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    Interpretation of Tax Statutes PPT

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    Shyam
    The document discusses the principles of taxation and interpretation of tax statutes. It provides 4 key principles of taxation laid down by Adam Smith including that taxes should be proportionate to taxpayer abilities and certain rather than arbitrary. It notes that even enlightened tax systems violate these principles to some degree based on circumstances. The document outlines that tax statutes must be authorized by law and are subject to strict interpretation by courts with any ambiguities resolved in favor of the taxpayer. Strict interpretation means applying the plain meaning of words without inferences around legislative intent. Courts cannot extend tax liability beyond what is clearly written in the statute.

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    Interpretation of Tax Statutes PPT

    Uploaded by

    Shyam
    85 views12 pages
    The document discusses the principles of taxation and interpretation of tax statutes. It provides 4 key principles of taxation laid down by Adam Smith including that taxes should be proportionate to taxpayer abilities and certain rather than arbitrary. It notes that even enlightened tax systems violate these principles to some degree based on circumstances. The document outlines that tax statutes must be authorized by law and are subject to strict interpretation by courts with any ambiguities resolved in favor of the taxpayer. Strict interpretation means applying the plain meaning of words without inferences around legislative intent. Courts cannot extend tax liability beyond what is clearly written in the statute.

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    The document discusses the principles of taxation and interpretation of tax statutes. It provides 4 key principles of taxation laid down by Adam Smith including that taxes should be proportionate to taxpayer abilities and certain rather than arbitrary. It notes that even enlightened tax systems violate these principles to some degree based on circumstances. The document outlines that tax statutes must be authorized by law and are subject to strict interpretation by courts with any ambiguities resolved in favor of the taxpayer. Strict interpretation means applying the plain meaning of words without inferences around legislative intent. Courts cannot extend tax liability beyond what is clearly written in the statute.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    85 views12 pages

    Interpretation of Tax Statutes PPT

    Uploaded by

    Shyam
    The document discusses the principles of taxation and interpretation of tax statutes. It provides 4 key principles of taxation laid down by Adam Smith including that taxes should be proportionate to taxpayer abilities and certain rather than arbitrary. It notes that even enlightened tax systems violate these principles to some degree based on circumstances. The document outlines that tax statutes must be authorized by law and are subject to strict interpretation by courts with any ambiguities resolved in favor of the taxpayer. Strict interpretation means applying the plain meaning of words without inferences around legislative intent. Courts cannot extend tax liability beyond what is clearly written in the statute.

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    © All Rights Reserved
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    of 12

    Strict Interpretation of Tax

    Statutes

    By – Raghav Goyal (1927)


    Rishabh Chopra(1934)
    4 Principles of Taxation

    Adam Smith has laid down four principles of


    taxation, which have been generally accepted
    by subsequent political economists. These are :
    • The subjects of every State ought to contribute
    to the support of the government as nearly as
    possible in proportion to their respective
    abilities.
    • The tax ought to be certain, not arbitrary.
    Principles of Taxation

    • Every tax ought to be levied at the time or in


    the manner most convenient for the
    contributor.
    • Every tax ought to be so contrived as both to
    take out and keep out of the pockets of the
    people as little as possible over and above
    what it brings into the public treasury of the
    State.
    Principles of Taxation
    • Even in countries where the most enlightened
    principles of finance are followed, it will generally
    be found that all these maxims are violated in some
    way or the other.
    • Special circumstances have to be taken into account
    with regard to every tax that can be proposed, and
    the policy of imposing one tax instead of another
    depends upon the balance of advantages and
    disadvantages, and often to a greater or less extent
    on considerations of convenience and sentiment.
    Constitutional Conspectus of Taxation

    • Article. 265 provides “No tax shall be levied or collected


    except by authority of law.”
    • Article. 366(28) defines Taxation and Tax reads as:
    “Taxation include the imposition of any tax or impost
    whether general or local or special and ‘tax’ shall be
    construed accordingly.”
    CCE v. Kisan Sahkari Chinni Mills, AIR 2001 SC 3379
    It has been held that any compulsory exaction of money by
    Government amounts to imposition of tax which is not
    permissible except by or under the authority of a statutory
    provision.
    Need and Importance of
    Interpretation
    As the social, economic and political conditions of
    the society keeps on changing, interpretations of the
    laws also require change. Legislature is not
    equipped to meet such changing conditions and
    legislature cannot anticipate every situation which
    might occurred in real life. Thus, it is Courts which
    play the role and interpret the laws to adapt as per
    needs of the society.
    Rule of Strict Interpretation
    Strict rule of interpretation is one of the principles used to
    interpret fiscal and penal statutes. According to this rule, plain,
    clear and direct meaning is given to words which are used in
    common parlance by the general public to which such law is
    applicable. There can be no presumption by court with respect
    to particular meaning. Court cannot give particular meaning to
    a word which is not clear by making a presumption that
    particular meaning is the intention of the legislature. Court
    cannot under the guise of possible or likely intention of the
    legislature, give meaning to the words which are not clear and
    where contextual meaning cannot be made out.
    Reasons for Applicability of Strict Rule on
    Taxation Statute
    • Taxes place a monetary burden on the taxpayer and thus to some extent it is
    considered as penalty on the taxpayer which is imposed under the authority of
    law. Thus, unless the imposition of tax is clearly backed by law, no tax can be
    imposed.
    • Taxation statute is a fiscal statute which is enacted on the basis of trial and error
    method or on experimentation basis. It is not practicable for legislature to
    anticipate all the possible situations or conditions which may arose after the
    law is enacted. As tax results in pecuniary burden so the benefit of doubt is
    given to assessee in case of any contradictions.
    • Strict rule is applicable to taxation statutes, so courts are bound to give clear
    and plain meaning to the words without delving into the consequences it can
    result in. There is no presumption of tax or intendment of the legislature to
    impose tax unless clearly and specifically provided. Thus, it is the legislature or
    subordinate authority to come forward and bring amendments and clarifications
    to rectify the loopholes.
    Strict Rule of Interpretation applicable to Taxation Statute

    • Taxation statute is a fiscal statute which imposes the


    pecuniary burden on the taxpayer. So such statutes are
    construed strictly. Plain, clear and direct grammatical
    meaning is given. Where there are two possible outcomes
    then that interpretation is given which is in favour of
    assessee.
    • Nothing can be inferred to substantiate the intention of the
    legislature or purpose for which the law was made. Once the
    revenue shows that particular subject is covered by law then
    tax is applicable for all those subjects. But if it fails to proof
    then no tax can be imposed by extending the meaning.
    • Principal of equity has no role to play in case of taxation law. Thus, whatever is
    written must be strictly followed without considering its justness. It is duty of the
    legislature to rectify it through amendments.
    • In a Taxation statute, if a word has a clear meaning, then in that case, the court is
    bound to follow the clear meaning even if such meaning results in absurd results.
    It is in legislature’s domain to rectify such absurdity. In case of taxation statutes,
    Courts cannot extend the scope of law by giving meanings to word which are
    unclear or uncertain.
    • The words used in the taxation law should be given meaning which is understood
    by general public in daily routine and one which is popular. Such meaning should
    be given to words which people to whom law is applicable are familiar with.
    • In case of contradiction whereby two meaning are coming out then one which is
    reasonable, which will assist in fulfilling the intention of the legislature and
    solving the purpose for which law was enacted is preferred. They are to be
    interpreted in such a way so as to enforce and apply charging provisions smoothly.
    Case Analysis

    Achal Industries v. State of Karnataka


    [(2019) 7 Supreme Court Cases 703]
    Thank You

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