Sukumar Mukhopadhyay: Interpretation in favour of stability

One of the well accepted principles in the realm of interpretation is that a taxing principle should not be tampered with lightly. In other words if by practice, over a long period of time, settled law has developed in fiscal matters, the Court should not interpret the law in such a way as to unsettle it without considering all the repercussions very seriously. The Supreme Court has enunciated this concept in several judgments.

In the case of CIT vs B. Malhotra -1971 (2) SCC 547 under the Income Tax Act, 1922, Revenue wanted to alter the settled practice followed in a case contending that assessment only referred to determination of income and not the quantum of tax payable. The Supreme Court said that the settled law that assessment means both of them had already been sanctified by the Madras High Court in 1953 in Viswanathan’s case and no other High Court has taken a contrary view all this time. “Interpretation of a provision in a taxing statute rendered years back and accepted and acted upon by the department should not be easily departed from.

It may be that another view of the law is possible but law is not a mere mental exercise. The Courts while reconsidering the decisions rendered long time back, particularly under taxing statutes, cannot ignore the harm that is likely to happen by unsettling law that had been settled.”

There is another judgment in the case of Commercial Tax Officer, Jaipur v. Hemraj Udyog - 1987 (64) STC 324 (Raj.) on this issue. Under Section 11B of the Rajasthan Sales Tax Act, 1954, as originally inserted and prior to its substitution by a new section with effect from April 7, 1979, interest in respect of default in payment of tax could be charged only in respect of completed months and no interest was chargeable for default in the payment of tax in respect of periods of time less than a month. Though the provisions contained in the unamended Section 11B of the Act were ambiguous and capable of more than one interpretation, since the Board of Revenue had consistently for more than ten years taken that view, the Court did not after more than six years after its repeal, take a different view, even if that view was possible, especially as that section as originally enacted had been replaced by a provision having a different effect. The High Court held that there was no reason to depart from the interpretation which was settled by the Board a long time back and for a long time.

Depending on an old judgment of the Privy Council, the Calcutta High Court held in the case of Indian Cardboard Industries v. C.C.E. - 1992 (58) E.L.T. 508 (Cal.) that since certain clarifications had by long use obtained a certain meaning, even for a subsequent legislation the same construction should continue, unless the context can be proved to have changed.

The Bombay High Court has held in an income tax case namely Chamber of Income Tax Consultants v. CBDT - 1994 (209) ITR 660 (Bom.) that construction of a provision in a particular way for a long time should not normally be departed from.

If this principle is followed by the Courts it does not mean that they will always go by the settled principle. It only means that before changing a settled principle, a lot of consideration should go into before any change is ordered by the Court. This will bring stability to the judicial thinking and for tax collection it will go a long way.