DOCTRINE OF LEGITIMATE EXPECTATION IN TAXATION

[Dr. Sanjiv Agarwal]

The doctrine of legitimate expectation implies that the decisions or implementation of the law will be made as per the latter and spirit of the law and that is what expected from the persons applying the law.

The courts are bound to give effect to the statutes in accordance with their terms even if those statutes may be in conflict with the convention. Another example of legitimate expectation is that a provision of law cannot be made operative by applying the doctrine of legitimate expectation.

When the provisions of law are yet to come into force on being notified, this doctrine becomes applicable.

A legitimate expectation can be of two types- substantive legitimate expectation (e.g. right of receiving some benefit) and procedural legitimate expectation (e.g. right to be heard before adjudication)

When a statute confers power upon a public official to destroy defeat or prejudice a person’s rights, interests or legitimate expectations, the rules of natural justice regulate the exercise of that power unless they are excluded by plain words or necessary intendment.

Substantive protection of legitimate expectations does not mean that in all circumstances the expectation will be fulfilled by a favourable decision.

According to Halsbury’s Laws of England, a person may have a legitimate expectation of being treated in a certain way of an administrative authority even though he has no legal right in private law to receive such treatment. The expectation may arise either from a representation or promise made by the authority, including J implied representation, or from consistent past practice.

Following meanings and scope of ‘legitimate expectation’ are extracted as per P. Ramanath Aiyar’s Advanced Law Lexicon.

Where there is an "overriding public interest" the expectation may be dashed; but in the absence of such an "overriding public interest" legitimate expectations of some boon or benefit should be fulfilled. It follows that substantive protection does not grant an absolute right to a particular decision; it simply ensures that the circumstances in which that expectation may be denied are restricted. Substantive protection, therefore, is within the field of public law not private law." [The Provenance and Protection of Legitimate Expectations the Cambridge Law Journal, Vol. 47, Part - 2 at page 238]

The basic principles relating to 'legitimate expectation' were enunciated by Lord DIPLOCK in Council of Civil Service Unions v. Minister for the Civil Service, (1985) AC 374, 408-09 (Commonly known as CCSU case). It was observed in that case that for a legitimate expectation to arise, the decisions of the administrative authority must affect the person by depriving him of some benefit or advantage which either (i) he had in the past permitted by the decision maker to enjoy and which he can legitimately expect to be permitted to continue to do until there have been communicated to him some rational grounds for withdrawing it on which he has been given an opportunity to comment; or (ii) he has received assurance from the decision-maker that they will not be withdrawn without giving him first an opportunity of advancing reasons for contending that they should not be withdrawn. An expectation can be based on an express promise or representation or by established past action or settled conduct. [CHANCHAL GOYAL VERSUS STATE OF RAJASTHAN - 2003 (2) TMI 554 - SUPREME COURT]

The doctrine of 'legitimate expectation' has been developed as a principle of reasonableness and fairness and is used against statutory bodies and government authorities on whose representations or promises, parties or citizens act and some detrimental consequences ensue because of refusal of authorities to fulfil their promises or honour their commitments.  HIRA TIKKOO VERSUS UNION TERRITORY, CHANDIGARH & ORS. - 2004 (4) TMI 617 - SUPREME COURT.

A person may have a 'legitimate expectation' of being treated in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment. The expectation may arise either from a representation or promise made by the authority including an implied representation, or from consistent past-practice. The doctrine of legitimate expectation has an important place in the developing law of judicial review. [BANNARI AMMAN SUGARS LTD. VERSUS COMMERCIAL TAX OFFICER AND OTHERS - 2004 (11) TMI 320 - SUPREME COURT]

'Legitimate expectation' means what has been held out in the terms and conditions of the auctions and the lease deed. It does not mean illegitimate flight of fancy. 'Legitimate expectation' and provisions of the Act cannot be read together to mean that the terms of auction and lease deed should be ignored. [MUNICIPAL CORPORATION CHANDIGARH AND ORS. VERSUS SHANTIKUNJ INVESTMENT PVT. LTD. AND ORS. - 2006 (2) TMI 719 - SUPREME COURT]

The doctrine of 'legitimate expectation' is the latest recruit to a long list of concepts fashioned by the Court for review of administrative actions. Under this doctrine a person may have reasonable or legitimate expectation of being treated in a certain way by an administrative authority even though he has no right in law to receive the benefit. Such expectation may arise either from the express promise or from consistent practice which the person may reasonably expect to continue. This doctrine was found inapplicable to extend all medical facilities and benefits to ex-servicemen. [CONFEDERATION OF EX-SERVICEMEN ASSOCIATIONS AND ORS. VERSUS UNION OF INDIA AND ORS. - 2006 (8) TMI 690 - SUPREME COURT)

'Legitimate expectation' is not a legal right. It is an expectation of benefits, relief or remedy, that may ordinarily flow from a promise or established practice. It should be legitimate, that is, reasonable, logical and valid. [RAM PRAVESH SINGH & ORS. VERSUS STATE OF BIHAR & ORS. - 2006 (9) TMI 557 - SUPREME COURT ]

The "expectation" which shall be protected must be "legitimate" though it may not amount to a right in the conventional sense. But the hope or desire of a person to obtain a

favourable order, notwithstanding that he had not complied with the necessary requirements may not amount to a legitimate expectation. GOVERNMENT OF ANDHRA PRADESH AND ORS. VERSUS HEH THE NIZAM VIII OF HYDERABAD - 1992 (9) TMI 382 - ANDHRA PRADESH HIGH COURT. [Constitution of India,  Art. 14)

"Legitimate" in legal parlance means that which is lawful, legally recognised by law or according to law. "Expectation" means the act or the instance of expecting or looking forward something expected or hoped for probability of an event and "expectation" is most often relatahle to one's prospects. OSMANIA UNIVERSITY VERSUS. R. MADHAVI AND ORS. - 1997 (9) TMI 647 - ANDHRA PRADESH HIGH COURT

130 (page 135).

See also BECHARBHAI V. PATEL VERSUS STATE OF GUJARAT AND ORS. - 1997 (3) TMI 646 - GUJARAT HIGH COURT.

" .... The doctrine oflegitimate expectation in essence imposes a duty to act fairly. Whilst most of the cases are concerned, as Lord Roskill said, with a right to be heard, I do not think the doctrine is so confined. Indeed, in a case where ex hypothesi, there is no right to be heard, it may be thought the more important to fair dealing that a promise or undertaking given by a minister as to how he will proceed should be kept. Of course such promise or undertaking must not conflict with his statutory duty or his duty, as here, in the exercise of a prerogative power." R. v. Secretary of State for the Home Department, Ex-parte Ruddock, 1987 (2) All ER 518, per TAYLOR, J.

Doctrine of 'legitimate expectation' is a source of procedural or substantive right. [R. v. North and East Devon Health Authority exp Coughlan, 2001 QB 213, as referred in  KULDEEP SINGH VERSUS GOVT. OF NCT OF DELHI - 2006 (7) TMI 612 - SUPREME COURT

Further, the 'doctrine of legitimate expectation' is only an aspect of Article 14 of the constitution dealing with the citizens in a non-arbitrary manner and thus, by itself, does not give rise to an enforceable right but in testing the action taken by the Government authority whether arbitrary or otherwise, it would be relevant. [STATE OF WEST BENGAL AND ORS. VERSUS NIRANJAN SINGHA - 2000 (12) TMI 928 - SUPREME COURT]

A person may have a 'legitimate expectation' of being treated in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment. This doctrine has an important place in developing law of judicial review. It can provide a sufficient interest to enable one who cannot point to existence of a substantive right to obtain leave of Court to apply for judicial review. Doctrine  of legitimate expectation is to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an undertaking. It does not give scope to claim a relief straightaway from administrative authorities. [BANNARI AMMAN SUGARS LTD. VERSUS COMMERCIAL TAX OFFICER AND OTHERS - 2004 (11) TMI 320 - SUPREME COURT]

In public law in certain situations, relief to the parties aggrieved by actions or promises of public authorities can be granted on the 'doctrine of legitimate expectation' but when grant of such relief in likely to harm larger public interest, the doctrine cannot be allowed to be pressed into service. [HIRA TIKKOO VERSUS UNION TERRITORY, CHANDIGARH & ORS. - 2004 (4) TMI 617 - SUPREME COURT]

The doctrine of 'legitimate expectation' has been developed in the context of principle of natural justice whereby the citizens may legitimately expect to be treated fairly. [M/S ASHOKA SMOKELESS COAL IND. P. LTD & ORS VERSUS UNION OF INDIA & ORS - 2006 (12) TMI 516 - SUPREME COURT]