DIRECT TAXES CODE BILL, 2009 - preamble of the code must be modified to reflect correct objectives and scope.

[C.A. DEV KUMAR KOTHARI]

Preamble to any enactment is important:

Preamble to any enactment is very important part of introduction of the enactment itself. Preamble to any enactment can be considered as providing overall purposes and limitations of the enactment. Many times the preamble of enactment has been considered as important aspect in the overall context of all provisions as well as individual provisions. In case any provision is inconsistent with the preamble, the provision may be considered invalid.

Preamble as per draft code of 2009:

In the draft code preamble is given as follows:

A Bill to consolidate and amend the law relating to direct taxes.

BE it enacted by Parliament in the Sixty First Year of the Republic Of  India as follows:-

xxxxx

Preamble of the Income-tax Act, 1961:

The preamble to the income-tax Act, 1961 is also on similar lines and reads as follows:

An Act to consolidate and amend the law relating to income- tax and super-tax.

Comparison:

The new Code of 2009 intends to consolidate and amend all direct tax laws. Whereas in the Act of 1961 it was to consolidate law relating to income-tax and super-tax.

Importance of preamble as considered by courts- some examples:

A preamble to a statute is a preliminary statement of the reasons which have made the passing of the statute desirable, and its position is immediately after the title of the enactment. It may also be used to introduce a particular section or a chapter. The policy and purpose of a given measure may be deducted from the title of the Act and the preamble thereof.-  IN re Kerala Education Bill  AIR 1958 SC 956.

The preamble of the statute is a key to the understanding of it and may legitimately be consulted to solve ambiguity.-  K.K.Kochuni V State of Madras (1960) 3 SCR 887.

Whatever its value as an aid to the construction of a statute, it throws light on the intention and design of the Legislature and indicate the scope and purpose of the legislation itself.- Poppatlal Shah V The Stte of Madras AIR 1953 SC 274.

The terms of preamble may be restored to in two classes of cases, The first, where the text of the statute is susceptible of different constructions; the second , where the legislature intended that some limitation should be put on the statute. And the preamble is used to indicate to what particular instances the enactment was intended to apply.

It is permissible to look at the preamble for understanding the various clauses; but full import is to be given to express provisions even though they appears to go beyond the terms of preamble. -Barrackpore Coal Co. Ltd V UOI AIR 1961 SC 954.

Inconsistent provision of I.T. Act:

Thus, preamble of the Income-tax Act 1961 can be considered as fixing overall limitations of the provisions to be contained in the enactment. In view of author the levy of FBT , through the Income-tax Act, 1961 may be considered as beyond the preamble and purpose of income-tax Act, 1961. Because FBT is neither a tax on income nor it is as a consequence of consolidation of provisions relating to income-tax and super-tax. May be that on this ground alone provisions relating to levy of FBT may be held ultravirse the Act.

Similarly provisions of S. 56 (2) (v)/ (vi) and (vii)- ( popularly called deemed income by way of gifts) are also inconsistent with the preamble of the Act. The same may also be held in valid provisions.

Therefore, to avoid all such possibilities it is desirable that the preamble should be comprehensive and target the main purpose of the enactment.

Should we need to look in history for purposes of the new enactment?

As per the above referred preambles, in the income-tax Act, 1961 and the Direct Tax Code 2009  it becomes necessary to look back in the history of various enactments which are being consolidated and amended. This is not desirable. The preamble can be made comprehensive to include all real purposes.

Suggested preamble:            

"A Bill to consolidate and amend the law relating to direct taxes and to provide for levy, determination, collection, administration and incidental matters for the same."

A preamble on the above lines will make it clear that the law is in relation to direct taxes,

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