Explanation j) Schedule k) Transitional Provision l) Articles External Aids
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a) Reports b) Parliamentary/ Legislative History c) Commentaries d) Reference to other statutes e) Foreign Judgment (Persuasive Precedent) f) Social-Eco-Political Development and Scientific Innovation g) Practise Usages h) Dictionaries i) Statement of object and Reasons

CHAPTER II CORE ASPECTS OF INTERPRETATION STATUTES

2.1 Principles of Interpretation of Other Laws Applicable to Direct Tax Laws The Supreme Court in Institute of Chartered Accountants of India vs.

M/s. Price Waterhouse (A.I.R. 1998 S.C. 90), while lamenting the scant attention paid by draftsman to the language of statutes, referred to the British jingle I am the Parliamentary draftsman. I compose the countrys laws. And of half of the litigation, I am undoubtedly the cause. Reference was also made to Kirby vs. Leather (1965) 2 All ER 441, where the Court observed that the provision of the (UK) Limitation Act, 1939 was so obscure that the draftsman must have been of unsound mind. Construction of statutes and interpretation of laws should obviously cover all areas affecting the rights of the citizens17. A statute is an edict of Legislature observed the Apex Court and ruled that the elementary
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principle of interpreting or construing a statute is to gather the mens or sententia legis of the Legislature. The following observation of the Supreme Court in this context is very revealing. Salmond defines interpretation as a process by which the Court seeks the meaning of Legislature through the medium of authoritative forms in which it expresses. When does the need to interpret arise? Judicial authorities are consistent that where the language of the statute is plain and unambiguous and admits only one interpretation there does not arise a need for interpretation. Gray in his The Nature and Sources of the Law defines interpretation as the process by which a Judge constructs from the words of a Statute Book a meaning which he either believes to be that of the Legislature or which he proposed to attribute to it. Interpretation as widely accepted, is the process by which the Courts determine the meaning of a provision for applying it to a situation before them. Very often Interpretation is used as analogous to Construction, but judicial precedents have recognised the distinction between the two. Interpretation is the art of finding out the true sense of any form or words, the sense which they are intended to convey, while Construction is the drawing of the conclusions, respecting objects that lie beyond the direct expression of the text, from elements known from and given in the text. Construction constitutes the conclusions which are in the spirit though not within the letter of the law (Cooley Constitutional Limitations). The above concept of Interpretation as distinct from Construction has been recognized by the Supreme Court in a number of decisions. Corpus Juris Secundum distinguishes between Interpretation and Construction of statutes as follows: Construction, as a process for determining the meaning of statutes, has been defined as the drawing of conclusions with respect to subjects which lie beyond the direct expression of the text from elements known from, and given in the text, while interpretation, strictly speaking, is limited to exploration of the written text itself. It has been said that with respect to statutes construction sometimes is to be exercised as well as interpretation. The object and the rules of Interpretation being what they are it is only natural that the rules of interpretation should not be static but dynamic. Rules of interpretation are not the rules of law and have to evolve constantly to ensure that they lie in sync with the march of the society. It is

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in this context that the Supreme Court in Kehar Singh vs. State (A.I.R. 1988 Supreme Court 1883) gave a go-by to the golden rule by which statutes were to be interpreted according to the grammatical and ordinary sense of the word. The following observation of the Supreme Court is very revealing in this context: In Bhavnagar University vs. Palitana Sugar Mill (P) Ltd. (A.I.R. 2003 SC 511), the Supreme Court reiterated the rules relating to the interpretation of statutes and held that recourse to construction or interpretation of the statute arises only when there is an ambiguity, obscurity, or inconsistency therein or otherwise. The basic principle of construction of statutes is that it should be read as a whole, then chapter by chapter, section by section and word by word. True meaning of a provision of law has to be determined on the basis of the clear language with due regard to the scheme of the law. No words shall be added, altered or modified unless it becomes necessary to do so to prevent the provision becoming unintelligible, absurd, unreasonable, unworkable or totally irreconcilable with the rest of the statute. It is a presumption of interpretation of statute that the legislature inserted every word and expression in the statute for a definite purpose, and while interpreting a statute no word can be rejected as being inapposite or surplus age (Mithilesh Singh vs. Union of India (AIR 2003 SC 1145). Where the language of the statute is clear and unambiguous nothing can be read into it by implication and the intention of the legislature has to be gathered from the language used. (Dayal Singh vs. Union of India) (AIR 2003 SC 1140). LEGISLATIVE INTENTION: Object of interpreting a statute is to ascertain the intention of the Legislature enacting it. (Kartar Singh vs. State of Punjab) JT (1994) (2 SC 423). According to Salmond, the duty of the judicature is to act upon the true intention of the Legislature Mens or sententia legis. Where the statute is equivocal and open to more than one interpretation, the court has to adopt that which in its view represents the true intention of the Legislature also referred to as the legal meaning of the provision. This is so, since the role of the courts is only to expound and interpret and not to legislate. In ascertaining the intention of the Legislature courts will have to appreciate the background in which a particular legislation is enacted. In the modern welfare state legislation is actuated by a policy intended to curb a social evil or achieve a social benefit. This is based on experience, past and present, and generally decided by words intended to cover similar problems arising in the future. In the words of the House of Lords Those who seek to replace the common law by a statutory code always have to choose between certainty and flexibility. However, it does not fall within the

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realm of human agencies to exhaustively cover all situations and consequently controversial questions of construction arise. (1969) 3 All. E.R. 39). Intention of legislature covers two aspects viz. Meaning and Purpose & Object. The construction of a statute thus combines both literal and purposive approaches. This requires ascertaining the true or legal meaning of an enactment in the context of a desirable purpose or object of the statute. As observed by the Supreme Court, the purposive approach aims at finding out the mischief against which the statute is directed and the remedy (State vs. Kailashchand Mahajan (AIR 1992 S.C. 1227 See also C.C. Goutham vs. Union of India (1993) 199 ITR 530). The Privy Council in a decision in Crawford vs. Spooner (4 MIA 179) held that if the legislature intended nearly the opposite to what it said, it is not for the Judges to invent something which they do not want within the words of the text. The Courts cannot labour to find out the supposed intention or the underlying policy. The rule of purposive construction known as the rule in Haydens case and also the mischief rule requires four aspects to be taken into account while construing a constitute. They are: i) ii) iii) iv) The law before the making of the statute; The mischief or defect for which the law did not provide; The remedy provided under the Act; and The reasons for the remedy. Taking these four aspects into account, the Court has to adopt a construction which suppresses the mischief and advances the remedy (Bengal Immunity Co. Ltd. vs. State) (AIR 1955 S.C. 661) See also K.P. Varghese vs. I.T.O. (131 ITR 597)18. STATUTE TO BE READ AS A WHOLE In Poppatlal Shah vs. State (AIR 1953 S.C. 274), the Supreme Court emphasised the need to read the statute as a whole in the proper context. This was referred to as a settled rule and reiterated time and again. In R.S. Raghunath vs. State of Karnataka (AIR 1992 S.C.81), the Supreme Court quoted its earlier observation with approval as follows: The Court must ascertain the intention of the legislature by directing its attention not merely
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to the clauses to be construed but to the entire statute; it must compare the clause with the other parts of the law and the setting in which the clause to be interpreted occurs. In the words of the Apex Court that interpretation is best which makes the textual interpretations match the contextual.

2.2 Object of Interpretation The primary and foremost task of a court in interpreting a statue is to ascertain the intention of the legislature, actual or imputed.19 The words of the statute are to be construed so as to ascertain the mind of the legislature from the natural and grammatical meaning of the words which it has used. It is no doubt true that the felt necessities of the times must, in the last analysis, affect every judicial determination, for the law embodies the story of a nations development through the centuries and it cannot be dealt with as if it contains only axioms and corollaries of a book of mathematics. A judge cannot aloof on chill and distant heights. The great tides and currents which engulf the rest of men do not turn aside in their course and pass the judge by. But at the same time, the judge must remember that his primary function is to interpret the law and to record what the law is. SPECIAL RULES FOR INTERPRETATION OF CONSTITUTION There are certain general rules which are guides for the interpretation of all statutes, or rather all written documents whether they be in the nature of acts of private parties, Act of legislatures or even the Constitutions. But by reason of the special nature of a constitution as being the fundamental law, there are certain special rules for the interpretation of the constitution. This point was reiterated by the Honble SC in Ashok Tanwar v. State of M.P.20whilst interpreting section 16 of the Consumer Protection Act, 1986 dealing with the appointment of the President of the State Commission and the meaning of the term consultation employed in the section. The court observed that the process of consultation envisaged under section 16 of the Act can neither be equated to the constitutional requirement of consultation under article 217 of the Indian Constitution in relation to the appointment of a Judge of a HC nor can it be placed on the same pedestal. Consultation by the CJ of the HC
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with two senior most judges in selecting the best person to the high office of a judge of the HC as a constitutional functionary. Consultation with the CJ of the HC in terms of section 16 of the Act is a statutory requirement. This apart, the interpretation of a provision of the constitution having regard to various aspects serving the purpose and mandate of the Constitution by this court stands on a separate footing. A constitution unlike other statutes is meant to be a durable instrument to serve through longer number of years, that is, ages without frequent revision. It is intended to serve the needs of the day when it was enacted and also to meet needs of the changing conditions of the future. It further observed that this was not the case with statutory interpretation. However there are special rules for interpreting laws having a particular object, such as fiscal, penal, or emergency laws, which would not be applicable to other statutes. These special rules have been visited separately in specific chapters of this work. The rules bearing on the construction of contracts and will largely turn upon the substantive content of the specific documents. Consequently a brief mention of the rules relating to contracts and wills is being made in this introduction.

2.3 Basic Rule of Construction Beneficial Construction A beneficial legislation should receive liberal interpretation which would advance the purpose and object of the enactment. (Bajaj Tempo Ltd. vs. CIT) (189 ITR). In Oil and Natural Gas Corporation Ltd. vs. Sawpipes Ltd. (AIR 2003 S.C. 2629), the Supreme Court while interpreting the phrase Public Policy of India in Section 34 of the Arbitration and Conciliation Act, held that a wider meaning should be given to that expression to ensure that some of the provisions of the Act do not become nugatory. This is particularly so, since the expression connotes matters which concern public good and public interest. In a case arising under the Motor Vehicles Act, the Court reiterated that a beneficial legislation should be liberally construed so as to provide effective relief, untrammelled by technicalities (New India Assurance Co. Ltd. vs. C. Padma) [(2003) 7 SCC 713]. Grammatical Construction The rule of grammatical construction was applied by the Supreme Court in a case arising under
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the Service Laws, in Union of India vs. Rajeev Kumar (AIR 2003 6 SCC 516), where the Court held that since the provision was plain and unambiguous it has to be given a grammatical construction and nothing can be read into it or deleted there from. Harmonious Construction The rule of harmonious construction is the thumb rule to interpretation of any statute. An interpretation which makes the enactment a consistent whole should be the aim of the Courts and a construction which avoids inconsistency or repugnancy between the various sections or parts of the statute should be adopted. The Courts should avoid a head on clash, in the words of the Apex Court, between the different parts of an enactment and conflict between the various provisions should be sought to be harmonised. The normal presumption should be consistency and it should not be assumed that what is given with one hand by the legislature is sought to be taken away by the other. The rule of harmonious construction has been tersely explained by the Supreme Court thus, when there are, in an enactment two provisions which cannot be reconciled with each other, they should be so interpreted, that if possible, effect should be given to both. A construction which makes one portion of the enactment a dead letter should be avoided since harmonisation is not equivalent to destruction. It is a settled rule that an interpretation which results in hardship, injustice, inconvenience or anomaly should be avoided and that which supports the sense of justice should be adopted. The Court leans in favour of an interpretation which conforms to justice and fair play and prevents injustice (Union of India vs. B.S. Agrawal) (AIR 1998 S.C. 153721). Liberal vs. Literal Construction The normal rule of construction of statutes is the literal rule or strict construction. An interpretation based on the wordings of the statute cannot be avoided for the mere reason that it would result in hardship or harsh consequences. It is only if there is ambiguity in the words of the statute that the Court can exercise its power of interpretation. The Court can only iron out the creases, but cannot change the texture of the fabric of a statute based on consequences of its decision (Nazeeruddin vs. Sitaram Agrawal AIR 2003 SC 1543). Generally, the rule of strict construction is adopted in taxing statutes. The House of Lords in the case of Top Ten Promotions (1969)3 All E.R 39) observed In a Taxing Act one has to look merely at what is clearly said; there is no room for any intent; One can only look fairly at the language used. In Maclay vs. Dixon (1944) 1 All E.R 22) Scott L.J. observed the only duty of citizens to
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Parliament is to obey its Act: To beg the question by such a phrase as evading the Act is to indulge in confusion of thought. The normal rule of interpretation is that if the law does not forbid, it allows. The rule of strict construction was applied by the Supreme Court in interpreting certain provisions of the Monopoly and Restrictive Trade Practices Act (Goyal vs. Reliance Industries Ltd., (2003) 113 Comp. cases 1). In State of Maharashtra vs. Billimoria (2003) 7 SCC 336) the Supreme Court while considering certain provisions of the Urban Land (Ceiling and Regulation) Act, held that an expropriatory legislation should be strictly construed. However, in invoking certain exclusionary clauses, the Court adopted a liberal construction; thus, accepting the position that different portions of the same statute can be interpreted differently based on the texture, content and object thereof. A rule of strict construction is not of universal application. While statutes like the taxing statutes have generally to be interpreted strictly, wherever provisions are remedial or beneficent in nature they should receive a liberal construction. Remedial legislations are generally beneficent or social justice oriented. A remedial statute may contain penal provisions to prevent infringement. While remedial statute has to be liberally construed, the penal provisions should receive strict construction. The House of Lords in London and North Eastern Railway Company vs. Berriman (1946) 1 All E.R 255) while interpreting such a statute, observed Wherever Legislature prescribes a duty and penalty for breach of it, it must be assumed that the duty is prescribed in the interest of the community or some part of it and the penalty is prescribed as a sanction for its performance. The Supreme Court in Tolaram vs. State of Bombay (AIR 1954 SC 496) quoted with approval the observation of Lord Macmillan, Where penalties for infringement are imposed it is not legitimate to stretch the language of a Rule, however beneficent its intention, beyond the fair and ordinary meaning of its language.

2.4 Subsidiary Rules In dealing with rules of interpretation it must be remembered that there are various subsidiary rules of interpretation, some of which are dealt with below: (i) CASUS OMISSUS Normally the Court cannot supply any assumed omission in the statute except in case of necessity, within the four corners of the statute. (Union of India vs. Rajiv Kumar (AIR 2003 SC 2917)
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(ii) CONJUNCTION DISJUNCTION The word or is generally used disjunctively while and is used conjunctively. In certain situations however, these words may be interchanged. In the words of Lord Halsbury these words cannot be interchanged unless the clear intent of the statute requires that to be done. The Supreme Court considered this issue in the leading case of Chamarbaugwala (AIR 1957 S.C. 699) with a view to give effect to the clear intention of the Legislature as evidenced from the statute as a whole. (iii) RULE OF EJUSDEM GENERIS The Supreme Court in the case of Kavalappara vs. State (AIR 1960 SC 1080) explained the principle of Ejusdem Generis to mean that general words following a particular class, category or genes should be construed as limited to the same kind as those specified. In the words of the Supreme Court the Rule is intended to reconcile incompatibility between specific and general terms and applies only when specific words falling within a class or genes is followed by a general term. It is also relevant that the legislative intent should not point to a different interpretation. This rule can be invoked only if there is a distinct genus which comprises more than one species. Where the items specified belong to different classes or categories, the principle of Ejusdem Generis cannot be invoked22.

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CHAPTER -III JUDICIAL TRENDS

One of the controversial areas in which courts had to interpret the taxing statute is relating to the retrospective operation of the statute. This can be viewed with the background of various amendments made in sections 115J, 115JA and 115JB of the Income-tax Act, 1961. Let us look at some of the decided cases dealing with interpretation of retrospective nature of an amendment. a) In Heydons Case, in 1584, it was resolved by the Barons of the Exchequer that for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered: (1) What was the common law before the making of the Act (2) What was the mischief and defect for which the common law did not provide, (3) What remedy the Parliament hath resolved and appointed to cure the disease of the commonwealth, and, (4) The true reason of the remedy; and then the office of all the Judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro private commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico23. In 1898, Lindley M.R: said: In order properly to interpret any statute it is as necessary now as it was when Lord Coke reported Heydons Case to consider how the law stood when the statute to be construed, was passed, what the mischief was for which the old law did not provide, and the remedy provided by the statute to cure that mischief.

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Although Judges are unlikely to propound formally in their judgements the four questions in Haydons Case, consideration of the mischief or object of the enactment is common, and will often provide the solution to a problem of interpretation. b) In the case of Thomson vs. Lord Clan Morris, Lord Lindley M.R. stated that in interpreting any statutory enactment regard must be had not only to the words used, but also to the history of the Act and the reasons which lead to its being passed. c) In the case of CIT vs. Sundaradevi (1957) (32 ITR 615) (SC), it was held by the Apex Court that unless there is an ambiguity, it would not be open to the Court to depart from the normal rule of construction which is that the intention of the legislature should be primarily to gather from the words which are used. It is only when the words used are ambiguous that they would stand to be examined and considered on surrounding circumstances and constitutionally proposed practices. c) Lord Denning in Sea Fort Tea Estates, 1949 (2) AER 155 CA has opined that in some situations, the Court supplement the words of the statute to give the force and life to the intention of the legislature and are compelled to perform some judicial services. d) In the case of CIT vs. National Taj Traders (1980) (121 ITR 535), it has been held by the Supreme Court that it is permissible for the Courts to modify any of the statutes if the literal construction or its clause leads to manifestly absurd anomalous results which could not have been intended by the legislature. e) In the case of CIT vs. Vegetable Products Ltd. (1973) (88 ITR) 192 Y. Mahindra & Mahindra Ltd. (1983) (144 ITR 225) it has been held by the Supreme Court that if any of the taxing provision is ambiguous or capable of more meaning than the one used, then the courts can take the interpretation which favours the assesse, more particularly so, when the provision relates to imposing taxes or levy of penalty24. f) The Supreme Court in the case of CIT vs. Sun Engineering (1992) 198 ITR 297) SC held as follows: It is neither desirable nor permissible to pick out a word or a sentence from the judgement of the Supreme Court divorced from the context of the question under
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consideration and treat it to be the complete law declared by the Court. The judgement must be read as a whole and the observations from the judgement have to be considered in the light of the questions which were before the Court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, courts must carefully try to ascertain the true principle laid down by the decision. The Supreme Court, again in the case of Madhavrao Scindia vs. Union of India AIR 1971 SC 53025 at page 533 held as under: Precedence It is not proper to regard a word a clause or a sentence occurring in a judgement of the Supreme Court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgement. This judgement was delivered by the Constitution Bench consisting of 11 Judges. As early as in (1949) 17 ITR at page 493, the Chief Justice Chagla has held that the courts should as far as possible try to avoid interpretation which leads to absurd results. While dealing with a very ingenuous argument advanced by R.J. Kolah on the interpretation of Section 23A which applies to short declaration of dividend, he argued that the provisions will not apply to the case if no dividends are declared at all. The High Court held that this would lead to absurd results in rendering a person who declares dividend not as per requirement of the statute but would absolve a person who commits total default in not declaring dividend. Similar conflict arises in the courts mind in determining the priority or form over substance and vice versa. There are number of judgments and notable amongst them are: Rogers vs. CIT (1946) 14 ITR 336 which was overruled by Supreme Court in CIT vs. Kharwars (1969) 72 ITR 603 (SC). This controversy of form over substance on many cases culminated in the Supreme Courts judgement in McDowell & Sons vs. CTO (1985) 154 ITR 148 which again disapproved B.M. Kharwars case26. These controversies appear to be unending in view of the latest judgement of Supreme Court in the case of Union of India vs. AZAADI BACHHAO ANDOLAN (2003) 263 ITR 706. Suffice it to say that the tenor of the judicial pronouncements lead to a position where form is important and it has to be discarded only if it is an artifact or tax saving device.

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CONCLUSION It is neither desirable nor permissible to pick out a word or a sentence from the judgement of the Supreme Court divorced from the context of the question under consideration and treats it to be the complete law declared by the Court. The judgement must be read as a whole and the observations from the judgement have to be considered in the light of the questions which were before the Court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, courts must carefully try to ascertain the true principle laid down by the decision. Thus, interpretation of statutes is keenly debated in taxing matters, as there are several ways of interpretation which cannot be covered in a single article. However, we can look to one more battle scene in which the courts have debated at length viz. whether while interpreting the taxing statute courts must look into at the plain language of the statute or must also yield to equity. It is very often said that equity and taxation are strange bed fellows but even while accepting this dictum which forbids the courts to read the plain language of the statute, the courts have tried to avoid interpretation which leads to absurd results.

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BIBLIOGRAPHY Books Referred:

Gray, Nature and Sources of the Law, 2nd edn, p.176-78 Salmond, Interpretation of Statutes, eleventh edn, p 152 Nature and Sources of Law, second edn, 1921 p 172-73 Maxwell, Interpretation of Statutes, pp1-2

Cases Referred:

State of Jammu and Kashmir v Thankur Ganga Singh [1960] 2 SCR 346 Brutus v Cozens (1972) 3 WLR 521 Padma Sundra Rao & Ors v State of Tamil Nadu & Ors (2002) 3 SCC 533 Madhavrao Scindia vs. Union of India AIR 1971 SC 530 District Mining Officer & Ors v Tata Iron Steel Co & Anr (2001) 7 SCC 358 Heydons Case

Website Referred:

http://www.itatonline.org/interpretation/interpretation21.php http://statutelaw.blogspot.com/2011/02/14-object-and-purpose-of-statutory.html http://www.gutenburg.com/object/interpretation http://www.scribd.com/interpretation http://www.legalserviceindia.com

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