CASE COMMENT
The New Piecegoods Bazar Co. Ltd., Bombay Vs. The
Commissioner of Income Tax, Bombay
Equivalent
citations: 1950 AIR 165, 1950 SCR 553
Author:
M C Mahajan
Bench:
Mahajan, Mehr Chand
Court-
Supreme Court of India
PETITIONER:..................................THE
NEW PIECEGOODS BAZAR CO., LTD.,BOMBAY
V.
RESPONDENT:................................THE
COMMISSIONER OF INCOME-TAX,BOMBAY
DATE OF
JUDGMENT:26/05/1950
BENCH:
MAHAJAN, MEHR
CHAND
BENCH:
MAHAJAN, MEHR
CHAND
FAZAL ALI, SAIYID
SASTRI, M.
PATANJALI
MUKHERJEA, B.K.
CITATION:
1950 AIR 165
1950 SCR 553
Introduction
Even though statutes are normally drafted by legal
experts who are specialists in the particulararea of law in which the
legislation is meant to be a part, there may be some ambiguity in thestatute
despite their best efforts. The Court will next determine how to interpret such
anambiguous phrase or statement. The process is referred to as “legislative
interpretation”. Taxrules are very complicated, perplexing, and beyond the
understanding of the average taxpayer.The terms and idioms used are not easy to
understand. Subsections, clauses, and sub-clauses arecommon in many parts.
There are a lot of deeming provisions in this bill. The meaning of astatement
is expanded by the explanation and decreased by the proviso, with many provisos
andexplanations sometimes having various meanings. Various rules are used
during theinterpretation of tax law. One of them is the concept of strict
construction. The researcherexamined the case of New Piece Goods Bazar Co.
Ltd., Bombay vs. The Commissioner of IncomeTax, Bombay to determine the norms
of interpretation, as well as the following instances inwhich the subject of
New Piece Goods Bazar was challenged. He further clarified the concept
ofinterpretation used in the New Bazaar case, as well as future instances that
followed the sameapproach, by using the New Bazaar case as a precedent.
Provisions of Law
involved
Section
9(1) of the Income Tax Act 1939
9
(i) “The tax shall be payable by an assessee under the head income from
property in respect of the bona fide annual value of property consisting of any
buildings or lands appurtenant thereto of which he is the owner, subject to the
following allowances, namely”
9
(iv) “where the property is subject to a mortgage or other capital charge, the
amount of any interest on such mortgage or charge; where the property is
subject to an annual charge not being a capital charge, the amount of such
charge; where the property is subject to a ground rent, the amount of such
ground rent; and, where the property has been acquired, constructed, repaired,
renewed or reconstructed with borrowed capital, the amount of any interest
payable on such capital”
Issues
Whether
municipal property tax and urban movable property tax paid under the applicable
Bombay Acts acceptable deductions under sections 9(1)(iv) and 9(1)(v) of the
Indian Income-tax Act?
Facts of the case
The
company in this case is an investment company that derives its income from some
of the properties in Bombay. For the 1940-1941 year, the net income from
properties computed by the IT officer is around 6 lakhs. For the same year, the
company had paid around 1 lakh and 32,000 as municipal tax and urban property
tax respectively and they claimed deductions of these municipal and urban taxes
from income tax but the commission and high court did not agree on it
Contentions
Arguments given by Petitioner
The
appellant's counsel argued that both taxes are assessed on the annual value of
the land or building and are annual taxes, though they may be collected at
six-month intervals for convenience's sake, that the income tax itself is
assessed on an annual basis, that in allowing deductions all payments made or
all liabilities incurred during the previous year of assessment should be
allowed, and that the taxes in question fell within the scope of the previous
year of assessment (iv).
Arguments given by Respondent
The
Counsel for the defendants argued that, while taxes are assessed for the year,
the obligation to pay them arises at the start of each half-year, and that
there is no obligation to pay them until a notice of demand is issued and a
bill is presented, and that until then, no charge under section 212 of the Act
could arise, and that because the obligation to pay is half-yearly in advance,
the charge is not an annual charge.”
Reasoning
The
court believes that interest is deductible under the first subclause regardless
of whether the money borrowed on the property's security was spent on the
property or not. They further decided that the expression “capital charge in
the subclause could not relate to a charge on the capital, i.e. the assessed
property. A capital charge is a charge imposed on a capital amount, i.e., a fee
imposed to secure the repayment of a capital obligation. The term ‘capital
charge’ cannot refer to a charge on the property, and it must be interpreted in
the same way as sub-clause (1), i.e., where the first sub-clause provided for a
deduction of interest where a capital sum is charged on the property, this
sub-clause provides for a deduction of annual sums so charged, such sums not
being capital sums, with the limiting words intended to exclude cases, where
capital raised on the security of the property, where capital raised on
the security of the property is made repayable in instalments.”
According
to the court, the provisions of the legislation under which the taxes in
question are imposed determine whether they fall within the purview of the
phrase "annual charge not being a capital charge. The City of Bombay
Municipal Act of 1888, Section 143, authorizes the imposition of a general tax
on all structures and lands in the city.”
The
tax obligation is produced at the start of each official year, and the tax is
annual, as required by the Bombay Municipal Act. All property taxes must be paid
in advance in half-yearly payments on the first of April and the first of
October, according to Section 197 of this Act. The option of paying in
half-yearly instalments implies a year-round commitment. In other words, the
annual duty might be paid in half-yearly instalments.
Section
212 creates a statutory charge on the building if there is any due in taxes and
this is in similar lines with section 24(2)(b) of the Bombay Finance Act. The
respondent’s arguments were rejected by the court. The court thinks that an
annual responsibility may be paid in half-yearly instalments and that since the
liability is annual and the property has been exposed to it, the terms of
paragraph (iv) of sub-section (1) of section 9 apply immediately.Finally, the
Supreme Court stated, “It is elementary that a Court's primary duty is to give
effect to the legislature's intention as expressed in the words used by it, and
no outside consideration can be called in to assist in finding that intention
Cases referred
Bijoy
Singh Dudhuria v. Commissioner of Income Tax[i]
In
this instance, the court-ordered support for his stepmother under the aforesaid
sub-clause, which had been levied against all of his assets by a court order.Appellant
invokes this case and the clause "where the property is subject to an
annual charge not being a capital charge, the amount of such charge" was
added” for deductions in municipal and urban property taxes.
Commissioner
of Income-tax, Bombay v. MahomedbhoyRowji
In
this case, the Allahabad High Court concurred with the “interpretation given to
these phrases in the Bombay case, namely, that the words "annual fee"
refer to a payment to secure an annual responsibility. As a result, there is no
judicial controversy over the meaning of the term annual fee’ found in section
9(1)(iv), and the interpretation supplied is the natural meaning of these
words.”
PRINCIPLE OF
INTERPRETATION
When
interpreting the definition of 'Annual charge,' the honourable judge in the
aforesaid instance stated that the court's principal role is to give effect to
the legislature's meaning and that outside factors cannot be used to discern
that intention. The Income Tax Act is designed in such a manner that it allows
for a lot of debate. As a result, conceptions of interpretation are necessary.
These suggestions aren't perfect, and they'd have to be tailored to the
individual conditions of each instance. The two well-established principles of
tax law interpretation are that (a) taxing enactments should be properly read,
and (b) taxing power must be convincingly shown. We don't have a guiding
concept to look at when reading such Acts. All we have to do now is go through
the Act to see whether the requisite duty or tax has been imposed by the
Legislature. There is no such thing as fairness in taxes, and the concept of
stringent or literal interpretation applies to tax law interpretation. As a
consequence, under the Act's clear language, if an assessee is entitled to two
advantages, he must get both; and, “where two plausible interpretations of taxation
law exist, the one that favours the assessee must be adopted.
In
the Cape Brandy Syndicate v I.R.C.case, Rowlatt J. observed that one has to
look merely at what is clearly said in a taxing statute. There is no room for
any intendment. There is no equity in a tax. There is no presumption as to a
tax. Nothing is to be read in, nothing is to be implied. One can look fairly at
the language used.” We have no governing principle of the Act to consider when
construing such Acts. We only need to look at the Act to see if the purported
duty or tax was passed by the Legislature.
In
Innamuri Gopalan and MaddalaNagendrudu v State of A.P., case, “The Court
observed in construing a statutory provision the first and foremost rule of
construction is the literary construction. All that the court has to see at the
very outset is what the provision says. If the provision is unambiguous and if the
legislative intent is clear from the provision, the court need not call into
aid the other rules of construction of statutes. The other rules of
construction are called into aid only when the legislative intent is not clear”
The basic concept is that the
meaning and intent of a piece of legislation should be derived from its most
basic and unambiguous form, rather than any assumptions made by the court about
what is reasonable or expedient. The court must be guided by the stated goal. If
the Legislature's objective is obvious and apparent, the fact that the
provisions might have been more aesthetically constructed cannot be used to
reject any feature of a provision as otiose. Though there has been a shift in
emphasis in recent years from grammatical meaning to legislative intent or legislative
purpose, the court has a primary obligation to imbue the Legislature's language
with a reasonable interpretation if the words are unclear, doubtful, or there
is any uncertainty as to the terminology used.
The
ultimate aim of statutory construction is to determine the legislature's
intention, and the primary responsibility is to ascertain the same through
reference to the language employed. The Supreme Court in Doypack
Systems Pvt. Ltd. v/s. UOI laid down:
"It
has to be reiterated that the object of interpretation of a statute is to
discover the intention of Parliament as expressed in the Act. The dominant
purpose in construing a statute is to ascertain the intention of the
legislature as expressed in the statute, considering it as a whole and in its
context that intention, and therefore, the meaning of the statute, is primarily
to be sought in the words used in the statute itself, which must if they are
plain and unambiguous be applied as they stand. The object of all
interpretation is to discover the intention of Parliament, but the intention of
Parliament must be deduced from the language used.”
Law is
a legislative decree, and the conventional technique of interpreting or
construing a statute is to ascertain its author's "intention." The
legislature's goal includes two components:
(1) In
one sense, it conveys the concept of 'real meaning,' i.e. what the words imply.
(2) In
another sense, it represents the legislation's pervasive concept of
"purpose and objective" or "reason and spirit."
As a result, the
building process blends literal and functional methods. The Hon'ble Court
observed in GEM Granites v. CIT, “what one may believe or think to be the
intention of Parliament cannot prevail if the language of the statute does not
support that view, and thus the object of the statute must be gathered from
language rather than what one believes or thinks.”
In the New Bazaar
decision, the Supreme Court emphasized the court's obligation to give effect to
the legislative meaning represented by the language in it. Many later decisions
have affirmed this concept in their reasoning.In Jaswant Singh
and Ors. vs. Prakash Kaur and Ors.,If the plain interpretation of the Clause is
followed, the court has not come across any argument establishing that the
requirements of Order 43, Rule 1(c) resulted in any absurdity or difficulty. As
a result, using the terms "on merits" or any other wording in the
aforementioned Clause is not permitted (c). The fundamental concept of
statutory interpretation is that the legislature's intent must be carried out.
It is also critical that the wording of the legislation itself serves as a
repository for the objective of the legislature. As a consequence, if the
language is clear and the message is plain, it must have an impact. The Court
cannot read legislation as if it were written in a language other than the one
it is written in. Otherwise, it would be akin to changing the law, which the
Court is not permitted to do.
After
reviewing several precedents, the researcher concluded that law should be
construed in light of "the goal of those who produce it," and that
"the function of judicature is to act upon the true purpose of the
legislature - "the men or sententia legs." If a legislative provision
may be interpreted in more than one way, the court must pick the one that best
represents the legislator's true intent, often known as the statutory
provision's legal meaning.
Conclusion
A
tax is a financial burden imposed by the government on the taxpayer. As a
consequence, no tax may be imposed unless it is expressly authorized by law. We
just need to check the Act to see whether the purported duty or tax has been
passed by the Legislature. The literary rule is the first and most important
guideline to follow when construing a legislative clause of a taxation Act.
construction. The only thing the court needs to know at the outset is what the
provision says. The court does not have to apply the other standards of
statutory interpretation if the provision is unambiguous and the legislative aim
is evident from the provision.
The
Supreme Court ruled that municipal taxes and urban immovable property taxes are
both eligible deductions under sections 9(1)(iv) and 9(1)(v), respectively.
0 Comments