PRINCIPLES OF STRICT CONSTRUCTION - Indian Laws - General

PRINCIPLES OF STRICT CONSTRUCTION Justice G.P. Singh, in his treatise Principles of Statutory Interpretation (14th ed. 2016 p. 879) after referring to Re, Micklethwait , (1885) 11 Ex 452; Partington v. A.G. , (1869) LR 4 HL 100; Rajasthan Rajya Sahakari Spinning Ginning Mills Federation Ltd. v. Deputy CIT, Jaipur- 2014 (5) TMI 160 - SUPREME COURT , State Bank of Travancore v. Commissioner of Income Tax , 1986 (1) TMI 1 - SUPREME COURT and Cape Brandy Syndicate v. IRC , (1921) 1 KB 64, summed up the law in the following manner- A taxing statute is to be strictly construed. The well-established rule in the familiar words of LORD WENSLEYDALE, reaffirmed by LORD HALSBURY AND LORD SIMONDS, means: The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words. In a classic passage LORD CAIRNS stated the principle thus: 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 to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute. VISCOUNT SIMON quoted with approval a passage from ROWLATT, J. expressing the principle in the following words: In a taxing Act one has to look merely at what is clearly said. This is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. It was further observed: In all tax matters one has to interpret the taxation statute strictly. Simply because one class of legal entities is given a benefit which is specifically stated in the Act, does not mean that the benefit can be extended to legal entities not referred to in the Act as there is no equity in matters of taxation . Yet again, it was observed: It may thus be taken as a maxim of tax law, which although not to be overstressed ought not to be forgotten that, the subject is not to be taxed unless the words of the taxing statute unambiguously impose the tax on him , [Russel v. Scott, (1948) 2 All ER 1]. The proper course in construing revenue Acts is to give a fair and reasonable construction to their language without leaning to one side or the other but keeping in mind that no tax can be imposed without words clearly showing an intention to lay the burden and that equitable construction of the words is not permissible [Ormond Investment Co. v. Betts, (1928) AC 143]. Considerations of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity [Mapp v. Oram, (1969) 3 All ER 215]. It has also been said that if taxing provision is so wanting in clarity that no meaning is reasonably clear, the courts will be unable to regard it as of any effect [IRC v. Ross and Coutler, (1948) 1 All ER 616]. Further elaborating on this aspect, the learned author stated as follows: Therefore, if the words used are ambiguous and reasonable open to two interpretations benefit of interpretation is given to the subject [Express Mill v. Municipal Committee, Wardha, AIR 1958 SC 341]. If the Legislature fails to express itself clearly and the taxpayer escapes by not being brought within the letter of the law, no question of unjustness as such arises [CIT v. Jalgaon Electric Supply Co., AIR 1960 SC 1182]. But equitable considerations are not relevant in construing a taxing statute, [CIT, W.B. v. Central India Industries, AIR 1972 SC 397], and similarly logic or reason cannot be of much avail in interpreting a taxing statute [Azam Jha v. Expenditure Tax Officer, Hyderabad, AIR 1972 SC 2319]. It is well settled that in the field of taxation, hardship or equity has no role to play in determining eligibility to tax and it is for the Legislature to determine the same [Kapil Mohan v. Commr. of Income Tax, Delhi, AIR 1999 SC 573]. Similarly, hardship or equity is not relevant in interpreting provisions imposing stamp duty, which is a tax, and the court should not concern itself with the intention of the Legislature when the language expressing such intention is plain and unambiguous [State of Madhya Pradesh v. Rakesh Kohli Anr., (2012) 6 SCC 312]. But just as reliance upon equity does not avail an assesse, so it does not avail the Revenue. The passages extracted above, were quoted with approval by this Court in at least two decisions being Commissioner of Income Tax vs. Kasturi Sons Ltd. , 1999 (3) TMI 6 - SUPREME COURT and State of West Bengal vs. Kesoram Industries Limited, 2004 (1) TMI 71 - SUPREME COURT [ Kesoram Industries Case for brevity]. In the later decision, a Bench of seven Judges, after citing the above passage from Justice G.P. Singh s treatise, summed up the following principles applicable to the interpretation of a taxing statute: (i) In interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) 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; and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and there is nothing unjust in a taxpayer escaping if the letter of the law fails to catch him on account of Legislature s failure to express itself clearly . [COMMISSIONER OF CUSTOMS (IMPORT), VERSUS M/S. DILIP KUMAR- 2018 (7) TMI 1826 - SUPREME COURT] The principles of strict construction have to be adopted for interpretation of the provisions of the Maharashtra Control of Organized Crime Act, 1999 (hereinafter referred to as MCOCA ), which is a penal statute. However, it is no more res integra that even a penal provision should be interpreted to advance the object which the legislature had in view. The interpretation of Section 2(1)(d) of the Protection of Children from Sexual Offences Act, 2012 came up for consideration before this Court and Justice R.F. Nariman [ 2017 (7) TMI 1081 - SUPREME COURT ] held as follows: 24. It is thus clear on a reading of English, U.S., Australian and our own Supreme Court judgments that the 'Lakshman Rekha' has in fact been extended to move away from the strictly literal Rule of interpretation back to the Rule of the old English case of Heydon, where the Court must have recourse to the purpose, object, text, and context of a particular provision before arriving at a judicial result. In fact, the wheel has turned full circle. It started out by the Rule as stated in 1584 in Heydon's case , which was then waylaid by the literal interpretation Rule laid down by the Privy Council and the House of Lords in the mid 1800s, and has come back to restate the Rule somewhat in terms of what was most felicitously put over 400 years ago in Heydon's case . In Principles of Statutory Interpretation by Justice G.P. Singh, 5th Edn., at pages 455 and 456, which reads as follows :- 1. STRICT CONSTRUCTION OF TAXING STATUTES (a) GENERAL PRINCIPLES OF STRICT CONSTRUCTION : A taxing statute is to be strictly construed. The well-established rule in the familiar words of LORD WENSLEYDALE, reaffirmed by LORD HALSBURY and LORD SIMONDS, means : The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words . [Re: Hicklotheweit, (1885) II Ex 452, p. 456 : referred to in Tenant v. Smith, (1892) AC 150 (HL).p.l54 (LORD HALSBURY); St. Aubyn v. A.C. (1951) 2 All ER 473 (HL) p. 485 (LORD SIMONDS); The Member Secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution v. Aandhra Pradesh Rayons Ltd. AIR 1989 SC 611, p.614.] In a classic passage LORD CAIRIS stated the principle thus : 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 to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable, construction , certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute . [ SURESH COLOUR LABS VERSUS UNION OF INDIA- 1993 (1) TMI 139 - MADRAS HIGH COURT ]