PURPOSIVE INTERPRETATION IN TAX

[Dr. Sanjiv Agarwal]

Taxing statutes cannot be interpreted on any presumptions or assumption. The court must look squarely at the words of the statute and interpret them.

The court while interpreting the provisions of a statute must look at the purpose and if the purpose of a particular provision is easily discernible from the whole scheme of the Act then bear that purpose in mind.

The principle of purposive interpretation stipulates that a purposive construction of an enactment is one which gives effect to the legislative purpose by following the literal meaning of the enactment where such meaning is in accordance with the legislative purpose, or by applying a strained meaning where the literal meaning is not in accordance with the legislative purpose. Apex court applied this principle in National Insurance Co. Ltd. v. Laxmi Narain Dhut (2007) SCC 700. Also see Reserve Bank of India v. Peerless General Finance & Investment Co. Ltd. (1987) 1 SCC 424 where it was held that interpretation must depend on the text and the ontext. They are the basis of interpretation. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and every thing is in its place.

While construing a word which occurs in a statute or a statutory instrument in the absence of any definition in that very document it must be given the same meaning which it receives in ordinary parlance or in the sense in which people conversant with the subject-matter of the statute or statutory instrument understand it. When the word to be construed in used in a taxing statute or a notification issued there under, it should be understood in its commercial sense. [(Narang Overseas P. Ltd. v. ITAT 2007 -TMI - 1644 - HIGH (COURT, BOMBAY)]

A statutory provision is to be interpreted in its context and also to advance the true intention and purpose of law [CCE, Indore v. Lloyd Insulation (India) Ltd. 2007 -TMI - 49055 – (CESTAT, PRINCIPAL BENCH, NEW DELHI)]

Consequences of interpretation are to be kept in mind Harmonious interpretation suppressing mischief and advancing remedy has to be given. In case of conflict between purpose and material, purpose would prevail because in absence of material, substitute materials can be used. Material is subordinate to purpose. Where subordinate idea clashes with principal idea, former must adjust to latter or be disregarded altogether. Where conflict is between use and substance, use should be given greater regard. [Jaipur Golden Transport Co. Pvt. Ltd. v. CCE, Surat 2007 -TMI - 1872 – (CESTAT, MUMBAI)] 

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