It is
important to understand every single word used in a statute which conveys a
specific meaning, but it is neither possible nor desirable to define every word
in the statute. The words which are not defined in such Acts should be
interpreted according to their ordinary and natural meaning.
If
the language of an Act is clear and explicit, we must give effect to it, whatever
may be the consequences, for in that case the words of the statute speak the
intention of the Legislature. In other words, if the language used by the
Legislature is precise and unambiguous, we have only to expound the words in
their natural and ordinary sense.
To do
so, first one has to find whether any definition has been assigned to that word
in the General Clauses Act, 1897, in which case, this definition is used to
understand the meaning of that word. If it is not defined in the General
Clauses Act, 1897, one has to find whether that word is defined in any other
Act, in which case, its meaning in such an Act may be used as a guide to
understand the meaning of the word. At times the dictionary meaning or a judicial
interpretation helps understand the meaning of a word used in an Act.
Before
the start of Chapter I of any Act it is written as follows:
“BE it enacted by Parliament in the _____ Year of the Republic of India as follows: -”
“BE it enacted by Parliament in the _____ Year of the Republic of India as follows: -”
Every
year various Acts are passed by Parliament and unique serial numbers are
assigned to these Acts for better reference. The Income Tax Act, 1961, is the
forty-third Act passed by Parliament in the Twelfth Year of the Republic of
India. Year 1961 is the twelfth year of Republic of India from 1950. Therefore
the Income Tax Act, 1961, is [43 of 1961].
In the
Income Tax Act, 1961 (the Act), ‘definitions’ can be found in section 2 of the
Act, which applies to the whole Act unless the context otherwise requires.
Definitions are also found in sections 3, 17, 27, 43, 55, among several other
sections of the Act. It has to be carefully noted whether a particular
definition applies to the whole Act, or a Chapter, or a section, or group of
sections or a sub-section. If a particular definition applies to a specific
Chapter, its meaning cannot be used in another Chapter unless it is stated
otherwise. This is also true for sections, groups of sections, and so on.
Generally definitions
can be categorized in five types
(i) ‘Inclusive definitions’
‘Inclusive definitions’ can be identified by the presence of the word
‘includes’ in the definition. An inclusive definition allows including, within
its ambit, anything which is similar to the term defined.
FOR EXAMPLE:
Sections 2(8)
"assessment" includes reassessment. Therefore ‘protective assessment’
is also an assessment. Section 2(12A) "books or books of account"
includes ledgers, day-books, cash books…”, Section 2(13) "business"
includes any trade, commerce or manufacture…”, Section 2(15) "charitable
purpose" includes relief of the poor, education, medical relief…”, Section
2(24) "income" includes—(i) profits and gains; (ii) dividend..”
(ii) ‘Exhaustive
definitions’
‘Exhaustive definitions’ can be identified by the presence of the word ‘means’
in the definition. An exhaustive definition does not allow including anything
from outside to the scope of the definition. It restricts the meaning therefore
it may also be called restrictive definitions.
FOR EXAMPLE:
Sections 2(1)
"advance tax" means the advance tax payable in accordance with the
provisions of Chapter XVII-C.” Therefore anything which is not stated in
Chapter XVII-C cannot be interpreted as advance tax. Section 2(33)
"prescribed" means prescribed by rules made under this Act, Section 2(42B)
"short-term capital gain" means capital gain arising from the
transfer of a short-term capital asset. In this category of definitions
anything beyond the scope of definitions is not permitted.
(iii) ‘Adoptive
definition’
‘Adoptive definition’ can be identified by the presence of a reference of
other Acts in the definition. In this category instead of defining the term
afresh, for the purpose of the Act, the definitions from other Acts are adopted
in the Act.
FOR EXAMPLE:
Section
2(20)"director", "manager" and "managing agent",
in relation to a company, have the meanings respectively assigned to them in
the Companies Act, 1956 (1 of 1956)”, Section 2(37) "public servant"
has the same meaning as in section 21 of the Indian Penal Code (45 of
1860)”.
(iv) ‘Exclusive definitions’
‘Exclusive
definitions’ can be identified by the presence of the phrase ‘does
not include’. In this category something is expressly excluded from the
definition.
FOR EXAMPLE:
Section
2(14)"capital asset" means property of any kind held by an assessee,
whether or not connected with his business or profession, but does not include
— (i) any stock-in-trade, consumable stores or raw materials held for the
purposes of his business or profession…”
(v) ‘Combined
definitions’
‘Combined
definitions’ can be identified by
the presence of both the words ‘means’ and ‘includes’ in the definition. In
this category, on one hand it restricts inclusion, and on the other, it allows
inclusion.
FOR EXAMPLE
Section 2(7) "assessee" means a
person by whom any tax or any other sum of money is payable under this Act, and
includes — (a) every person in respect of whom any proceeding under this Act
has been taken…”
Significance of a few phrases used
generally at the beginning of some of the provisions
Significance
of a few phrases used generally at the beginning of some of the provisions to
indicate a special meaning assigned to them.
(i) “Notwithstanding anything contained
in…” (Non-obstante
clause)
The Latin phrase ‘non obstante’ means ‘notwithstanding’,
which means in spite of; in spite of the fact that; without being opposed or
prevented by; although; regardless of; irrespective of. It seeks to give
the provision an overriding effect as against any contrary provision that may
be found either in the same enactment or (if the words so suggest) in some
other statute; it is used to avoid the operation and effect of all contrary
provisions.
FOR EXAMLPE :
Sections 9(2), Section 10A (6), Section
10A (8), Section 12(3), Section 13(4), Section 40 respectively
Notwithstanding anything contained in this Act
(ii) “Subject to the provisions of…”
When any provision contains this phrase, it attaches a condition that the provisions of the specified section are also to be complied with. That is, while complying with the provision where this phrase occurs, other provision mentioned therein must also be complied with. Those provisions may be this Act/sub-section/clause/this section/other provisions of this section/sections
When any provision contains this phrase, it attaches a condition that the provisions of the specified section are also to be complied with. That is, while complying with the provision where this phrase occurs, other provision mentioned therein must also be complied with. Those provisions may be this Act/sub-section/clause/this section/other provisions of this section/sections
FOR EXAMPLE:
Sections 5(1); Section 10(2), Section 10A
(1); 11 (1); Section 32AB (1); respectively
(iii) “Save as otherwise provided in this Act…”
When any provision contains this phrase it implies that the provision of this section has to be applied without affecting any provisions in which something else has been stated.
When any provision contains this phrase it implies that the provision of this section has to be applied without affecting any provisions in which something else has been stated.
In legal context, save means
except, but, other than; to preserve something from harm, injury, loss, etc. This phrase seeks to keep applicability of
any other provision on the same subject unaffected.
FOR EXAMPLE :
Sections 1(3) and Section
14]
(iv) “Without prejudice to…”
When any provision contains this phrase it implies that the provision has to be applied without affecting other provision of the Act which may deal with same subject matter. Other provisions may be – the provisions of sub-section/the generality of the provisions of.
When any provision contains this phrase it implies that the provision has to be applied without affecting other provision of the Act which may deal with same subject matter. Other provisions may be – the provisions of sub-section/the generality of the provisions of.
FOR EXAMPLE :
Sections 12AA(4); Section 13(2)
respectively
(v) “Nothing
contained in section … or section … shall operate so as to exclude from…”
When any provision contains this phrase it implies that referred sections are excluded from the applicability of the whole section. [Refer section 13(1), 13 (7), 13 (8)]
When any provision contains this phrase it implies that referred sections are excluded from the applicability of the whole section. [Refer section 13(1), 13 (7), 13 (8)]
(vi)
“Sub-section”
A
sub-section is a part of a section. A
sub- section starts with a capital letter and ends with a full stop. When parts
of a section are interrelated, or when one whole provision emerges out by putting all the parts of the section together, then those parts are referred to
as sub-sections.
Examples of parts being
sub-sections may be seen in sections 1, 44AD, 139 and so on as parts of these
sections like section 1(1), 1(2), 1(3) and 44AD (1), 44AD (2), 44AD (6), 139
(4) and 139 (9) are interrelated and one whole provision of the respective
section emerges out by putting together all the parts of these sections.
(vii)
“Clauses”
Whereas a clause may be
a part of either a section or a sub-section. A clause starts with a small letter and ends with a semicolon. But the last clause ends with a full
stop. This is because a sub-section is a complete sentence whereas a clause is
a part of a sentence.
(viii)
“Proviso”
A proviso qualifies the
generality of the main enactment by providing an exception and taking out from
the main provision, a portion, which, but for the proviso would be part of the main provision. A proviso, must, therefore, be considered in relation to the
principal matter to which it stands as a proviso.
A proviso defeats the operation
or conditionality of a ‘rule’ (section/sub- section/clause/sub-clause etc.)
below which it is placed. The subject matter of ‘rule’ and the proviso thereof
should relate to each other.
A proviso must be interpreted harmoniously
with the section or sub-section to which it is appended. Unless the words of
the proviso indicate otherwise, the proviso applies to the whole of the main
part of the section or subsection under which the proviso has been inserted.
FOR EXAMPLE
Where the main section contained two
periods, eighteen months and one year, and the proviso used the words “the
period”, it was held that the proviso applied to both the period mentioned in
the main section.
A proviso is a clause in a statute, which
begins with the phrase Provided that. Literally it means ‘on the condition
or understanding that’. A
proviso has one or more of the following three functions:
(a) Exception to the main provision;
(b) Condition to the main provision;
(c) Additional requirement.
KNOW THE NUMBER OF A PROVISO
First proviso begins with the phrase
‘Provided that’, second proviso with ‘Provided further that”, and subsequent provisos
with ‘Provided also that’. If the proviso starts with ‘Provided also that’ it
has to be manually counted to know whether it is third proviso, fourth proviso,
and so on. Reference may be made to section 10(23C) as it has eighteen provisos
(ix)
“Explanation”
The object of an Explanation to a
statutory provision is (i) to explain the meaning and intendment of the Act
itself; (ii) to provide an additional support to the dominant object of the Act
in order to make it meaningful and purposeful; (iii) an Explanation cannot in
anyway interfere with or change the enactment or any part thereof, but where
some gape is left which is relevant for the purpose of the Explanation in order
to support the mischief and advance the object of the Actit can help or assit the
court in interpretation the true purport
and intendment of the enactment.
In other words, an Explanation is
introduced by the Legislature for clarifying some doubts or removing confusion
which may possibly arise from the existing provisions. The normal principle in
construing an Explanation is to understand it as explaining the meaning of the
provision to which it is added.
Explanation is normally
clarificatory and retrospective in operation.
The Explanation does not enlarge
or limit the provision, unless the Explanation purports to be a definition or a
deeming clause.
(x) "Prescribed"
In section 2(33) of the Income Tax
Act, 1961, the word 'prescribed' is defined as "prescribed" means
prescribed by rules made under this Act ; Whenever in any provisions of the
Income Tax Act, 1961, the word ‘prescribed’ or group of words ‘as may be
prescribed’ or 'prescribed form verified in the prescribed manner' is found, it
suggests that there shall be some provisions in a rule or Form in the Income
Tax Rules, 1962. Reference may be made to section 10(5) to find Rule 2B,
section 10(13A) to find Rule 2A, and so on.
