Every CA student goes through various laws right from CPT to Final Level. All the students are supposed to have a sound knowledge of various kinds of laws (Taxation laws, Commercial and Mercantile Laws, Labor Laws, Security Laws, Economic Laws etc.) to be a Chartered Accountant and a successful professional in future. There are plenty of reference books that are available in market and which help in understanding of Law. Laws are made based upon the requirements of the environment and society under which it operates. So as society is never static, hence are our laws which keep on changing from time to time. It is never sure that the provisions we study today for our exams will remain same when we will be dealing with our client. And it's then that no such books will help us and we will have to go back to our real Acts. However, reading a language of a bare act is not at all similar to reading a book in your shelf. It requires special understanding of the language of law and interpretation of statues. In such a scenario, how fair is it to pass the exams with reading and understanding the current laws with the help of those reference books without ever referring to the Bare Acts and trying to get insights about them.
Here I am trying to figure some points out that every CA or CS student must be aware of while reading a Law. The list is, however, not exhaustive.
1. Laws are legislatures passed either in the Parliament of India or any of the State Legislatures of states. These contain various rules and regulations on different issues of a nation. However, not every government (Central or State) is empowered to make and pass the law on every issue. The powers have been given in the Seventh Schedule to The Constitution of India which divides it in three lists:
• Union List
• State List
• Concurrent List
(issues on which both State and Central governments are empowered to make laws).
2. How many of us have ever questioned that why the word 'Central' is prefixed before the name of a few Acts. Or how many of us think that it is prefixed with the central laws (those passed by the parliament) and not with State Laws. Well, what about Customs Act, 1962 then?
It is a central Act passed by the Parliament of India and does not contain the word 'Central'. That's certainly an incomplete answer. Off course, the word 'Central' is always prefixed with Central Laws. But not with all of them. Laws which are made on the issues on which both the Governments are empowered to make laws are prefixed with word 'Central' by the Central Government so as to distinguish them from the State law. (E.g. Central Sales Act, Central Excise Act contains the word 'Central' because state governments are also empowered to make laws on Sales (Intra-State) and Manufacturing (of Alcohol, narcotics, opium and Indian Hemp). And Customs Act, 1962 does not contain the word 'Central' because no state government has been empowered to make law on Imports and exports.)
Please note that Income tax act, 1961 does not contain the word 'Central' even though the state governments are empowered to make law on Income (Agricultural) because till date, no state has framed any Law governing the taxation of Agricultural Income.
3. If you have ever picked up any Bare Act, then you would have certainly seen something like No _ of Year _). For e.g. Companies Act, 2013 (No. 18 of 2013). Ever wondered what does it actually convey? It simply denotes the number of Act passed during that year. In the given example, it says that Companies Act, 2013 is the 18th Act which was passed in the year 2013.
4. If someone comes to you and asks a basic question, What is the objective of Income Tax Act, 1961? How are you going to answer it professionally? Well, every act has a preamble which spells out its objectives. Look for it on the very first page of the Act, just above the Section -1. For e.g. Objectives of Income tax Act, according to its preamble, are to consolidate and amend the law relating to income-tax and super-tax.
5. Every Act is divided between chapters and sections. Further, it has sub-sections, clauses and sub-clauses. But, if I ask you to speak "Section - 40(1)", how are you going to? Sub-section 1 of section 40 or Clause 1 of Section 40? Well, that's practically impossible to speak without seeing the given section in the act. Because, if there is any base line given after the section, then it's a clause, otherwise sub-section. Here is an elaborative example from Income tax Act: If you look up at section 24 of Income Tax Act, it says:
24. Income chargeable under the head "Income from house Property" shall be computed after making the following deductions, namely:-
(a) A sum equal to "There is a base line between (a) and (24). Hence it will be read as clause (a) of Section 24. However, if you look at section 23, it goes something like this: 23. (1) for the purposes of section 22." One can see there is no base line between (1) and (23). Hence, it will be read as sub-section (1) of section 23.
6. Now, why does lawmaker sometimes use "a, b, c..." as clauses and sometimes "1, 2, 3"? Section 40(a) and Section 2(1)? Is it on his will only? Certainly not. Actually if there are only 26 or less clauses to be added, then "a, b, c" are used. And if there are more than that then "1, 2, 3" are used.
7. Tired of cramming those confusing sections (40A(2), 47A)? What does this "A" meant to be? It generally denotes Amendment made.
8. Inclusive definitions are part of every law. The word "Include" that is used for creating Deeming Fiction extends the scope of a definition beyond its general meaning. In a Layman's Language, if there is a definition that starts with a word "include", it simply means that in addition to what is generally assumed to be the meaning of that word, following shall also be deemed to have included.
9. Every Law has many conditions to be satisfied for a provision to be applicable. And such conditions are usually divided with "AND" or "OR". What difference do both create? If there is "AND" between 2 or more conditions, then all of them have to be satisfied. And if there is "OR", then either or any of them has to be satisfied.
10. Exceptions are always there; even in the law. Many of them. They are presented with the help of Proviso's. Remember those provisions starting with "Provided that"
11. Case Laws are always a part of any Law. Hence, it is extremely important to learn about their correct citation.
Let's take an example of a Famous Case Law of Excise:
Union of India Versus Delhi Cloth and General Mills Co. Ltd. 1977 (1) E.L.T. (J 199) (S.C.)
- Here, Union of India is an Appellant (or Plaintiff) - One who filed the Case.
- Delhi Cloth and General Mill is a Defendant (or Respondent)
- 1977 is the year of publishing of judgement.
- (1) is the volume no. of journal in which the given judgement was published.
- E.L.T. is Publisher or Journal who published it.
- (J 199) is the page no. on which it was published.
- S.C. is the name of court.
12. Non Obstante Clause - These are the over ruling clauses that nullify certain provisions on satisfaction of the given conditions. These are generally included in this way; Notwithstanding anything contained in. These may also be included with, "Subjects to the provisions of."
Some other Miscellaneous Points
1. Isn't it confusing that in the Income tax act, there is a head by the name of "Income from House Property" and the charging section 22 of which says, "Property consisting of any building or land". Yeah, it definitely is if you don't know that in case of a conflict between heading and provision, the latter shall prevail.
2. There are three ways of minimizing your tax liability:
a) Tax Planning - To use the benefits given by law. Completely Legal.
b) Tax Avoidance - To misuse the Loopholes. According to the verdict of Supreme Court, Tax Avoidance is not illegal. However, no responsible citizen should employ it.
c) Tax Evasion - To give false information of hide it. Illegal practice.
3. Mistakes in the Law are termed as Loopholes. And correcting them is termed as "Plugging the Loophole" Learning to interpret the Law is a continuous and never ending process. I just made my attempt.