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THE CHAMBER OF TAX CONSULTANTS

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STUDY GROUP MEETING ON 26/2/2013


Prepared by: Ms. Priti Shukla
Advocate.

Generalia Specialibus non derogent or Generalia Specialia derogent :

This maxim means that ‘general things will not derogate from the special
provisions’ .This maxim is invoked to determine the scope of a general enactment
with reference to a special enactment which precedes it.

The requisite conditions for applying this maxim are:

(1) Both the general enactment and particular enactment must be simultaneously
operative, the general enactment covering the larger field and the particular
enactment covering a limited field out of a larger field covered by the general
enactment.

(2) There must be nothing contained in the general provisions indicating the
legislative intent to overrule or set aside the particular provision.

In other words this maxim will apply whenever there is particular enactment
and a general enactment in the same statute, and the latter, taken in its most
comprehensive sense, would overrule the former, the particular enactment must
be operative, and the general enactment must be taken to affect only the other
parts of the statute to which it may properly apply.

This maxim is applicable subject to the condition that there is nothing in the
general provision, expressed or implied, indicating an intention to the contrary.

If a special provision is made on a certain matter that matter is excluded from the
general provision.

Hindustan Electron Ltd. V. CIT 258 ITR 518 (MP)

The assessee-company was maintaining a residential accommodation in the compound


of its staff colony for the stay of the company’s officials from Delhi, auditors, foreign
technicians, etc. Though the nomenclature given to the accommodation was guest

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house, the Assessing Officer disallowed the entire expenditure under section 37(4) as
being impermissible. On appeal, the Commissioner (Appeals) confirmed the finding

of the Assessing Officer. On further appeal, the Tribunal confirmed the order of the
Commissioner (Appeals).On further appeal the court relying on this maxim held that
Section 37(4) specifically denies any depreciation on maintenance of such kinds of
guest house. This is a special provision and this will override the general provisions
of depreciation applicable in the Act. The Tribunal applying this principle had rightly
declined to grant any relief to the assessee. Once a particular provision has been
made, then that provision will prevail as against the general provision. It is a well
known dictum which has been accepted and known as “Generalia specialibus non
derogant . The Tribunal had rightly approached the matter and denied the
depreciation to the assessee in respect of the expenditure claimed.

2) Deputy Commissioner of Income-tax v. Vickers Systems International Ltd. [2003]


87 ITD 182 (Mum)

The assessee-company had paid ex gratia bonus in excess of 8.33 per cent in the
relevant previous years. The Assessing Officer disallowed the excess amount. On
appeal, the assessee contended that those payments were made as per the agreement
with Workers’ Union dated 3-7-1985 and the purpose was to buy industrial peace. It
also claimed that the expenditure incurred on ex gratia payment was to be allowed
under section 37(1) and that as the amount did not exceed 20 per cent of the salary,
that was also allowable under section 36(1)(ii). The Commissioner (Appeals) allowed
the expenditure. On revenue’s appeal, the Tribunal held that from section 37(1) it
refers to the allowability of only those expenses, which are not described in sections
30 to 36. It is a general provision. If some expenditure is described in sections 30 to
36, the same cannot be considered under section 37(1). That is a residuary provision.
If the Act has prescribed any special provision for the allowability of such
expenditure, that special provision will prevail over the general provision. That is in
conformity with the principle enunciated in the dictum: generalia specibus non
derogant (general things will not derogate from special things). Relying on this
maxim the court held that in the instant case, the amount of bonus was reasonable
with reference to pay of the employees and the conditions of their services. It was also
reasonable with reference to the profit of the business. It was established with
reference to the records that there was general practice of making such ex gratia
bonus to the employees. As such, the assessee complied with the conditions contained
in section 36(1)(ii). For the reasonings adduced in the impugned order, the
Commissioner (Appeals) took a correct view in the matter and his order called for no
interference and, accordingly, it was to be upheld. In the result, appeal of the revenue
stood dismissed.
3) Deputy Commissioner of Income-tax, Circle 4(1), Mumbai v. RBS Equities India
Ltd. 141 TTJ 58 (Mum).
In this case the assessee was a corporate member of the Bombay Stock Exchange as
also National Stock Exchange. During the relevant year, the assessee carried out stock

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broking activities for foreign institutional investors, mutual funds, domestic financial
institutions and banks. In the course of business, the assessee had also provided stock
broking services to certain associated enterprises. While computing arm's length price,
the assessee adopted the transactional net margin method. The assessee rejected the
CUP method for the reason that Indian transfer pricing regulations prescribed

application of CUP method only where reliable adjustments could be made for
different factors, which would affect the price, and since, in the instant case, no
reliable adjustments could be made to neutralize all the varying factors, it was not
possible to apply CUP method. In the course of the assessment proceedings, the
Assessing Officer referred the ascertainment of arm's length price to the Transfer
Pricing Officer (TPO). The TPO rejected the TNMM method and proceeded to adopt
CUP method. The TPO made an adjustment of Rs. 1,10,29,746 to the arm's length
price. This determination of price was also adopted by the Assessing Officer.
However, the Assessing Officer further observed that the TPO had calculated the
arm's length price in a very systematic method and his calculation was based on a
solid footing and, thus, the assessee had filed inaccurate particulars of his income to
evade tax. Therefore, the Assessing Officer imposed a penalty equivalent to 100 per
cent tax sought to be thus evaded. On appeal, the Commissioner (Appeals) concluded
that the explanation offered by the assessee was bona fide and there was neither any
concealment of income nor furnishing of inaccurate particulars and, accordingly,
deleted penalty imposed by the Assessing Officer. On further appeal , the Tribunal
allowed the appeal & by relying on this maxim, the court held that it is fairly well
settled in law that general provisions do not override specific provisions, as aptly
described by the maxim 'generalia specialibus non derogant'. A special provision
normally excludes the operation of a general provision and we are of the view that
such a principle governs the instant case also. In the case of South India Corpn. (P.)
Ltd. v. Secretary, Board of Revenue AIR 1964 SC 207, at p. 215, Hon'ble Supreme
Court had an occasion to consider whether Article 277 or Article 372 of the
Constitution of India should govern the particular situation involved therein.
Their Lordships then pointed out that "a special provision should be given effect
to the extent of its scope, leaving the general provision to control cases where
specific provisions do not apply". Therefore, in a situation in which Explanation
7 comes into play, the provisions of Explanation 1 cannot be applied. It is thus
clear that so far as the present case is concerned, the same is to be examined on
the touchstone of legal position under Explanation 7 to section 271(1)(c). In this
view of the matter, the Assessing Officer's reference to Explanation 1 to section
271(1)(c), and reliance upon judicial precedents on the scope of the said Explanation,
is wholly misconceived.

(II) Vigilantibus , non dormientibus jura subveniunt:


The literal meaning of this maxim is that ‘Laws come to the assistance of the
vigilant, not of the sleepy’.
According to this maxim, delay defeats equitres. Equity aids the vigilant, not the
indolent. A Court of equity, which is never active in relief against conscience or
public convenience, has always refused its aid to state demands, where the party has
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slept upon his right for a great length of time, for nothing can call forth the court into
activity but conscience, good faith and reasonable diligence. Even a comparatively
short period of delay, not satisfactorily accounted for, also tells heavily against the
plaintiff in equity in respect of an equitable right or for equitable relief. The maxim
refers to the important subject of limitation of actions, which exemplifies that general

Principle of law in pursuance of which the using of legal diligence is always


favoured, and shall never turn to the disadvantage of the creditor (Cox V. Morgan , 2
B & P , 412)
As this maxim directs that where a statute directs that a claim shall be made within a
specified time, the right will be forfeited by omission to assert it within that time, and
in such a case the maxim under consideration has been held forcibly to apply. But the
rule does not apply where the party is disabled from bringing an action and also where
he has, by means of fraud, been kept from the knowledge of his right to bring an
action, or of the title on which it is founded, or where any document necessary to
establish such right has been fraudulently concealed from him.
But the equitable doctrine of laches and acquiescene does not apply to suits for
which a period of limitation is provided by the Limitation Act. (Rama Rau V. Raja
Rau, 2 Mad . H.C.R.114) .Mere laches or indirect acquiescene , short of the period
prescribed by the statute of Limitations is no bar to the enforcement of a right
absolutely vested in the plaintiff at the time of suit. The doctrine of acquiescence or
laches will apply only to cases, if such there are, in which they can be regarded as a
positive extinguishment of right. When they go merely to the remedy, the courts have
no power arbitrarily to substitute an extinguishing prescription different from that
established by the legislature. (Peddamuthulaty V. N. Timma Reddy, 2 Mad
H.C.R.270)
Plaintiffs sued defendants for arrears of rent. Defendant alleged that part of land
had been taken up by Governement, 24 years previously, for the purpose of railway,
and they claimed an abatement on that ground. Held, that the Limitation Act does not
in terms prevent a defendant from setting up such a defence, but that the great delay in
this case, combined with other circumstances disentitled the defendants to any relief in
a court of Equity. (Ram Narain V. Pooolin Behan Lal, 2 C.L.R 5)
The courts of this country have no power to refuse relief on the ground of mere
delay where the plaintiff establishes a right not affected by limitation.
( Ramphul Sahoo V. Misree Lall, 24 W.R.97).
Held that in determining the amount of damages the question whether the plaintiff
has unnecessarily delayed bringing his suit, and so allowed his claim to mount up to a
sum far in excess of the principal money originally advanced, may be taken into
consideration as a reason for not making the original rate of interest the basis on
which to assess such damages (Bishen Dayal V. Udit Narain, 8 All, 486)

(II) Contemporanea Exposito:


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