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We, the people of India resolved to

constitute India into a SOVEREIGN SOCIALIST
secure to all our citizens: Justice, social, economic and
political; Liberty of thought, expression, belief, faith and
worship; Equality of status and of opportunity; and to
promote among all of us Fraternity, assuring the dignity
of the individual and the unity and integrity of the

To govern is the duty of the Executive,

headed by the President. To legislate is the duty
of the Parliament and State Legislatures. It is for
the judiciary to keep a watch, visit and see that
the freedom enshrined in the Constitution reach
to every citizen and is not jeopardized or tinkered
with or obstructed by the executive or any person
in authority or otherwise.
O    |  

The Indian legal system is the product

of history. It is rooted in our soil; nurtured and
nourished by our culture, languages and
traditions; fostered and sharpened by our genius
and quest for social justice; reinforced by history
and heritage inspired and strengthened by
English Law guided and enriched by concepts
and precepts of justice, equity and good
conscience which are indeed the hallmarks of the
common law.

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.

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 Explanation and is curtailed
by way of proviso, sometimes more than one
provisos and explanations meaning differently.
O ||  

The rule of construction of a charging

section is that before taxing any person, it must
be shown that he falls within the ambit of the
charging section by clear words used in the
section. No one can be taxed by implication.A
charging section has to be construed strictly.

It is the basic principle of construction

of statute that the same should be ready as a
whole, then chapter by chapter, section by
section and words by words. Recourse to
construction or interpretation of statute is
necessary when there is ambiguity, obscurity or
inconsistency therein and not otherwise.
O |

It is well-settled that in interpreting a

provision creating a legal fiction, the court must
ascertain the purpose for which the fiction is
created and having done so, to assume all those
facts and consequences which are incidental or
inevitable corollaries to the giving effect to the

The normal principle in construing an

Explanation is to understand it as explaining the
meaning of the provision to which it is added.
The Explanation does not enlarge or limit the
provision, unless the Explanation purports to be a
definition or a deeming clause.

A proviso qualifies the generality of the

main enactment by providing an exception and
taking out from the main provision, a portion,
which, but for the proviso would be part of the
main provision. A proviso, must, therefore, be
considered in relation to the principal matter to
which it stands as a proviso.


Now, it is a well-settled rule of

interpretation hallowed by time and sanctified by
judicial decisions that, unless the terms of a
statute expressly so provided or necessarily
require it, retrospective operation should not be
given to a statute so as to take away or impair an
existing right or create a new obligation or
impose a new liability otherwise than as regards
matters of procedure.


The question as to whether a statute is

mandatory or directory depends upon the intent
of the Legislature and not upon the language in
which the intent is clothed. The meaning and
intention of the Legislature must govern, and
these are to be ascertained not only from the
phraseology of the provision but also by
considering its nature, its design, and the
consequences which would follow from
construing it one way or the other.

It is a sound principle of law to follow a view

which is operating for long interpretation of a
provision rendered years back and accepted and
acted upon should not be easily departed from.
While reconsidering decisions rendered a long
time back, the courts cannot ignore the harm that
is likely to happen by un-settling law that has
once being settled.


The principles governing any non obstante

clause are well established. Ordinarily, it is a
legislative device to give such a clause an
overriding effect over the law or provision that
qualifies such clause. When a clause begins
with ³notwithstanding anything contained in the
Act or in some particular provision/ provisions in
the Act´, it is with a view to give the enacting part
of the section, in case of conflict, an overriding
effect over the Act or provision mentioned in the
non obstante clause.

The Court only interprets the law and

cannot legislate. To legislate is the prerogative of
the Parliament or the State Legislature. A casus
omissus should not be readily inferred and for the
purpose all the parts of the statute or section
must be construed together and every clause of
a section should be construed with reference to
the context and other clauses thereof so that the
construction to be put on a particular provision
makes a consistent enactment of the whole

It is well settled principles of law that

the decision on an interpretation of one statute
can be followed while interpreting another
provided both the statutes are in parimateria and
they deal with identical scheme. However, the
definition of an expression in one statute cannot
be automatically applied to another statute whose
object and purpose are entirely different.
O  |  

A person is known by the company he

keeps¶ Birds of same feather flock together.
Similarly a word is to be interpreted after
considering the other words used and in its
context. The principle of ejusdem generis is
applicable when particular words pertaining to a
class, category or genus are followed by general

It is true that the speeches made by the

Members of the Legislature on the floor of the
House when a Bill for enacting a statutory
provision is being debated are inadmissible for
the purpose of interpreting the statutory provision
but the speech made by the mover of the Bill
explaining the reason for the introduction of the
Bill can certainly be referred to for the purpose of
ascertaining the mischief sought to be remedied
by the legislation and the object and purpose for
which the legislation was enacted.

Many provisions confer discretion on the

Court or the Authority. Discretion should be
exercised judiciously as a judicial authority well
versed in law.

a) Liberal Construction
b) Harmonious Constructions
c) Beneficial Constructions
"!# $%$
o) Rule of Ejusdem Generis
2) Reddendo Singula Singulis
3) Contemporanea Expositio
4) Casus Omissus
5) Autrefois Acquit/Autrefois Convict

& ! #'()#)'(

The rule of liberal construction does not give
a freehand to the Court to stretch and strain the
statutory language to accord with abstract notions
of justice and fair play Ë    


 If the statutory
language is susceptible to two constructions the
rule of liberal construction should incline the
Court to prefer the one, which accomplishes the
legislative purpose.
& $'(''()#)'(*

It is a cardinal rule of construction that when

there are in a statute two provisions which are in
conflict with each other, such that, both of them
cannot stand, they should if possible, be so
interpreted, that effect can be given to both and
that construction which renders either of them
inoperative and useless should not be adopted
except in the last resort [ë   
  ë  Ë   
  This is
what is known as the rule of harmonious
#& !(!+# '()#)'(

The construction of a statute must not so

strain the words as to include cases plainly
omitted from the natural meaning of the
language. However, where the usual meaning of
the words falls short of the object of the
legislature, a more extended meaning may be
attributed to them, if they are fairly susceptible to
it. This relaxation of strictly literal principles of
interpretation is called as Beneficial

,*  !'+ -!$|!(!
Also known as Lord Tenderan¶s rule, this
rule provides that where words of specific
meaning are followed by general words, the
general words will be construed as being limited
to persons or things of the same general kind or
class as those enumerated by the specific words.

As an outcome of the rule of Ejusdem

Generis, there is another rule that statutes which
deal with persons or things of inferior rank are not
extended to those of superior degree by
introduction of general words and the general
words following particular words will not cover
anything of a class superior to those to which the
particular words relate.
> !!(' (3  (3 

This high sounding phrase only means that

words should be read distributively, the sense
produced by using the English word ³respectively´
whenever necessary, or ³a´ applicable.
†* '()!$"'(! %"')'

Contemporanea exposition est optima

et fortissinia in lega: meaning Contemporaneous
exposition is the best and strongest in law

It is said that the best exposition of a

statute or any other document is that which it has
received from contemporary authority.
* '$. ! ! )5)0&
·* )!+'#6)

The principle of the doctrine of Autrefois

Acquit is codified in section 300 of the Code of
Criminal Procedure. As per this doctrine a
person cannot be prosecuted twice for the same

Tax laws being part of statutory law, the general

rules governing interpretation of statutes also
govern interpretation of taxing statutes. However,
due to certain peculiar characteristics of taxing
statutes, there are certain particular rules which
govern interpretation of a taxing statute. I will
deal with only special rules of construction
governing a tax statute
.&  !'+)#)#'()#)'(

As tax laws impose liability on the subject

they have to the strictly construed. The subject is
not to be taxed, unless the words of the taxing
statute unambiguously impose the tax. The
subject is not to be taxed without clear words for
that purpose. If the person sought to be taxed
comes within the letter of the law, he must be
taxed however great the hardship may appear to
the judicial mind.
.& |' !( !'+)#)#'()#)'(

The Courts have disregarded the rule of

strict and literal construction, if such construction
leads to an absurd result of defeats the very
purpose of the Act. In such cases, the Courts
have adopted what is known as ³Golden rule of
.#& #0!+ !

In case of ambiguity in the matter of

construction the literal rule of construction will
also give way to mischief rule of construction,
which is better known as Hyden¶s rule of
construction. As per this rule while construing a
provision of a statute, one has to consider the law
before coming into force of the Act, what was the
mischief and defect for which the law did not
provide, what remedy had the legislature resolved
and appointed to cure the disease and the true
reason of the remedy.
.& )))!! (35)0"'#!!

In contrast to statutes dealing with substantive

rights, statutes dealing with merely matters of procedure
are presumed to be retrospective, unless such a
construction is inadmissible. No person has a vested
right in any course of procedure. He has only the right
of prosecution or defense in the manner prescribed for
the time being by or for the Court in which the case is
pending and if, by an Act of Parliament the mode of
procedure is altered, there is no other right than to
proceed according to the altered mode.
.!& 0!''++'$()(#!

The assesses under the Income-tax Act

have legal right to plan the affairs in appropriate
manner so as to attract least amount of tax. Tax
planning is permissible and only tax
avoidance/tax evasion is punishable under the
.+& '()#)'((+4''+)0!-!#)

If two constructions of a provision of a

statute are possible, the construction in favour of
the assessee has to be accepted. If a section in
a taxing statute is of doubtful and ambiguous
meaning, it must be resolved in favour of the
.3& !-#)

  ! means a matter adjudged, a

thing judicially acted upon or decided; a thing or
matter settled by the judicial decision. The
principle of   ! is to bring finality to
litigation; that a time should come when litigation
shall cease, in order that the decree of the Court
may be carried out.
.0& )'""!

For similar reasons the principle of estoppel

strictly does not apply to income tax proceedings.
The question would arise how far the promise
given by the tax authorities would fall within
doctrine of promissory estoppel.
.& '()#)'(3()' !)%)'(

There is always presumption against double

taxation. Broadly stated the principle of a taxing
statute is to charge income or wealth only once in
one hand. Accordingly such construction is
preferred which avoids double taxation.
.-& ()!3)!#0!$!

Where there are different statutes in ’

 though made at different times, they will
be taken and construed together as one system
and explanatory to one another.
.1& # '+)0! !")$!()

Section oo of the Income-tax Act, o06o

specifically empower the Central Board of Direct
Taxes to issue general instructions for the
general administration of the Act and such
instructions issued are binding on the subordinate
.& !( )))!

Penal statutes which create offences or

which have the effect of increasing penalties for
existing offence will only be prospective by
reason of the constitutional restriction imposed by
Article 20 of the Constitution.

When a statute creates an offence a normal

question that arises is as to whether `  " is
a necessary element of such offence. The
question is whether the statute dispenses with
   and creates a strict liability. Answer to
this question depends on the proper interpretation
of the provision in question.
.(& ()!"!))'('+ !

Under the direct tax laws, the Central Board

of Direct Taxes has been empowered to make
proper rules for the purpose of administration of
the various direct tax laws. Accordingly, the
Board is delegated with legislative power to make
.'& '#)(!'+54!

A waiver is an intentional relinquishment of a

known right. The generally accepted connotation
is that to constitute ³waiver´, there must be an
intentional relinquishment of a known right or
voluntary relinquishment or abandonment of a
known existing legal right, or conduct such as
warrants an inference of the relinquishment of a
known right or privilege.
."&  !'+

Both parties should be heard before any

decision. The right to fair hearing has been used
by the Court as the base on which to build a kind
of code for administrative procedure comparable
with due process of law. A proper hearing must
always include a fair and adequate opportunity to
those who are parties in the controversy for
correcting and contradicting anything prejudicial
to their view.

.& !$ !
The preamble of a statute is a prefatory
statement at its beginning, following the title and
preceding the enacting clause, explaining or
declaring the policy and purpose, the reasons
and motives for, and the objects sought to be
accomplished by the enactment of the statute.
The preamble is that part of a statute which
contains the recital showing the reason for the
.& !(3

The headings prefixed to a section or sets of

section in some modern statutes are regarded as
preamble to those sections. They cannot control
the plain words or statutes, but they may explain
ambiguous words. If there is any doubt in the
interpretation of the words of the section, the
headings certainly help the Court to resolve that
.#& 3( (')!

Although a marginal note cannot afford any

legitimate aid to the construction of a section, it
can however be relied upon as indicating the drift
of the section. Marginal notes to the sections are,
however not to be referred to for the purpose of
construction, unless they have been inserted
with the assent of the legislature.
.&  ))'(

Illustrations in enactments provided by the

legislature are valuable aids in understanding the
real scope of the text thereof. They are part of
the statute. The illustrations, however, do not
make law. They only exhibit the law in full action.
An illustration does not exhaust the full content of
the section which it illustrates and equally it can
neither curtail nor expand its ambit.
.!& !+()'(!#)'(

It is quite common to find in a statute

definitions of certain words and expressions used
elsewhere in the body of the statute. The object
of such a definition is to avoid the necessity of
frequent repetitions in describing all the subject-
matter to which the word or expression so defined
is intended to aid. The definition of a word in the
definition section may either be restrictive of its
ordinary meaning or it may be extensive of the
.+& '4'

A proviso merely craves our something from

the section itself; a proviso never destroys the
section as a whole. The proper function of a
proviso is that it qualifies the generality of the
main enactment by providing an exception and
taking out, as it were, from the main enactment a
portion which, but for the proviso, would fall within
the main enactment.
.3& %" ()'(

An Explanation is at times appended to a

section to explain the meaning of words
contained in the section. It becomes a part and
parcel of the enactment. The meaning to be
given to an Explanation must depend upon its
terms, and no theory of its purpose can be
entertained, unless it is to be inferred from the
language used.
.0& #0! !

Schedules appended to statutes form part of

the statute. They are added towards the end and
their use is made to avoid encumbering the
section in the statute with matters of excessive
detail. They often contain details and forms for
working out the policy underlying the sections of
the statute.
.& '()!%)

In interpreting a legislation which is

ambiguous the context has to be taken into
account to deal with dubiousness. The context
includes not only other enacting provisions of the
same statute, but its preamble, the existing state
of the law, other statutes in ’  and the
mischief which the statute, discerned from those
and other legitimate means, was intended to

The rule of `# !$ !" Ëi.e., `within

the four corners of the Act¶), lays down that a
statute must be read as a whole, and every
provision in the statute must be construed with
reference to the context and other clauses in the
statute so as, as far as possible, to make a
consistent enactment of the whole statue.
.1& $!($!()

An amendment is a legislative act designed

to change some prior and existing law by adding
or taking from it some particular provision. Where
the amendment alters the language of a provision
the presumption is that it was deliberately done to
change the law. Sometimes amendments are
made to clarify the law and not to change it. For
instance, if the amendment only deletes some
superfluous words it does not mean that the law
has been altered.
.& '(')()!# !

The expression ³  $ % means

³notwithstanding´. Sometimes a section
commences with the clause stating that
³notwithstanding anything contained in this Act or
any law for the time being in force´ and, in case of
conflict, the idea is to give the enacting or
operative part of the section an overriding effect
over the provisions of the Act found in the 
$  clause.
.$& !+!!(#!)'')0!)))!

Statute must be read as a whole as words are to

be understood in their context. Extension of this rule of
context permits reference to other statutes in ’
& i.e. statutes dealing with the same subject-
matter of forming part of the same system. Where there
are different statutes in ’  though made at
different times, or even expired, and not referring to
each other, they shall be taken and construed together,
as one system and as explanatory of each other. Acts
are regarded to be in ’  when they deal with
the same person or thing or class.
.(& # !#'(

ëuestions of law settled by a long course of

decisions should not ordinarily be disturbed. Also
an interpretation of a provision in a taxing Act
rendered years ago and accepted and acted
upon by the Department should not be easily
departed from.
.'& 3!("#)#!

Usage and practice developed under a

statute is indicative of the meaning ascribed to its
words by contemporary opinion and in case of an
ancient statute is an admissible external aid to its
construction. The rule of ! ’ 
#’ is that the interpretation that a provision
has received from contemporary authorities who
are charged with executing the Act should be
clearly wrong before it is overturned.
."& '()#)'(")!%!#)4!

As a general rule a construction placed by

the executive cannot bind a judicial or quasi-
judicial authority, except where the statute itself
so directs (e.g. in the case of circulars of the
Central Board of Direct Taxes under section oo
of the Income-tax Act, o 6o, which are binding
even if they deviate from the Act).
.6& #)'(!()!%)7''1

When a word is not defined in the statute a

dictionary is often useful in ascertaining its
meaning. Courts usually rely on standard
dictionaries, such as Webster¶s or Oxford

.& "!$!')!#'(8 )# !,,

As mentioned earlier the Article o4o
embodies the doctrine of precedent as law. The
Article o4o of the Constitution of India provides
that the law declared by the Supreme Court shall
be binding on all the Courts in India. The law as
interpreted by the Supreme Court is binding on all
Courts and Tribunals in India.

It is an expression of opinion by a
Judge on a question immaterial to the 
!  , and unnecessary for the decision of
the particular case. It is in no-way binding on any
Court but may receive attention as being an
opinion of higher authority. Thus, the
observations made in a judgement which are not
relevant to the  !   DO NOT HAVE
ANY BINDING FORCE. However, $ ! of
the Supreme Court are binding or are entitled to
the highest respect.
.#& 30')-3!$!()

The doctrine of precedent is applicable to

the decisions delivered by the High Court. The
law declared by the High Court is binding on all
the Courts subordinate to it within its territorial
jurisdiction. Where there are two decisions of the
same High Court holding two different views, the
latter decision should be followed.

General principles of interpretation of

Law including the Tax Laws are to protect a
citizen against the excesses of the Executive,
Administration, Corrupt authority, erring
individuals and the Legislature. It is an aid to
protect and uphold `enduring values¶ enshrined
in the Constitution and Laws enacted by the
Parliament/ Legislatures.