Taxing provisions often has the tendency to get complex and difficult to interpret in certain situations. Given the dynamic business environment and global business interaction, the way the businesses transact keeps on modifying. There are possibilities that the way transactions occur, changes, over the period of time as compared to the period when the law was legislated. Such situations often end up making the interpretation more tricky for the judiciary.
One such situation arises when different legal views/decisions in respect of a particular taxing provisions are available and such views are opposite. It can become difficult for the judiciary to go with one set of views and ignore the other. An example of one such situation can be the allowability for the deduction of Employee’s contribution to ESIC/PF paid after the due date of the respective statute but before the due date of filing of Income-tax return. There are contrary views available for this case wherein several high courts have ruled in favor of the assessee while a few high courts have also ruled against the assessee and disallowed the said contribution.
Now the question arises which of the two interpretations should be followed and adopted?
Supreme Court in the case of COMMISSIONER OF INCOME-TAX, WEST BENGAL I VERSUS VEGETABLE PRODUCTS LIMITED observed that:
There is no doubt that the acceptance of one or the other interpretation sought to be placed on section 271(1)(a)(i) by the parties wilful lead to some inconvenient result, but the duty of the court is to read the section, understand its language and give effect to the same. If the language is plain, the fact that the consequence of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the legislature to step in and remove the absurdity. On the other hand, if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well-accepted rule of construction recognised by this court in several of its decisions. Hence, all that we have to see is, what is the true effect of the language employed in section 271(1)(a)(i). If we find that language to be ambiguous or capable of more meanings than one, then we have to adopt that interpretation which favours the assessee, more particularly so because the provision relates to imposition of penalty.
Clearly laid out in this judgment, th
