ACKNOWLEGMENT

I would like to express profound gratitude to ----------- for her

invaluable support, encouragement, supervision and useful suggestions
throughout this research work. Her moral support and continuous
guidance enabled me to complete my work successfully. Her intellectual
thrust and blessings motivated me to work rigorously on this study. In
fact this study could not have seen the light of the day if his contribution
had not been available. It would be no exaggeration to say that it is his
unflinching faith and unquestioning support that has provided the
sustenance necessary to see it through to its present shape.

I express my deep sincere gratitude towards my parents for their blessing,

patience, and moral support. I express my gratitude to my all teachers and
friends who has supported and encouraged me during my study at

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 COSOLIDATING STATUTE AND CODIFYING
STATUTE

INTRODUCTION

CONSOLIDATING STATUTE

A Consolidating statute is a statute which collects the statutory provisions

relating to a particular topic, and embodies them in a single Act of
parliament, making minor amendments and improvements. The object of
a consolidating statute is to present entire body of different statutory laws
on a particular subject in a complete form. This is done by repealing all
former statutes.
Consolidating statutes are of three types
1. Consolidating statutes without changes
2. Consolidating statutes with minor changes.
3. Consolidating Act with amendment.

RULES OF INTERPRETAION
A) Presumption
In enactment of a consolidating Act, the presumption is that the
parliament is intended to alter the existing law. The further presumption
is that the words used in the consolidating Act bear the same meaning as
that of the enactment for which consolidation is made.
However, if the words have origin in different legislations, then the same
meaning cannot be sustained.

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 B) INCONSISTENCY
In case of inconsistency between the provisions of a consolidating Act, it
is pertinent to refer to different previous enactments with reference to
dates of enactment in chronological order.
For the purpose of enactment of a consolidating Act it is in order to refer
to previous laws, existing laws, judicial decisions, common law etc.
Just because certain terms of a non- repealed statute are used in the
consolidating statute, it does not mean that the non-repealed statute and
general laws are affected by the consolidating statute.

A consolidating statute is not simply a compilation of different earlier

statutes, but enacted with co-ordination and for the changing present
social circumstances. In this context a consolidating statute may also be
an amendment act.
E.g. Arbitration and Conciliation Act, 1996.

In Galloway v Galloway, it was argued as per a 26 (1) of the matrimonial

clauses Act, 1950, the term children is limited to legitimate children
only.
The interpretation was rejected by Lord Radcliff and gave a liberal
interpretation to include illegitimate children also.

CODIFYING STATUTE

A codifying statute is a statute which states exhaustively the whole of the

law upon a particular subject. The maker of law incorporates in the
enactment both the pre-existing statutory provisions and the common law
relating to the subject.

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The purpose of a codifying statute is to present uniform, orderly and
authoritative rules on a particular subject.
When once the law has been codified, it cannot be modified gradually
from day to day, as the changing circumstances of the community. Any
modifications to it whether of a minor matter or a major amendment must
be made by the legislature (bank of England v vagliano brothers)
Lord Hershell interprets a codifying statute as follows:- The object of a
codifying Act is to end the conflict of decisions .A codifying statute does
not exclude reference to earlier case laws on the subject for the purpose
of true interpretation of the words. The reference of the previous
legislations is for the reason of removal of ambiguity. The aim of a
codifying statute is to declare the law on the subject so that the judge, by
true interpretation of words decides the meaning within the parameter of
such law.
In Subba Rao v Commissioner of Income Tax , the Supreme Court held
that the Income Tax Act, 1922 is a self-contained code exhaustive with
the matters dealt with therein, and its provisions show An intention to
depart from common rule law qui facet per alium facit per se. The
preamble of the Act states it to be an act to consolidate and amend.
Therefore the court should try to find out the true scope of the code and
matters dealt with exhaustively therein.

To conclude, the difference between a consolidating and codifying

statutes are that the aim of a consolidating

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DIFFERENCE BETWEEN CONSOLIDATING AND CODIFYING
STATUTE

The difference between these two is very pointed. Ledgers in his The
Construction of Deeds and Statutes treats both of them on the same level.
He says that there is no difference in between them. For him, the
language used in the statute is very much important rather than
classifying into codifying statutes and consolidating statutes. However,
there are certain differences in between them as follows:

CONSOLIDATING STATUTE CODIFYING STATUTE

Consolidating statutes is the Codifying statutes systematizes

combination of of the statutes case-law as well as statutes.
relating to a given subject-
matter. It does not contain the
case-law.

A consolidating statute should A codifying statute should be

be interpreted according to the
normal canons of constructions
and recourse to repealed
enactments can be taken only
to solve any ambiguity.
interpreted according to the
normal canons of constructions
and recourse to repealed
enactments can be taken
generally to solve any
ambiguity.

The primary rule of While constructing the

construction of a consolidating
statute is to examine the
language used in the statute
itself without any reference to
the repealed statutes.
codifying statute, the language
used in the statute is examined
in the context, but at the same
time, the repealed statutes may
also be referred.

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 TAXING STATUTE

INTRODUCTION

A taxing statute is one, which imposes taxes on income or certain other

kinds of transactions. It may be in the form income tax, wealth tax, sales
tax etc. the object of such statute is to collect revenue of the government.
Tax is levied for public purpose. It is the source for revenue generation
for the state. The money so collected is used for welfare activities for the
people. Tax can be levied only when a statute unequivocally so provides
by using express language to that effect and any doubt is resolved in
favour of the assesse.

Taxation is statutory filed. No tax can be levied and collected except

according to the authority of law. There is fiscal legislation every year
much of it prepared in great secrecy and under server pressured of time,
and it directly affects most people. This legislation is complicated and
elaborated because of intricate prepositions it has to express, and the
verity of circumstances and conditions in which it falls to be applied and
the refined distinctions it embodies in order to attempt to cater expressly
for them. Consequently, the body of tax statues as whole is voluminous
and complex in structure as well as in concept and expression. There is
another reason for the fiscal legislation being complex and complicated.
In fact, taxes are as complex as life. The moralist calls for just taxes, but
taxes cannot just be just, if we recall the scheme of special bearer bonds
for mopping up black money. They cannot simply be simple. The
businessman demands practical taxes, but financially history proves that
it is impracticable to make them practical. Exemption Notifications have
to be strictly construed; if exemption is available on complying with
certain conditions, conditions have to be complied with; plea of
'substantial compliance' depends upon facts of each statues imposing
taxes or monetary burdens are strictly construed. The logic behind this
principle is that imposition of taxes is also a kind of imposition of
penalty, which can only be imposed if the language of the statute
unequivocally says so.

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 STRICT CONSTUCTION OF TAXING STATUTE

The manner in which the Income-Tax Act has been drafted leaves great
scope for litigation. For this purpose, principles of interpretation have to
be applied. These principles themselves are not infallible and would
depend on the facts of each case. The two well-settled principles of
interpretation, as applicable in taxing statutes, are:

There is no equity in tax, and the principle of strict or literal

construction applies in interpreting tax statutes. Hence, on the plain
language of the statute, if the assessee is entitled to two benefits, he
has to be granted both these benefits.
If there are two reasonable interpretations of taxing statutes, the
one that favours the assessee has to be accepted.

The principle of strict interpretation of taxing statutes was best

enunciated by Rowlatt J. in his classic statement in Cape Brandy
Syndicate v I.R.C. (1 KB 64, 71): "In a taxing statute one has to look
merely at what is clearly said. There is no room for any intendment.
There is no equity about 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."

In A. V. Fernandes v State of Kerala (8 STC 561; SC; AIR 1957 SC 657),

the Supreme Court stated the principle that if the revenue satisfies the
court that the case falls strictly within the provisions of the law, the
subject can be taxed. If, on the other hand, the case does not fall within
the four corners of the provisions of the taxing statute, no tax can be
imposed by inference or by analogy or by trying to probe into the
intentions of the Legislature and by considering what was the substance
of the matter.

Hence, in taxing statutes the language cannot be stretched (State of

Punjab v Jullundar Vegetables Syndicate; 17 STC 326; SC). If the words
of a taxing statute fail, so must the tax. The courts cannot, except in clear
cases, help the draftsman by a favourable construction (I.T.O. v T. S.
Devinatha Nadar (68 I.T.R. 252; SC) and C.I.T. v Elphinstone Spg. and
Wvg. Mills Co. Ltd. (40 I.T.R. 142; SC). However, a fair and reasonable
construction must be given (C.W.T. v Kripashankar Dayashanker Worah
(81 I.T.R. 763; SC) and R. B. Jodha Mal Kuthiala v C.I.T. (82 I.T.R. 570;
SC).
It is a cardinal principle of interpretation that a statute should be read in

7
its ordinary, natural and grammatical sense.

In Innamuri Gopalam and Maddala Nagendrudu v State of A. P. (14 STC

742; SC), the exemption was denied to the assessee on the ground that the
intention of the notification was to avoid double taxation, and as this was
not a case of double taxation no exemption could be granted.

The Supreme Court held that on the plain language of the notification, the
assessee was entitled to exemption, and since the intention was not
reflected in plain words, it could not be taken into consideration. As
observed by the apex court: "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 does the provision say. If the
provision is unambiguous and if from the provision the legislative intent
is clear, 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."

In C.I.T. v G. Hyatt (80 I.T.R. 177; SC) the question was whether under
Section 17(3) of the Income-Tax Act, 1961, the interest on the assessee's
own contribution to an unrecognised provident fund could be treated as
salary. The Supreme Court held that the language of Section 17(3) was
plain and unambiguous, and hence the said amount was not salary but
income from other sources and taxable under Section 56.

In Polyster and Co. Ltd. v Addl. C.S.T. (41 STC 409) the question was
whether sales outside Delhi could also be included in taxable income.
The Supreme Court held that the section used the word "resale"
simplicitor, and hence it referred to all resales and could not be limited to
resales within Delhi alone. Thus, the Supreme Court went by the plain
language of the statute, and did not speculate on the intention of the
legislature.

In Hemraj Gordhandas v H. H. Dave, Assistant Collector (2 ELT 350),

the Supreme Court considered the language of a notification under the
Central Excise Tariff and held that all that was required for claiming an
exemption was that the cotton fabric must be produced on powerlooms
owned by the co-operative society.
There was no further requirement in the language of the notification that
the cotton fabric must be produced by the society for itself. The Supreme
Court refused to go into the question of the intention behind the
exemption since the language of the notification was clear. In C.W.T. v
Ellis Bridge Gymkhana (229 I.T.R. 1; SC), the Supreme Court held that

8
the word "individual" in the charging Section could not be stretched to
include an association of persons. The court held that the charging
Section had to be construed strictly, and if a person could not be brought
within the ambit of the charging Section by clear words, he could not be
taxed at all.

A liberal interpretation of a taxing provision cannot be adopted on the

plea that this would advance the purported object of the Act by
encouraging the establishment of industrial undertakings in backward
areas (C.I.T. v N. C. Budharaja and Co. (204 I.T.R. 412; SC).

In Steel Authority of India Ltd. v C.C.E. (AIR 1996 SC 2544), the

question was whether raw naphtha intended for use in the manufacture of
fertilisers was exempted although it was not actually used. It was held
that the exemption notification only required proof that the raw naphtha
was intended for use in the manufacture of fertilisers, and there was no
further requirement that it was actually so used. Hence, if it was
purchased with the intention to be used for the manufacture of fertilisers,
it was exempt, even though it could not be used for some reason
subsequently.

In Partington v Attorney General ([1869] LR HL 100), Lord Cairns

observed thus: "If the person sought to be taxed comes within the letter of
the law he must be taxed, however great the hardship may appear to the
judicial mind.

On the other hand if the court seeking to recover the tax cannot bring the
subject within the letter of the law, the subject is free, however,
apparently within the spirit of the law the case might otherwise appear to
be."Thus, in interpreting a taxing statute one cannot go by the notion as to
what is just and expedient (C.I.T. v Shahzada Nand and Sons; 60 I.T.R.
392; SC).

The Supreme Court has held that equity is out of place in tax laws (C.I.T.
v MR. P. Firm, Muar; 56 I.T.R. 67; SC). In C.I.T. v Madho Pd. Jatia (105
I.T.R. 179; SC), it held that there could be no consideration of equity if
the language of the provision was plain and clear, but where it was not,
and two interpretations were possible, the one in consonance with equity
and fairness should be preferred.

Where the language of a provision is plain, courts cannot ordinarily

concern themselves with the policy behind the provision (Baidyanath
Ayurved Bhawan P. Ltd. v Excise Commissioner; AIR 1971 SC 378) or

9
the intention of the Legislature (I.T.O. v T. S. Devinatha Nadar; 68 I.T.R.
252; SC). As Lord Watson said in Salomon v Salomon and Co. Ltd.
([1897] AC 22; HL) "intention of the Legislature is a common but
slippery phrase."
In C.I.T. v B. M. Kharwar (72 I.T.R. 603; SC), the assessee transferred
some machinery of a firm to a private limited company. He sought to
avoid the liability to be taxed on the excess realised over the written
down value of the machinery on the plea that the substance of the
transaction was only a step to readjust the business relation of the
partners inter se. The Supreme Court rejected this contention holding that
while the taxing authorities were entitled to determine the true legal
relation resulting from a transaction to unravel the device adopted by a
party, the legal effect of a transaction could not be displaced by probing
the "substance of the transaction".

The aforesaid authorities create a veritable paradise for lawyers and

chartered accountants. While judicial authorities are well-versed in
principles of interpretation, the applicability thereof to the facts and
circumstances of each case requires an extremely balanced and objective
approach.

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