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TMI Blog2005 (6) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is dismissed. - - - - - Dated:- 1-6-2005 - Judge(s) : J. B. KOSHY., K. T. SANKARAN. JUDGMENT The judgment of the court was delivered by J.B. Koshy J.- While challenging the order of the Income-tax Appellate Tribunal for the assessment year 1996-97, the appellant-assessee filed this appeal with the following substantial questions of law: "(i) Whether the provisions of the Double Taxation Avoidance Agreement between India and Malta are applicable to income arising in India within the previous year relevant to the assessment year 1996-97? (ii) Whether on the facts and circumstances of the case, the Tribunal went wrong in denying the benefits of the DTAA between India and Malta to the appellant?" Before answering the questions and deciding the appeal, we may refer to the short facts of the case. The assessee is a non-resident company engaged in the business of shipping in international traffic and registered in the Republic of Malta. The appellant, though paid income-tax due in India, filed its return of income on March 25, 1997, for the assessment year 1996-97 claiming relief available under the Double Taxation Avoidance Agreement (in short "the DTAA" or "the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contention of the assessee is that since the agreement came into force in February, 1995, the benefit should be given from the next fiscal year, that is, the year starting from April 1, 1995 to March 31, 1996. So, the assessee claimed the benefit for the assessment year 1996-97. According to the Revenue, it will start only in the fiscal year starting from April in the next calendar year, that is, from 1996-97. So, the assessee can claim the benefit only from the assessment year 1997-98. The first contention of the assessee is that even though the clauses are not happily worded, two views are possible, in such cases, a view in favour of the assessee should be taken especially in view of section 90(2) of the Act wherein it is stated that the provisions shall apply to the extent it is more beneficial to the assessee. Section 90(2) of the Act reads as follows: "90. Agreement with foreign countries.-... (2) Where the Central Government has entered into an agreement with the Government of any country outside India under sub-section (1) for granting relief of tax, or, as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neral (No. 2) [1951] 2 All ER 473 (HL) at page 485, reiterated the following well established principle laid two centuries ago: "... 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." No tax in terms of article 265 of the Constitution of India can be imposed except by the authority of law. But, if it is taxable an equitable construction cannot be pleaded as one has to simply adhere to the words of the statute as held by the House of Lords in Ransom (Inspector of Taxes) v. Higgs [1974] 3 All ER 949 at page 970 The same principle was adopted in India as can be seen from the decision of the apex court in A.V. Fernandez v. State of Kerala [1957] 8 STC 561; AIR 1957 SC 657 at page 661. In Cape Brandy Syndicate v. IRC [1921] 1 KB 64 at page 71, it is stated by Rowlatt J. as follows: "... in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." The ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interpretation rules need be looked into only if the wording is ambiguous or reasonably capable of two meanings. The next contention is one based on the theory of "contemporanea expositio". It refers to interpreting a statute or any other document by referring to the exposition it has received from contemporary authority "Optima est legum interpres consuetude Contemporanea expositio est optima et fortissima in lege." This principle was used originally to explain ancient statutes. In Maxwell on the Interpretation of Statutes, Twelfth edition, at page 264, it is stated as follows: "It is obvious that the language of a statute must be understood in the sense in which it was understood when it was passed, and those who lived at or near the time when it was passed may reasonably be supposed to be better acquainted than their descendants with the circumstances to which it had relation, as well as with the sense then attached to legislative expressions. Moreover, the long acquiescence of the Legislature in the interpretation put upon its enactment by notorious practice may, perhaps, be regarded as some sanction and approval of it." In Craves on Statute Law, Seventh edition, at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troduced by giving certain expressions a particular meaning and then an attempt can be made to emerge out of semantic confusion and obscurity by having resort to the presumed intention of the Legislature to give effect to international obligations." In this case, no clarification was issued by the CBDT under section 119 of the Act. In fact, the Chief Commissioner of Income-tax by letter dated October 13, 1997, informed the assessee as directed by the CBDT that the provisions of the agreement are operative in India with effect from the fiscal year beginning on April 1, 1996, i.e., for the assessment year 1997-98 and onwards (annexure D to the statement dated May 30, 2005, filed by the respondent) and instructions received from the Board were also given to the assessee. The clarification given by the Assessing Officer and the Chief Commissioner is not contemporaneous with date of the agreement; but, issued much later and such information and clarification are not binding on the Revenue. In fact, the assessee did not enter into contract based on such wrong clarification. The assessee paid the tax as if double taxation benefit was not available to it. Therefore, the principle of prom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construed accordingly unless that leads to some ambiguity. The above is approved by the apex court in Jugalkishore Saraf v. Raw Cotton Co. Ltd., AIR 1955 SC 376, at page 381, and Harbhajan Singh v. Press Council of India, AIR 2002 SC 1351 at page 1354. In Kanai Lal Sur v. Paramnidhi Sadhukhan, AIR 1957 SC 907, Gajendragadkar J. observed: "The words used in the material provisions of the statute must be interpreted in their plain grammatical meaning and it is only when such words are capable of two constructions that the question of giving effect to the policy or object of the Act can legitimately arise." A Constitution Bench of the apex court in Union of India v. Hansoli Devi, AIR 2002 SC 3240 held as follows: "It is a cardinal principle of construction of statute that when the language of the statue is plain and unambiguous, then the court must give effect to the words used in the statute and it would not be open to the courts to adopt a hypothetical construction on the ground that such construction is more consistent with the alleged object and policy of the Act." After a careful and close reading of article 29(2) of the treaty in question, we are of the view that it giv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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