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CA Intermediate · Corporate and Other Laws · Interpretation of Statutes

A provision in a taxing statute is capable of two reasonable meanings. One meaning imposes the levy on a transaction; the other leaves it outside the levy. Both readings are grammatically sound, and there is no ambiguity about the legislative purpose beyond this. Which approach is consistent with the settled rules of interpretation of fiscal statutes?

The strict-construction approach applies: the words are read as they stand, nothing is added, and if real doubt remains in a charging provision, the construction favourable to the assessee is adopted. A tax can be imposed only by clear words.

  1. AAdopt the meaning favouring the Revenue, because taxes fund public needs
  2. BRead the words strictly and, if real doubt remains, adopt the construction favourable to the assesseeCorrect
  3. CAdd words to the provision to fill the gap in favour of the Revenue
  4. DIgnore the text and apply equity to decide what is fair

Explanation

Charging provisions are strictly construed; nothing is read in or implied, and a person can be taxed only by clear words. If genuine doubt remains, the interpretation favouring the subject is adopted. Option A reverses this and option C adds words, which is not allowed in taxing statutes.

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