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Question-08 'कर विधियों का कठोर निर्वचन होना चाहिए' इस कथन को समझाइये।

 Fiscal (Tax) Laws must be strictly interpreted. Explain this statement

Answer-08

The principle that fiscal (tax) laws must be strictly interpreted is an essential concept in the law of interpretation of statutes. It ensures that the imposition, collection, and enforcement of taxes are carried out within the limits prescribed by law. Here’s an explanation of this principle in a pointwise manner:

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1. Nature of Tax Laws

             Taxation is a statutory function: The authority to levy and collect taxes arises exclusively from legislative statutes. No tax can be imposed or collected unless explicitly authorized by law.

             As taxes interfere with the property rights of individuals, the legislature must clearly and unambiguously state the obligations, rates, and conditions for taxation.

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2. Strict Interpretation of Charging Provisions

             The charging provisions, which create the liability to pay taxes, must be interpreted strictly. If there is any ambiguity in the provision, the benefit of doubt must go to the taxpayer.

             Example: In CIT v. Vatika Township Pvt. Ltd. (2014), the Supreme Court of India held that the imposition of taxes must be clear and not based on assumptions.

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3. No Tax by Implication

             A tax cannot be levied by inference or implication; it must be explicitly provided by statute.

             Case Law Example: In Commissioner of Customs v. Dilip Kumar & Co. (2018), the Supreme Court emphasized that if two interpretations of a tax provision are possible, the interpretation favorable to the taxpayer should be adopted.

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4. Interpretation of Exemptions

             Provisions granting tax exemptions, deductions, or benefits must also be strictly construed. The taxpayer must fulfill all the specified conditions to claim the benefit of exemptions.

             Example: In Novopan India Ltd. v. CCE (1994), the court held that exemptions are to be interpreted strictly, but doubts should be resolved in favor of the Revenue.

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5. Penal and Procedural Provisions

             Penal provisions in tax laws, which impose fines or penalties for non-compliance, are also interpreted strictly. A taxpayer should not be penalized unless they have clearly violated the statutory provision.

             Procedural provisions, however, may receive a more liberal interpretation to ensure the efficient administration of tax laws.

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6. Reason for Strict Interpretation

             Tax laws affect the economic interests of individuals and businesses. Strict interpretation ensures that:

o             Arbitrariness is avoided.

o             Fairness and transparency are maintained.

o             The legislative intent is upheld without overreach or undue burden on taxpayers.

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7. Legal Maxim: “In Favour of Subject”

             The principle "In revenue matters, interpretation should favor the subject" applies. When there is doubt or ambiguity, the interpretation that is more beneficial to the taxpayer is adopted.

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8. Role of Courts

             Courts ensure that tax laws are interpreted strictly, keeping in mind both the taxpayer's rights and the legislative purpose. They refrain from expanding or modifying the scope of taxation through judicial interpretations.

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9. Illustrative Examples

             Ambiguous Language: If the wording of a statute leaves room for multiple interpretations, the court resolves ambiguity in favor of the taxpayer.

             Exemption Clauses: If a company claims exemption under specific conditions, the exact conditions must be met without deviations.

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Conclusion

The principle of strict interpretation of fiscal laws ensures that taxation powers are exercised lawfully and within limits prescribed by the legislature. It protects taxpayers from arbitrary imposition while upholding legislative intent. This principle reinforces the rule of law in fiscal matters.

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