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2017-02-01
Finance Minister’s Budget speech marks the very beginning of the Budget saga. It carries high significance providing the purpose and object of the introductions, deletions and amendments to the existing statutes. Courts have in numerous instances referred to and relied on the Budget Speech, Memorandum and Notes on Clauses as external aid to understand the intention of legislature and interpret various tax provisions.
Supreme Court in K.P. Varghese [TS-11-SC-1981-O] had examined the relevance of Budget Speech and held that Budget Speech which states the circumstances in which the amendment came to be passed, explains the reason for the introduction of the Bill, can always be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted. However, in cases where law is clear and unambiguous, the Courts have denied reliance on such external aids. In Anandji Haridas & Co. [TS-5002-SC-1975-O] SC had held that it is only where a statute is not exhaustive or where its language is ambiguous, or uncertain , that external evidence which the statute was intended to remedy, or of the circumstances which led to the passing of the statute may be looked into for the purpose of ascertaining the object of the legislature.
As we inch closer to the FM's speech, Taxsutra Database brings to you a compilation of landmark rulings by the Supreme Court and High Courts which discuss the relevance of Budget speech, Memorandum and Notes on Clauses as an aid to Statutory Interpretation.
1. [TS-11-SC-1981-O] : Mischief to be remedied, Reliance on Budget Speech, Marginal Note: Sub-Sec. (2) to Sec. 52 not applicable in absence of establishment by Revenue that there was an ‘understatement’ of sale consideration in the return - SC explains relevance of budget speech made by the Finance Minister; States that the speech made by the mover of the Bill for the year 1964, which states the circumstances in which the amendment came to be passed, explains the reason for the introduction of the Bill, can always be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted; Further, as regards marginal note to a section, SC holds that they cannot be referred to for the purpose of construing the section but can be relied upon as indicating the drift of the section or to show what the section is dealing with.
2. [TS-5012-SC-2004-O] : Promissory estoppel, Finance Minister’s Speech : Govt bound by its promise made to assessees to abolish purchase tax which was confirmed by Finance Minister of the State’s speech while presenting the budget - SC rules in favour of assessee, upholds HC ruling which in turn had upheld the plea of promissory estoppel ; HC had held that the State Government was bound by its promise/representation made to the milk producers to abolish purchase tax on milk which was confirmed by Finance Minister of the State’s speech while presenting the budget for the year 1996-97.
3. [TS-5002-SC-1975-O] : Finance Minister’s Speech, interpretation when provision of law is clear : External evidences such as Finance Minister’s Speech cannot be imported and used for construction of a provision, the language of which is clear and unequivocal – SC dismisses petitioner-company’s appeal; Holds that to arrive at “available surplus” for purpose of bonus payout, the direct taxes to be deducted has to be at 55% and not 65%; Rejects petitioner’s argument based on FM’s Speech that the actual rate applicable to it is 65% and the 10% is “rebate or relief” given to industrial companies to promote development of industry.
4. [TS-5205-HC-2004(KARNATAKA)-O]
5. [TS-5285-HC-2002(RAJASTHAN)-O]
6. [TS-5035-SC-1985-O] : Reliance on Notes on Clauses and Budget Speech, Wealth Tax Act : Single premium annuities dependent on human life constitute a species life insurance contracts and fall within the expression "any policy of insurance", constitute exempted assets u/s. 5(1)(vi) of the Wealth-tax Act, 1957 – SC relies on Notes on Clauses and Budget Speech of the Finance Minister for the year 1974 which stated that policies where premia are payable for less than ten years, only a proportionate amount of the value of the taxpayer's interest in the policy of insurance will be exempt from wealth-tax; Holds on harmonious reading of Sec. 2(e)(iv) with Sec. 5(1)(vi) and 5(1)(vii) that while non-commutable annuities are wholly outside the purview of wealth-tax, commutable annuities are exempt u/s. 5(1)(vi) and 5(1)(vii) to the limited extent.
