All the principles of construction of taxing statute were considered by the Supreme Court in Murarilal Mahabir Prasad vs BR Vaid (1976) 37 STC 27 and the rules of construction were laidsuccinctly by Chandrachud, J, thus: "... In that famous passage marked by a happy turn of phase, Rowlatt, J, said `there is no equity about a tax. There is no presumption as to a tax'. There is no equity about a tax in the sense that a provision by which a tax is imposed has to be construed strictly, regardless of the hardship that such a construction may cause either to the treasury or to the taxpayer, If the subject falls squarely within the letter of law, he must be taxed, howsoever inequitable the consequences may appear to the judicial mind. If the revenue seeking to tax cannot bring the subject within the letter of law, the subject is free no matter that such a construction may cause serious prejudice to the revenue. In other words, though what is called equitable construction may be admissible in relation to other statutes or other provisions of a taxing statute, such a construction is not admissible in the interpretation of a charging or a taxing provision of a taxing statute..."However, situationsarise where the language used is ambiguous or the claim of the taxpayer for taxation falls under two provisions. One favouring the tax-payer and the other going against him. In such situations the aforesaid principles laying down the rule that there is no equity about a tax, there is no presumption as to tax has to be given up to an interpretation that works to the benefit of the tax payer. In case of reasonable doubt, the construction most beneficial to the subject is to be adopted (CIT vs Shahzada Nand and Sons (1966) 60 ITR 392 (SC). If there are two interpretations possible, then effect is to be given to the one that favours the citizen and not the one that imposes a burden on him (AIR 1958 SC 341; AIR 1973 SC 2524 and AIR 1970 SC 1173).

The aforesaid principle has been followed in a number of cases by Indian courts in tax references. The latest decision on this issue is from the Delhi high court in the case of CS Mathur vs CBDT (1999) 235 ITR 769 (Del). In the case, the contention of the tax payer wasthat if the case of the petitioner was covered by both sections 80-O and 80RRA of the Income-tax Act, 1961 he would be legitimately entitled to the benefit of that provision of the tax law which enables a larger benefit being earned by him, by placing reliance on the decision of the Supreme Court in Collector of Central Excise vs Indian Petro Chemicals (1997) 1 SCC 38. Agreeing with the contention, the Delhi high court observed:

In CIT vs Indian Engineering and Commercial Corporation P Ltd (1993) 201 ITR 723 (SC), the situation was that section 40(c) applied to directors among others though the provision was applicable to companies only. Section 40A(5) was applicable to the employees whether of companies or others. The directors being employees of the company were covered by section 40A(5) also which confer a higher benefit. As both the provisions were attracted the judges held that in the case of directors who were also employees the higher of the two ceilings had to be applied.

In Collector of CentralExcise vs Indian Petro Chemicals (1997) 1 SCC 318, there were two exemption notifications. The judges approved the view of the high court giving the assessee the benefit of that notification which was more beneficial to it. The court thus decided that if an assessee in the same set of facts and circumstances, is entitled to deduction from remuneration received at 50 per cent under section 80-O but at the rate of 75 per cent under section 80RRA, then the assessee would be entitled to the benefit of computation of deduction under the latter provision which is the higher of the two.

However, it has been clarified by the Bombay high court in CIT vs Mirza Attaullah Baid (1993) 202 ITS 291 (Bom) that this principle applies only when there is reasonable and genuine doubt in regard to the interpretation of a particular provision. It has no application to a case where the provision is clear and the law is well-settled. This principle cannot be stretched too far. It cannot be used to misinterpret a statutoryprovision which is otherwise clear and brooks no doubt about its meaning or interpretation just to give benefit to the taxpayer which the statute did not intend to give.

Similar view has been expressed by this court in the case of MH Daryani vs CIT (1993) 202 ITR 703 (Bom). In this decision the court has said:"...the principle of beneficial interpretation or interpretation in favour of the assessee has application only in a case where, on a proper interpretation, the court in doubt about the true scope and ambit of the provision or finds that two equally reasonable interpretations - one in favour of the assessee and the other in favour of the revenue - are possible. It is only in such cases that the question of accepting one of the two reasonably that the question of accepting one of the two reasonably possible interpretations would arise. The principle of beneficial interpretation has no application in a case where the words of a statute are plain, precise and unambiguous. In that case, the courts have nooption but to give effect to it."

However, the court's have taken different view in regard to provisions concerning appeals and have been found generally inclined to construe these liberally. In Gopi Lal vs CIT (1967) 65 ITR 477, the Punjab high court at Delhi held that the statute pertaining to a right of appeal should be given a liberal construction since it is remedial and the right of appeal should not be restricted or denied unless such a construction is unavoidable. The Supreme Court in CIT vs Ashoka Engineering Co (1992) 194 ITR 645, held that though the right of appeal is spelt from the words of the statute, yet it is an equally well established proposition of law that the provision conferring a right of appeal should be read in a reasonable, practical and liberal manner.

The author is former director of CBDT