STUDY GROUP MEETING ON

Transcription

1 STUDY GROUP MEETING ON Mr. Paras S. Savla, Advocate LEGAL MAXIMS A Legal Maxim is an established principle or proposition. Most of the Latin maxims developed in the Medieval era in European countries that used Latin as their language for law and courts. A. JUDICIS EST JUS DICERE, NON DARE - It is for the judge to administer, not to make law 1. The court has to decide what law is, not to make it. It is the duty of a judge to declare the law, not to enact it. 2. The Constitution of India follows a mixed system i.e. quasi federal system. It is termed as quasi federal as we neither follow complete Federal nor complete unitary but a combination of both. The above legal maxim, indirectly also finds place in the Constitution. This is because the Constitution has three branches i.e., the Legislative, the Judiciary, and the Executive. The task for each of branch is separated. 3. The said legal maxim was applied in following case laws. a. UOI & Anr. Vs. Azadi Bachao Andolan & Anr. (2003) 263 ITR 706 (SC) Para 108 reads as under; 108. There is elaborate discussion in Baker s treatise on the anti abuse provisions in the OECD model and the approach of different countries to the issue of treaty shopping. True that several countries like the USA, Germany, Netherlands, Switzerland and United Kingdom have taken suitable steps, either by way of incorporation of appropriate provisions in the international conventions as to double taxation avoidance, or by domestic legislation, to ensure that the benefits of a treaty/convention are not available to residents of a third State. Doubtless, the treatise by Philip Baker is an excellent guide as to how a state should modulate its laws or incorporate suitable Page 1

2 terms in tax conventions to which it is party so that the possibility of a resident of a third State deriving benefits thereunder is totally eliminated. That may be an academic approach to the problem to say how the law should be. The maxim Judicis est jus dicere, non dare" pithily expounds the duty of the Court. It is to decide what the law is, and apply it; not to make it. b. In, Standard Chartered Bank & Ors. vs. Directorate of Enforcement & Ors. (2005) 275 ITR 81 (SC) the court observed as under, 60. A number of arguments were addressed by learned counsel as to what is the true function of the Court in interpreting a statute. We would prefer to tread the conventional path that the maxim judicis est just dicere, non dare best expounds the role of the court. It is to interpret the law, not to make it. The Court cannot act as a sympathetic caddie who nudges the ball into the hole because the putt missed the hole. Even a caddie cannot do so without inviting censure and more. If the legislation falls short of the mark, the Court could do nothing more than to declare it to be thus, giving its reasons, so that the Legislature may take notice and promptly remedy the situation. This is precisely what has happened in the present case We are unable to subscribe to the view that by judicial heroics it is open to the Court to remedy an irretrievable legislative error by resort to the theory of presumed intention of the Legislature. It was contended that the Court should adopt a purposive construction of statutes. The dicta of Denning, L.J. in Seaford Court Estates Ltd. v. Asher [1949] 2 All ER 155, p. 164 were pressed into service for emulation. The view of Denning, L.J., that judicial heroics were warranted to cope with the difficulties arising in statutory interpretation, was severely criticized by the House of Lords in Magor & St. Mellons R.D.C. v. Newport Corpn. [1951] 2 All ER 839. Lord Simonds said, "the duty of the Court is to interpret the word that the Legislature has used. Those words may be ambiguous, but, even if they are, the power and duty of the court to travel outside them on a voyage of discovery are strictly limited." It appears to me, said Lord Simonds, "to be a naked usurpation of legislative function under the thin disguise of interpretation". Lord Morton observed: "these heroics are out of place". Lord Tucker said, "Your Lord ships would be acting in a legislative rather than a judicial capacity if the view put forward by Denning, L.J., Page 2

3 were to prevail." This disapproval of Denning L.J. s approach was cited with approval by this Court in Punjab Land Development & Reclamation Corpn. Ltd. v. Presiding Officer, Labour Court [1990] 3 SCC The argument of purposive interpretation, therefore, does not appeal when the statute in plain terms says something. 4. The said maxim goes along with the other maxim Causus Omissus - means to provide for something which is missing / omitted. P.K. Unni vs. Nirmala Indsutries (1990) 2 CC 378 ; Maulvai Hussen Umarji (2004) 6 SCC 672. In case of ACIT vs, Velliappa Textiles Ltd. (2003) 263 ITR 550 (SC), the Apex court held as under; If the act alleged against the accused does not fall within the parameters of the offence described in the statute the accused cannot be held liable. There is no scope for intendment based on the general purpose or object of law. If the Legislature has left a lacuna, it is not open to the Court to paper it over on some presumed intention of the Legislature. The doctrine of casus omissus, expressed in felicitous language in CST v.parson Tools & Plants [1975] 4 SCC 22, is : "If the legislature wilfully omits to incorporate something of an analogous law in a subsequent statute, or even if there is a casus omissus in a statute, the language of which is otherwise plain and unambiguous, the court is not competent to supply the omission by engrafting on it or introducing in it, under the guise of interpretation, by analogy or implication, something what it thinks to be a general principle of justice and equity. To do so "would be entrenching upon the preserves of legislature", (At p. 65 in Prem Nath L. Ganesh v. Prem Nath, L. Ram Nath AIR 963 Punj. 62, Per Tek Chand, J.). The primary function of a court of law being jus dicere and not jus dare." (p. 23) [Emphasis supplied] 27. The maxim "Judicis est jus dicere, non dare" pithily expounds the duty of the Court. It is to decide what the law is and apply it; not to make it Though, M.V. Javali s case (supra) refers to the recommendations of 47th report of the Law Commission of India Page 3

4 dated in support of its view, I find it difficulty to agree with its reasoning. The report of the Law Commission indicates a lacuna in the law and suggests a possible remedy by amending the law. Since the function of the court of law is jus dicere and not jus dare, the court of law cannot read the recommendations of the Law Commission as justifying an interpretation of the section in tune with them, even when the words of the section are plain and unambiguous. Though M.V. Javali s case (supra) also refers to the general principle of interpretation of statutes, the rule of interpretation of criminal statutes is altogether a different cup of tea. It is not open to the court to add something to or read something in the statute on the basis of some supposed intendment of the statute. It is not the function of this Court to supply the casus omissus, if there be one. As long as the presumption of innocence of the accused prevails in this country, the benefit of any lacuna or casus omissus must be given to the accused. The job of plugging the loopholes must strictly be left to the legislature and not assumed by the court. In Union of India vs. Dharmendra Textile Processors (2008) 306 ITR 277 (SC) the Supreme Court while interpreting the provisions of section 11AC applying penalty under Central Excise Act, 1944, observed as follows; 17. While interpreting a provision the court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of process of law, it is for the Legislature to amend, modify or repeal it, if deemed necessary. See CST v. Popular Trading Co. [2000] 5 SCC 511. The legislative casus omissus cannot be supplied by judicial interpretative process. 18. Two principles of construction - one relating to casus omissus and the other in regard to reading the statute as a whole, appear to be well-settled. Under the first principle a casus omissus cannot be supplied by the court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself but at the same time a casus omissus should not be readily inferred and Page 4

5 for that purpose all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the Legislature. "An intention to produce an unreasonable result", said Danckwerts, LJ. in Artemiou v. Procopiou [1965] 3 ALL ER 539 (All ER p. 544 I) "is not to be imputed to a statute if there is some other construction available". Where to apply words literally would "defeat the obvious intention of the legislation and produce a wholly unreasonable result", we must "do some violence to the words" and so achieve that obvious intention and produce a rational construction. [Per Lord Reid in Luke v. IRC [1963] AC 557 where at AC p. 577 he also observed : (All ER p. 664 I). "This is not a new problem, though our standard of drafting is such. 19. It is then true that : "When the words of a law extend not to an inconvenience seldom happening, but due to those which often happen, it is good reason not to strain the words further than they reach, by saying it is casusomissus, and that the law intended quae frequentius accidunt." "But", on the other hand, "it is no reason, when the words of a law do enough extend to an inconvenience seldom happening, that they should not extend to it as well as if it happened more frequently, because it happens but seldom".see Fenton v. Hampton [1858] 11 MOO PC A casus omissus ought not to be created by interpretation, save in some case of strong necessity. Where, however, a casus omissus does really occur, either through the inadvertence of the Legislature, or on the principle quod enim semel aut bis existit praetereunt legislatores, the rule is Page 5

6 that the particular case, thus left unprovided for, must be disposed of according to the law as it existed before such statute - casus omissus et oblivioni datus dispositioni communis juris relinquitur; "a casus omissus", observed Buller, J. in Jones v. Smart 1785 (1) TR 44 : 99 ER 963 (ER p. 967) "can in no case be supplied by a court of law, for that would be to make laws". The principles were examined in detail in Maulavi Hussein Haji Abraham Umarji v. State of Gujarat [2004] 6 SCC It may be seen that the said legal maxim Judicis est jus dicere, non dare is contrary to judicial activism. Hence, while applying this principle there are many other factors that need to be kept in mind. They are as under ; a. Ut Res Magi Valeat Quam Pereat Let it be workable rather that invalid & null Hindustan Bulk Carriers 259 ITR 449 (SC) b. A statute has to be read as a whole and non piecemeal - Gracemac Corporation vs. ADIT (2010) 47 DTR 65 / 134 TTJ 257 Interpretation must not only be close to the statutory language but should also not lead to conflict with the other provisions of the statute. The most basic rule of interpretation is embodied in the Latin maxim ex visceribus actus. Put it simply, this means a statute has to be read as a whole and not piecemeal. Interpretation must not only be close to the statutory language but should also not lead to conflict with the other provisions of the statute. The intention of the Legislature must be found by a reading of the statute as a whole and in its context which is derived from the contextual scheme. Hon ble Supreme Court in Unique Butyle Tube Industries (P.) Ltd. v. UP Financial Corpn. [2003] 41 SCL 418 held that every part of a section should be interpreted in terms of its own context and in relation to other part of the section and ultimately the interpretation placed in a particular provision should result in the whole statute remaining a consistent enactment. Similarly in Poppatlal Shah v. State of Madras AIR 1953 SC 274 at page 276, para (7), held as under: Page 6

7 "It is a settled rule of construction that to ascertain the legislative intent, all the constituent parts of a statute are to be taken together and each word, phrase or sentence is to be considered in the light of the general purpose and object of the Act itself." c. In case of reasonable doubt, the construction most beneficial to the subjected is to be adopted, but even so, the expressed intention must guide the Court - CIT vs. Shahzada Nand & Sons & Ors (1966) 60 ITR 392 (SC) d. Impossibility of performance - Krishnaswamy S. PD & Anr. Vs. UOI (2006) 281 ITR 305 (SC) 6. In the current economic and political scenario, the Delhi High Court in recent few cases, have followed the principle of Judicial activism, and had come to the rescue of the taxpayers. B. INCUMBIT PROBATIO QUI DICIT NON QUI NEGAT - burden lies upon one who alleges and not upon one who denies the existence of a fact 1. In the matter of casting onus or burden, this maxim has its share of importance to lay stress on the principle that the burden lies upon one who alleges and not upon one who denies the existence of a fact. 2. The legal maxim was applied in Smt. Aruna A. Bhat vs. ACIT (2002) 81 ITD 218 (Pune)(TM) at para 17 The law as regards burden is canonised in the dictum : "Incumbit probatio qui dicit non qui negat". The burden of proving lies upon one who alleges the existence of a fact, not upon one who denies it. The assessee demonstrated with reference to the various circumstantial evidence that there existed a partnership. Existence of such fact was ratified in the Agreement dated and also in the Deed of Partnership executed on There is no material to show that the partnership was merely a device to convert the right of the assessee in the land into money with a view to avoid the liability of tax on capital gains. 3. In Sunder Agencies v. Dy. CIT [1997] 63 ITD 245 (Mum.) the issue of what constitutes undisclosed income and who bears the burden of proving or Page 7

8 disproving the same first came up for consideration before the Bombay Bench of the Tribunal in the case of Sunder Agencies (supra). In this case, the Tribunal stated that without any evidence or material indicating some direct evidence relating to undisclosed income, the Assessing Officer has no power to draw any presumption as to the existence of any undisclosed income. According to the Tribunal, the scheme of Chapter XIV-B does not give power to the revenue to draw the presumption in regard to the undisclosed income. The Assessing Officer could only proceed on the basis of material detected at the time of search and the evidence gathered. While dealing with the said issue, the Tribunal referred to a very well-known canon of law Incumbit Probatio Qui Dicit Non Qui Negat which means burden lies upon one who alleges and not upon one who denies the existence of a fact. Thus, it is on the department to prove that there is some undisclosed income existing and earned by the assessee. It was observed by the Tribunal that additions under this Chapter cannot be based on genuine reasonings or guess work without the department having in its possession, cogent material or evidence to support. The Tribunal categorically observed that it is not open for the Assessing Officer to grope in the dark. It is worthwhile to note the following observations of the Tribunal : "... It is obvious from the perusal of impugned order that no attempt was made to examine the evidentiary value of the gift book. Its contents are not discussed in the order. How it proves a fact is not known to us. Its nexus with the undisclosed income was not established. Its relevance in the facts of the present case is a dark cat. This cannot be used as a panoply for making the roving enquiries. It appears that the Assessing Officer is looking for a black cat in a dark room which may or may not be there...." (p. 259) Thus, it has been made very clear by the Tribunal that no estimation/presumption can be made in respect of undisclosed income without any evidence as it would mean looking for a black cat in a dark room which may or may not be there. Perhaps, this decision has set at rest a lot of confusion as to the scope of the Assessing Officer while framing block assessment. Page 8

9 4. In the case of Lakshmi Jewellery vs. CIT 171 ITR 649 (AP), it was held that the burden is far more greater on the Revenue where penalty is sought to be justified not with reference to the Explanation to section 271(1)(c) of the Income Tax Act but with reference to the provisions contained in the substantive section itself. Even under criminal law a convict is presumed innocence unless proved guilty. Therefore, in the interpretation exercise of any criminal and/or quasi-criminal proceedings, the general intent of this maxim is applied to specify upon whom the onus lies. 5. The Supreme Court in case of Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC) the question raised was whether the apparent could be considered as real. The Court held that apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. 6. In Shanti Devi Progressive Education Society vs. ADIT (1999) 68 ITD 1 (Delhi)(TM) it was held that; 5.11 The law of onus, as canonised in the dictum : Incumbit probatio qui dicit non qui negat (burden lies upon one who alleges and not upon one who denies) takes a different shape when it comes to the claim of exemption from tax levies. In such cases, the burden is on the party who claims exemption, to prove the fact that entitles him to the exemption. In order to be entitled to an exemption, an assessee must strictly come within the terms of the provisions under which such exemption is being claimed. In a fiscal provision, if benefit of exemption is to be considered, it should be construed strictly. It must be seen that tax concessions are not abused. Page 9

10 7. This legal maxim could be used in the recent assessments which are being framed based on the information received from the sales tax department. C. INTEREST REIPUBLICAE UP SIT FINIS LITIUM it is for the general welfare that a period be put to litigation 1. In Bharat Auto Center vs. CIT (2006) 282 ITR 366 (All) while condoning the delay held as under; The Commissioner (Appeals) as well as the Tribunal had taken a pedantic view while considering the application for condonation of delay. It has been consistently held by the Apex Court that in the matter of condonation of delay a liberal and pragmatic view should be taken. The reasons given by the assessee for the delay appeared to be sufficient cause and, accordingly, the delay was liable to be condoned. The Law of Limitation is enshrined in the maxim interest reipublicae up sit finis litium (it is for the general welfare that a period be put to litigation) Rules of Limitation are not meant to destroy the rights of the parties, rather the idea is that every legal remedy must be kept alive for a legislatively fixed period of time. 2. The above legal maxim is extention of Vigilantibus, Non Dormientibus Jura Subveniunt i.e. The law assist those who are vigilant, not to those who sleep over their rights. 3. However, there is one exception i.e. Quod Ab Initio Non Valet in Tractu Temporis Non Convalescit - that which was originally void, does not by lapse of time become valid. 4. The rule of this maxim has general importance in our day-to-day practice, in pleading and in the application of legal principles to various occurrences of Page 10

11 facts and events. This maxim finds its significance in the interpretation of Law of Contract and other Commercial Law. Page 11