Budget 2024 Updates

FM proposes to lessen tedium of TDS; reduces rates in many casesFM overhauls capital gains regime; to come into play from todayFM hikes exemption limit for long-term capital gain to Rs 1.25 lakh + hikes tax rate to 12.5% on specified financial assetsTourism: Temple corridors to be developed in BiharCGST - Finance Bill proposes to amend Sec 9 to take ENA out of purview of GST + inserts Sec 11A to regularise non-levy of tax on general practice in tradeCGST - Sub-sections to be inserted in Act to relax time-limit to avail ITC u/s 16(4) + New Sec 74A proposed to provide for common time limit for demand notices in fraud cases3.4% of GDP allocated as Capital expenditure to support infra sectorCGST - Proviso to be inserted in Sec 30(2) to provide for enabling conditions for revocation of registration + Amendment in Sec 39 to mandate return filing by TDS deductors even if there is no deduction in a particular monthIGST - Amendment proposed to prohibit refund of unutilised ITC on zero-rated supplyIncome tax - Finance bill revamps re-assessment regime againCustoms - Finance Bill proposes to amend Sec 28DA for acceptance of different types of proof of origin under FTAsFM hikes standard deduction to Rs 75K for new ITR regime + revises tax rates for all income slabs + Rs 7000 Cr revenue foregoneIncome tax - Search & Seizure cases - Block assessment is backBudget withdraws 2% equalisation levyFM reduces corporate tax rate for foreign companies to 35%FM proposes vivad se vishwas scheme + hikes monetary limits for filing appealsFM proposes 20% capital gains tax on short-term assets + listed financial assets held for more than one year to be classified as long-termGovt scraps TDS on Mutual Funds + decriminalises delay in depositing TDS + rationalisation of compounding of offences + revamps reassessment periodBudget proposes comprehensive review of I-T Act, 1961 + simplifies provisions for charities and TDSFM reduces customs duty on gold and silver to 6% + Nil BCD on nickel cathodeBudget proposes to reduce BCD on mobile phone and chargers to 15% + exempts 25 minerals from customs dutyFM exempts cancer medicines from Customs duty + amends BCD for various machinesFM proposes Rs 48 lakh expenditure outlay; 4.9% fiscal deficitFM announces Rs 1 lakh crore fund for developing space economyPromotion of Tourism - Vishnupad temple and Bodh Gaya temple corridors to be supportedFM announces over Rs 11 lakh crore capital expenditure in current fiscalGovt to invest in small Nuclear energy plants in partnership with private playersCentre to ask States to lower stamp duty for women purchasers of housesIBC - More Benches of NCLT to be set up to speed up recoveryFM spikes limit of Mudra loan to Rs 20 lakhsBudget offers financial aid to labour-intensive MSMEs in manufacturing sectorGovt announces 3 crore additional houses under PM SchemeGovt to secure Rs 15K loan for AP from multilateral agenciesGovt to frame new policy for all-round development of Bihar, Jharkhand and OdishaGovt to give one-month salary to all new recruits in formal sector through EPFOGovt to promote vegetable clusters closer to urban settlementsGovt to focus on productivity of agriculture with climate-resilient seedsFM allocates Rs 2 lakh outlay for PM's five schemes for job creation and farmersFM Nirmala Sitharaman presents 7th Union Budget in ParliamentBudget 2024: FM arrives at Parliament; Speech to begin at 11AMEconomic Survey 2023-24 - from GST PerspectiveUkrainian FM goes on tour to ChinaI-T- Additions framed u/s 69A are untenable where affidavits submitted by assessee's parents to explain source of cash deposits, were discarded by AO without consideration : ITATSurvey acknowledges productivity loss due to mental health disordersI-T- Short term capital gains returned by the assessee in terms of provisions of section 50 of the Act on assets held for a period of more than 36 months be treated as long term capital gains: ITATExpenditure on social services up from 6.7% to 7.8% of GDP: SurveyI-T-Additions framed u/s 68 are upheld where assessee is unable to prove genuineness of transaction involving purchase and sale of penny stock: ITATTrade deficit contracts to USD 78 bn from USD 126 bn in 2023I-T-Re-assessment is invalidated when there is no failure on part of assessee to make full and true disclosure of facts necessary for assessment: ITATCorporate profitability has peaked to 15-yr-old high between 2020-2023: SurveyI-T- When cash generated out of sales has been credited in the books of accounts, the provisions of Sec.69A could not be invoked: ITATBudget 2024: More relief for senior citizens & individual taxpayers on card; tweaking of capital gains tax likely; steady capital expenditure to stayI-T- If any amount invested is purely a strategic investment & for purpose of commercial expediency, then AO cannot hold such investments to be for non-business purpose: ITATGoogle backpedals on plan to scrap cookies from ChromeCus - For a HNWI individual, an expensive watch of 'Rolex' make would be his personal effect but same may not be the case if the person is of mere means - Pendant studded with diamonds not liable for confiscation: HCGovt amends Recruitment Rules for Debts Recovery TribunalGST - Even if no date, time or place of hearing is indicated in the notice issued, it was the duty of assessee to file his reply to SCN, which was admittedly received - Plea regarding violation of principles of natural justice cannot be countenanced: HCAbhinav Bindra conferred with Olympic OrderGST - Mismatch between value of e-way bills generated on portal and returns filed in Form GSTR-3B - Petitioner did not provide a comprehensive explanation - To remit sum of Rs.3.50 crores within six weeks - Matter remanded: HCHackers mercilessly hack Bangladesh PM’s website along with police portalsGST - Rule 30 of Rules, 2017 - Assessing officer ought to have issued summons and obtained clarification rather than estimating the outward supply value at 110% of purchase value - Order set aside and matter remanded subject to remit of 10% disputed tax demand: HCUS law-makers call for resignation of Secret Service chief in Trump assassination caseGST - Net ITC shown incorrectly - An inadvertent error was committed and such error was rectified, albeit irregularly, however, sum recovered from petitioner's bank account - Order set aside and matter remanded: HCKarnataka IT Industries piling pressure on govt to extend working hoursGST - Since notification is declared unconstitutional, Amount of IGST paid pursuant to Entry No. 10 of Notification No. 10 of 2017 is to be refunded along with statutory interest: HCStudy says earth’s water depleting fastFDI inflows slide to USD 26.5 bn in 2024 from USD 42 bn in 2023: Economic Survey
 
Principles of Interpretation of Taxing Statutes - Part II

JUNE 10, 2024

By Dr Sanjay Kalra, LLM., Ph.D.(GST Law), Advocate, KPS Legal

THIS Part-II explains the Principles of Interpretation under category of Secondary rules of Interpretation, International aids in Interpretation, External aids in interpretation, and other Rules of Interpretation including Judicial Principles. In Part-I of the series we had discussed the Primary Rules of Interpretation of Taxing Statutes.

(B) Secondary Rules of Interpretation

The conventions & concepts used by the Courts for a very long time are termed as secondary rules of interpretation. The court looks at the language of the statute, the context of the statute, the legislative history of the statute, the purpose of the statute and the consequences of a particular interpretation of the statute. This is commonly known as 'the Golden Rule of Interpretation'.

(i) Rule of Noscitur a Sociis : The 'Noscitur a Sociis' in Latin phrase means that "it is known by its associates". This rule suggests that a word is given meaning by its context or association with surrounding words and phrases i.e., the meaning of a word is to be judged by the company it keeps. The words in a statute are construed with reference to the words found in immediate connection with them. To put it differently, if two or more words which are capable of analogous (similar or parallel) meaning, are grouped together, they should be understood in cognate sense i.e., they are interpreted to take their color from each other and are given a similar or related meaning.

Hon'ble Supreme Court in the case of Commissioner of Trade Tax U.P v Kartos International [2011-TIOL-39-SC-CT] observed as under:

"Nositur a Sociis means that when two words are capable of being analogously defined, then they take colour from each other. The term ejusdem generis is a facet (small part) of Nositur a Sociis. The aforesaid principle means that the general words following certain specific words would take colour from the specific words."

The principle of 'Noscitur a sociis' is closely related to the rule of 'Ejusdem generis', with the former being broader in scope than the latter. Noscitur a sociis involves interpreting a word based on its context, while ejusdem generis focuses on interpreting a general term in a list based on specific accompanying terms. Rule of noscitur a sociis does not apply where a statute defines a term, which applied only to a particular Section or part of a statute, such definition cannot extend to other Sections/parts. This cannot be applied when the words are used in different context, for example, the word 'plant' shall be given a different meaning when construing the term 'plant & machinery' and the term 'plant & trees.'

Hon'ble Apex Court in the case of State of Bombay v Hospital Mazdoor Sabha [AIR 1960 SC 610] as well as in the case of Pardeep Aggarbatti v State of Punjab reported [(1997) 107 STC 561 (SC)] held that noscitur a sociis is merely a rule of construction & it cannot prevail in cases where it is clear that the wider words have been deliberately used in order to make the scope of the defined word correspondingly wider. It is only where the intention of the legislature in associating wider words with words of narrower significance is doubtful or otherwise not clear, then this rule of construction can be usefully applied. It can also be applied where the meaning of the words of wider import is doubtful; but, where the object of the legislature in using the wider words is clear and free of ambiguity the rule of construction in question cannot be pressed into service.

(ii) Rule of Expressio Unius Est Exclusio Alerius: This rule of interpretation means that "expression of one thing is the exclusion of another". This rule clarifies that where things are specifically included in list and others have been excluded it means that all others have been excluded. As per this maxim if two or more things belonging to a particular class are mentioned, other members of that class are silently excluded. Sometimes a list in a statute is illustrative, not exclusionary. This is usually indicated by a word such as "includes" or "such as". Thus a statute granting certain rights to "police, fire, and sanitation employees" would be interpreted to exclude other public employees not enumerated from the legislation. This is based on presumed legislative intent and where for some reason this intent cannot be reasonably inferred the Court is free to draw a different conclusion. The general meaning of "expression of one thing is the exclusion of another" is also known as the negative implication rule. This rule assumes that the legislature intentionally specified one set of criteria as opposed to the other. Therefore, if the issue to be decided addresses an item not specifically named in the statute, it must be assumed the statute does not apply.

(iii) Contemporanea Expositio: It means interpretation of a Statute by reference to the exposition it has received from contemporary authority. The best way to interpret a law is to read it as it would have been read when made. Where the language is ambiguous, the Court shall pay due regard to the interpretation which the language of the Act has received over a long period of time. Besides, much weight is given to the interpretation adopted by the Department whose duty is to construe & implement the said Act. Accordingly, Circulars, Clarifications &Notifications issued by administrative authorities like CBDT, CBE&C should be given due consideration in interpretation of a statute. This Rule cannot be applied for interpretation of a new statute.

(C) Intrinsic aids in Interpretation of Statutes

Intrinsic/ internal aids to interpretation refer to those elements which are present in the concerned Act itself.

(i) Title: It is a part of the Act & describes it. It is used for ascertaining the scope of the Act & interpreting it. It is used to resolve any ambiguity, but it cannot modify the plain language of the Act. For example, the Central Goods and Services Tax Act, 2017

(ii) Preamble: If the wording of a statute is ambiguous, the preamble can be referred to ascertain the scope & object of Act. The main objective and purpose of the Act are found in the Preamble of the statute. It contains the recitals showing the reason for enactment of the Act.

Example: The preamble of the Central Goods and Service Tax Act, 2017 reads as : "An Act to make a provision for levy and collection of tax on intra-State supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto."

Preamble of a statute is a part of the enactment and can legitimately be used for construing it. However, the Preamble does not override the plain provision of the Act but if the wording of the statute gives rise to doubts as to its proper construction, e.g. where the words or phrase has more than one meaning and a doubt arises as to which of the two meanings are intended in the Act, the Preamble can and ought to be referred to in order to arrive at the proper construction.

Preamble to an Act discloses the primary intention of the legislature but can only be brought in as an aid to construction if the language of the statute is not clear. However, it cannot override the provisions of the enactment. The preamble expresses the scope & object of the Act more comprehensively than the long title. It is a part of the Act. It states the reasons for creation of the Act and evil it wants to suppress

(iii) Definitional sections/clauses: Justice G.P. Singh in the 'Principles of Statutory Interpretation' (12th edition, 2010) says that the object of a definition of a term is to avoid the necessity of frequent repetitions in describing all the subject matter to which that word or expression so defined is intended to apply. Statutes contain definitions of certain words and expressions used in an Act. Definition gives the interpretation of certain words or expressions, they may include or exclude something, may be of restrictive extensive, ordinary or special kind.

When a word or expression has been defined prima facie, such definition governs that word in the body of an Act everywhere, unless specially excluded. A definition is not to be read in isolation, it must be read in context of its use. Where definition itself is ambiguous, it has to be interpreted in the light of other provisions of the Act.

If exhaustive definition is given for a term, the meaning of such term must be restricted to the meaning given in the definition. Use of word 'means' & 'means & include" imply that a definition is exhaustive. If inclusive definition is given for a term, an extended meaning is given to such term. Such word can also include something else in addition to the meaning assigned to it in the definitional clause. In addition, use of words 'includes', 'deemed to include' and 'to apply and to include' imply that a definition is inclusive. Example: In terms of Section 2(34) of the CGST Act "conveyance" includes vessel, an aircraft and a vehicle

Effect of statutory definition: Where the meaning of a word or expression is statutorily given, only that meaning must be given. The Court cannot ignore the statutory definition & make wide speculations about the meaning of the expression. However, if there is anything repugnant in the context, a different meaning may be adopted considering the object of the Act & ordinary meaning of such word. Further, a word defined in the Act bears the same meaning throughout the Act, unless by doing so any repugnancy is created

(iv) Illustrations: These are examples appended to a section. These are inserted to clarify the scope & object of the Section. These furnish indications of the presumed intention of the legislature. These follow the text of the Section and do not form part of the Section. However, these do form part of the statute

(v) Proviso: A clause which is an exception to the main provision is known as proviso. A proviso is added to qualify or create an exception to what has already been stated in the main body of the section. It does not state a general rule. Its scope is restricted to what has already been stated in the main body of the section. The normal function of a proviso is to except something out of the enactment or to qualify something stated in the enactment which would be within its purview if the proviso were not there.

(vi) Explanation: It is generally a clarification of the legislative intent. It does not make a substantive provision. It is so construed as to remove any ambiguity in the main Section. It is used to clarify & explain the meaning of the Section/legislative intent. It makes the main Section more meaningful & purposeful. However, it cannot take away a statutory right given under the Act

(vii) Non-Obstante Clause: Non-obstante clause usually starts with the word 'Notwithstanding anything contained in…….'. Non obstante clause is employed to give overriding effect to certain provisions over some contrary provisions that may be found in the same enactment or some other enactments, which is to say to avoid the operations and effect of all contrary provisions.

(D) External aids in Interpretation of Statutes

"External Aids means consideration of the situation behind enactment of an Act. These can be used for limited purpose of finding out the intention of the legislature and that too if the words used in the statute are not clear."

History or process of enactment of the subject Act may be looked into. Objects for such enactment is relevant. Further, a statute must be interpreted to include circumstances/situations which were unknown / did not exist at the time of enactment of the statute. Changes in social conditions and technology should be given due consideration. For Example - 'Handwriting' under Indian Evidence Act also implies 'typewriting' and 'email'. Judicial pronouncements in various other cases may also be referred.

(E) Other rules of interpretation of statutes

(i) Rules or Notifications: Any rule or notification cannot override provisions of the Act: Rules cannot be framed to bring into existence substantive rights or obligations or disabilities not contemplated by the provisions of the Act itself.

(ii) Doctrine of merger: Doctrine of merger states that there cannot be more than one decree or operative orders governing the same subject-matter at a given point of time. When a decree or order passed by inferior court, tribunal or authority was subjected to a remedy available under the law before a superior forum then, though the decree or order under challenge continues to be effective and binding, nevertheless its finality is put in jeopardy. Once the superior court has disposed of the lis before it either way - whether the decree or order under appeal is set aside or modified or simply confirmed, it is the decree or order of the superior court, tribunal or authority which is the final, binding and operative decree or order wherein merges the decree or order passed by the court, tribunal or the authority below.

(iii) Doctrine of Prospective Ruling: This doctrine implies that a law to be made applicable prospectively so not to affect the earlier transactions. This is general proposition of law. Hon'ble Supreme Court in the case of Union of India & Ors. v M/s Martin Lottery Agencies Ltd. [2009-TIOL-60-SC-ST] held that when a new type of tax is introduced or a new concept of tax is introduced to widen the net, it, in our opinion, should not be construed to have a retrospective operation on the premise that it is clarificatory or declaratory in nature.

(iv) Legislative intention: At times, while interpreting the statutes, the legislative intention is also required to be taken into consideration.

A Constitution Bench of Hon'ble the Supreme Court in Mathuram Agarwal v State of Madhya Pradesh [1999 (10) TMI 125] held as under-:

"The intention of the legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language…Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter."

(v) Rule of Strict & Liberal Construction: Rule of strict & liberal construction of statutes applied for interpretation of penal and taxing statutes. As per the rule of strict & liberal construction, a statute enacting an offence or imposing a penalty should be strictly construed. While constructing a provision in penal statute if there appears to be a reasonable doubt or ambiguity, it shall be resolved in favour of person who would be liable to penalty. Statutes imposing taxes or monetary burdens are to be strictly construed. The logic behind this principle is that imposition of taxes is also a kind of imposition of penalty which can be imposed if the language of the statute so says.

[The views expressed are strictly personal.]

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)

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