Nuances of tax laws - How to understand & interpret?

1. Rule of harmonious construction requires that a provision of law must be read as a whole and not in isolation. The law should be given effect to without adding anything as per the intention of the legislature. The duty of the Court is to supply that interpretation which best defines the intention of the legislature, unless there is an ambiguity, nothing has to be added or deleted to a provision of law. The rule of strict construction must be followed in interpreting the law as much as possible unless the law itself is not clear enough or leaves room for difference of opinion.

Also law must be read as a whole which means that a provision of tax law must be read in harmony and not in isolation unless the law itself indicates an independent provision which can be separated from the other provision. For example, a section divided into various sub-sections must be read as a whole.

2. In taxing statutes, we may find substantive and machinery provisions. A substantive provision is one which lays down the rights and responsibilities of a subject or conferring a benefit or an exemption whereas machinery provision lays down the broad procedural aspect of the substantive law. For example substantive provision may lay down the exemption provisions whereas the rule or notification may lay down the procedural aspect how to avail the exemption provision and what are the conditions that are to be satisfied.

3. The substantive provisions are to be construed strictly whereas a machinery provision may be construed liberally if the situation demands. Charging section of a tax statute must always be construed strictly, likewise an exemption benefit should be allowed only if the subject strictly comes under the boundaries of that benefit.

4. Quite often we come across a legal provision in tax statutes that starts with the words ' notwithstanding anything contained'. This phrase is known as non obstante clause in legal terms, what it means that the provision starting with this clause has been given overriding effect over the other provisions either in the same section or any other provision of the same law or even in some cases it may be used to give overriding effect to a provision over the other laws as well. The intention will depend upon the language used in this regard. 

5. The explanation appended to a section or sub-section is used to clarify, specify, define or elaborate a particular ingredient of a provision or terms used in that provision. The explanation may be applicable in respect of the particular section wherein it has been appended and may be applicable only for the purposes of that section. Sometimes in tax laws we find that a term has been defined by the explanation, for example definition of the term relative. In which case it would mean that the term relative shall have the meaning as assigned to it by the explanation appended therein for the purposes of that particular section. More general meaning which is applicable to the whole of the law itself is normally provided under the definition clause of the law.

6. The provisos are used to qualify or restrict the applicability of a section to a particular situation or condition or to define the applicability to a particular situation subject to the conditions prescribed in the proviso itself.

7. We may come across a provision that contains the words' subject to subsection (1) or 2' in that case what it means that the particular section which makes use of these words is subordinate to the other section or sub section which has been referred to in that particular section. However, it does not necessarily mean that the other subsection or section being referred to has been given the overriding effect it is just that the intention of the legislature is to signify that a particular provision is subject to the applicability of the other section/sub section.