Rule of interpretation for the Constitution of India / empowering enactments and other laws in India brief discussion in view of recent judgment of the Supreme Court.

[DEV KUMAR KOTHARI]

Recent Judgment:

M/S. OCL INDIA LTD. VERSUS STATE OF ORISSA & ORS. - 2022 (11) TMI 287 - SUPREME COURT

Judgment followed and rules reiterated:

NAVINCHANDRA MAFATLAL, BOMBAY VERSUS COMMISSIONER OF INCOME-TAX, BOMBAY CITY - 1954 (11) TMI 6 - SUPREME COURT

And various other cases laws referred therein.

Constitutional and other  laws:

Central Government, State Governments and also local governments derive power to impose any tax, duty, cess, fees as per provisions of The Constitution of India.

(Earlier the Government of India Act, 1935 was empowering provision in palce of COI)

According to the power conferred by the COI tax laws are framed and implemented by Governments.

If any tax law is not within scope provided in the COI, then that provision can be held ultra vires or beyond  powers conferred by COI.

Rule is that provisions of COI and various entries in Schedules  therein conferring power are to be interpreted in wider manner and not restricted manner.

Recently in OCL India Ltd Vs State of Orissa (Supreme Court – three judges bench)   while considering provisions relating to Entry tax  this rule has been reiterated and applied while ascertaining meaning and scope of words “local area”  and keeping in mind purpose of insertion of Article 243Q and wider entry in state list,

In this regard paragraph 47 of the judgment is reproduced below with highlights added”

47. It is also a cardinal rule of interpretation that words of a taxing statute should be read in their ordinary, natural, and grammatical meaning. Further, in construing the words in a constitutional enactment that confers legislative power, a liberal construction should be placed upon the words so that they may have effect in their widest amplitude.

About case of  Navin Chandra Mafatlal supra:

This case related to levy of  income-tax on capital gains vide  Section 12-B  that was inserted in the Act by the Indian Income-tax and Excess Profits Tax (Amendment) Act, 1947 (XXII of 1947) which was a Central Act. Section 100 of the Government of India Act, 1935, ( now corresponding is The Constitution of India)  the Central Legislature was empowered to make laws with respect to matters enumerated in List I in the Seventh Schedule to that Act. The only entries in List I on which reliance could be placed to uphold the impugned Act were entries 54 and 55 which were as follows :--

 " 54. Taxes on income other than agricultural income.

55. Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies, and taxes on the capital of companies. "

Although in this case there was no initial challenge by way of petition before the High Court or the  Supreme Court  (like Writ Petitions now)  about competency to levy such tax. Rather tax  assessed and   levied in assessment  was challenged  as not within power, in appeals  till Supreme Court the challenge was as a routine Income tax appeal  or reference.

In this case about interpretation of laws the Supreme Court concluded as follows:

“ The cardinal rule of interpretation, however, is that words should be read in their ordinary, natural and grammatical meaning subject to this rider that in construing words in a constitutional enactment conferring legislative power the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude.

Unquote:

Furthermore, provisions of tax laws are generally to be interpreted in strict manner particularly in relation to charging section. In case of other provisions  sometimes a liberal, wider or narrower interpretation can be  adopted in purpose seeking manner and to serve objects  of any  provision.

Readers can undertake in-depth study on rule of interpretation by searching case laws with search criterion like ultra vires , unconstitutional, ultra vires the Constitution, ultra vires the Act, beyond powers and other similar searches.  

Readers are also requested to share their knowledge on wider and important issue of interpretation.