While strict rules of construction apply in interpreting the tax law, courts have very often provided a liberal and humane touch in order to make the law taxpayer-friendly. The cardinal principle of interpretation of fiscal laws is that they should be construed strictly and so long as the provision is free from ambiguity, there would be no need to draw an analogy. Unless the language of the provision is clear, tax liability cannot be fastened on a person. Conversely, if the subject comes within the letter of the provision, then he must be taxed, however great the hardship may appear to the mind of the court.
Equitable construction may be resorted to where the strict literal construction does not lead to the result intended. This principle of strict interpretation is not applicable while construing provisions like machinery provisions. 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 the purpose should be borne in mind. Taxing statutes cannot be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them.
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 is used in a taxing statute or a notification issued thereunder, it should be understood in its commercial sense.
It is an equally well-settled rule that a construction which will render a provision of an enactment wholly or partially meaningless or futile is not to be adopted by the court.
An interpretation that will result in an absurd situation cannot be accepted. The court should endeavour to interpret the provisions of a statute in a manner that it will achieve the object of provision, avoid mischief, advance the cause of justice, provide the remedy intended by the statute, make the law workable and enforceable instead of reducing it to a redundant or dead letter and best harmonise with and effectuate the object of the legislation. Words indicative of any exclusion or condition, in the absence of any intention to the contrary, have to be given full effect.
Though ordinarily no words can be added or read into an Act unless it is absolutely necessary to do so, departure from this rule is legitimate in such cases where literal construction may result in depriving certain words of the intended meaning or to avoid any part of the statute becoming meaningless or otiose. Thus, where a literal construction would defeat the obvious intention of the legislation and produce a wholly unreasonable or manifestly unjust result, the court must follow the rule of reasonable construction or modify the language of the statute or even ?do some violence to the words? to achieve that obvious intention and produce a rational construction.
Further, if two interpretations are possible, the interpretation that upholds the constitutionality or advances the object of the enactment should be favoured. Interpretation cannot be unreasonable or unjust, and a construction that accords with reason and justice must be preferred to one that would completely defeat the intention of the legislature without advancing the object of the provision. An intention to produce an unreasonable result is not to be imputed to a statute if there is some other construction available.
In Narang Overseas P Ltd v Income Tax Appellate Tribunal (295 ITR 22), the Bombay High Court considered the principle of interpretation in the light of the fact that the Finance Act, 2007 substituted section 254(2-A) of the Income-Tax Act, 1961. The amendment of 2007 conferred the power to extend the period of interim relief to 365 days. Parliament clearly intended that such appeals should be disposed of at the earliest. If that be the object, the mischief which was sought to be avoided was the non-disposal of the appeal during the period the interim relief was in operation.
By extending the period, Parliament took note of delay. The object was not to defeat the vested right of appeal in an assessee whose appeal could not be disposed of, not on account of any omission or failure on his part, but the failure of the tribunal or acts of the Revenue resulting in non-disposal of the appeal within the extended period as provided.
The power to grant stay or interim relief has to be read as co-extensive with the power to grant final relief, the object being that in the absence of the power to grant interim relief the final relief itself may be defeated.
It would not be possible, on the one hand, to hold that there is a vested right of appeal and, on the other hand, to hold that there is no power to continue the grant of interim relief for no fault of the assessee by divesting the incidental power of the tribunal to continue the interim relief. Such a reading would result in this an exercise being rendered unreasonable and violative of article 14 of the constitution. Courts must, therefore, construe and or give a construction consistent with the constitutional mandate and principle to avoid a provision being rendered unconstitutional.
The power to grant stay or interim relief being inherent or incidental is not defeated by the provisos to section 254(2-A). The third proviso to section 254 (2-A) has to be read as a limitation on the power of the tribunal to continue interim relief in a case where the hearing of the appeal has been delayed for acts attributable to the assessee.
The power of the tribunal, therefore, to continue interim relief is not overridden by the language of the third proviso to section 254(2-A). There would be power in the tribunal to extend the period of stay on good cause being shown and on the tribunal being satisfied that the matter could not be heard and disposed of for reasons not attributable to the assessee.
The aforesaid decision highlights the important principle that the interpretation of the law must be considered having regard to its purpose and intent.
This dimension of purposive construction is gaining ground among judicial authorities.
The author is advocate, Supreme Court