INTERPRETATION OF STATUTES
By: Syed Hassaan Naeem
14 November 2014
What is a statute?
A statute is a written law passed by a legislative body/
legislature at the federal or province level. Statutes set forth
general propositions of law. A statute may prohibit a certain
act, direct a certain act, make a declaration, or set forth
governmental mechanisms to aid society
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Interpretation of Statutes
Source/ authority of law
Every law derives its source from the Constitution which is
the supreme/ fundamental law of the land. Therefore, all
statutes must be in harmony with the Constitution and
should not be in conflict thereto
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Interpretation of Statutes
Constitution of Pakistan, 1973
The Preamble to our Constitution is important to refer and its
opening para reads as under –
“Whereas sovereignty over the entire Universe belongs to
Almighty Allah alone, and the authority to be exercised by
the people of Pakistan within the limits prescribed by Him
is a sacred trust;”
Cont’d.
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Interpretation of Statutes
Constitution of Pakistan, 1973
Article 7 defines ‘State’ to read –
"…..the State" means the Federal Government, Majlis-eShoora (Parliament), a Provincial Government, a Provincial
Assembly, and such local or other authorities in Pakistan
as are by law empowered to impose any tax or cess.”
Cont’d.
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Interpretation of Statutes
Constitution of Pakistan, 1973
Part III of the Constitution describes the composition of ‘the
Federation of Pakistan’ which consists of the Parliament.
Article 50 provides the definition of Parliament to read –
“50.
Majlis-e-Shoora (Parliament)
There shall be a Majlis-e-Shoora (Parliament)
of Pakistan consisting of the President and two
Houses to be known respectively as the
National Assembly and the Senate.”
Cont’d.
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Interpretation of Statutes
Constitution of Pakistan, 1973
Per Article 41, the President shall be the Head of State and
shall represent the unity of the Republic. The President is
elected by the members of an electoral college consisting of (a)
the members of both Houses (the National Assembly
and the Senate); and
(b)
the members of the Provincial Assemblies
Article 51 describes the constituents of the National Assembly
whereas Article 59 describes the Senate
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Interpretation of Statutes
Authority to levy a tax
The authority to levy a tax is derived from the Constitution which
allocates the power to levy various taxes between the Centre and
the provinces. Article 70 read with Article 73 (Procedure with
respect to Money Bill) prescribe the procedure of enacting a law
more specifically a law that imposes a fiscal charge on the subject.
An important restriction on this power is Article 77 of the
Constitution which states –
“77
Tax to be levied by law only.
No tax shall be levied for the purposes of the
Federation except by or under the authority of Act
of Parliament.”
Cont’d.
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Interpretation of Statutes
Authority to levy a tax
Therefore each tax levied or collected has to be backed by an
accompanying law, passed either by the Parliament or the
Province.
Article 75 mandates that every Bill (if passed by the respective
House) shall be presented to the President for his assent and shall
only be implemented after President’s assent
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Interpretation of Statutes
Laws via Ordinances
Article 89 authorizes the President to promulgate laws, under
special circumstances.
“89.
Power of President to promulgate Ordinances.
(1)
The President may, except when the Senate or
National Assembly is in session, if satisfied that
circumstances exist which render it necessary
to take immediate action, make and
promulgate an Ordinance, as the
circumstances may require.
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Interpretation of Statutes
Cont’d.
Laws via Ordinances
(2)
An Ordinance promulgated under this Article
shall have the same force and effect as an Act
of Parliament and shall be subject to like
restrictions as the power of Parliament to make
law.”
An Ordinance repeals after the expiry of 120 days of its
promulgation.
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Interpretation of Statutes
Constitutionally established scheme of taxation
Article 142 of the Constitution, distributes legislative powers including
taxation, between the National and the Provincial assemblies. The
Fourth Schedule to the Constitution enumerates these subject matters
with the use of Legislative Lists. Part I of the Fourth Schedule lists
down the powers of the Federal govt. to levy/ impose taxes at the
Federal level
Entries 47 and 48 of Part I of the Legislative List respectively empower
the Federation to levy –
(a)
Taxes on income other than agricultural income;
(b)
Taxes on corporations
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Interpretation of Statutes
What is Tax law?
It covers the rules, policies and laws that oversee the tax
process, which involves charges on estates, transactions,
property, income, etc. by the government. Taxation also
includes duties on imports from foreign countries and all
compulsory levies imposed by the government upon
individuals for benefit of the state
In Pakistan, the Income Tax Ordinance, 2001 governs the
taxation of income and is the governing law that deals with
the subject of direct taxation at federal level
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Interpretation of Statutes
Structure of a Tax law
The generic structure of a fiscal law is as under –
(i)
Preamble
(ii)
Definitions
(iii)
Charging provisions
In nutshell, the framework of tax law consists of –
(i)
Levy
(ii)
Assessment
(iii)
Recovery
Cont’d.
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Interpretation of Statutes
Structure of a Tax law
The provisions of a fiscal law are regulated through Rules
that are separately legislated under the delegated authority.
Section 237 of the Income Tax Ordinance, 2001 gives
authority to the Federal Board of Revenue (which
administers the direct tax law in Pakistan) to make Rules for
the purposes of the Ordinance.
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Interpretation of Statutes
Interpretation of Statutes
Statutory interpretation is the process by which courts interpret
and apply legislation. Sometimes the words of a statute have a
plain and straightforward meaning. But in many cases, there is
some ambiguity or vagueness in the words of the statute. To find
the meanings of statutes, various tools and methods of statutory
interpretation are used, including traditional canons of statutory
interpretation, legislative history, and purpose.
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Interpretation of Statutes
“Read the Statute, Read the Statute, Read the Statute!”
The language of the text of the statute serves as the starting
point for any inquiry into its meaning. To properly understand
and interpret a statute, one must read the text closely,
keeping in mind that initial understanding of the text may not
be the only plausible interpretation of the statute or even the
correct one!
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Interpretation of Statutes
Tools for analyzing a Statute
Although some statutes appear simple and straightforward at first
glance, but upon further examination, it may appear that the terms
of the statute do not directly address the legal issue. Statutory terms
may be ambiguous because the enacting legislature did not
consider the exact factual situation that is being analyzed when the
statute was being drafted and debated. Changing circumstances
may also require that an old statute be applied to new issues that
the enacting legislature did not expect or could not have foreseen.
There are several tools that can help to determine the meaning of
an ambiguous statute, or to choose between multiple plausible
interpretations of the same statute
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Interpretation of Statutes
General principles of interpretation
The term interpretation means “To give meaning to”.
Governmental power has been divided into three wings
namely the legislature, the executive and the judiciary.
Interpretation of statues to render justice is the primary
function of the judiciary. It is the duty of the Court to interpret
the law and give meaning to each word of the statute.
The most common rule of interpretation is that every part of
the statute must be understood in a harmonious manner by
reading and construing every part of it together
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Interpretation of Statutes
Cont’d.
General principles of interpretation
The object of interpretation of statutes is to determine the
intention of the legislature conveyed expressly or impliedly in
the language used
The Supreme Court Pakistan has time and again held that if
two interpretations are possible of the same statute, the one
which validates the statute must be preferred
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Interpretation of Statutes
Kinds of Interpretation
There are generally two kinds of interpretation –
(i) literal interpretation; and
(ii) logical interpretation
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Interpretation of Statutes
Literal interpretation
Giving words their ordinary and natural meaning is known as
literal interpretation. Courts are not allowed to modify the
language of law and if the meaning is clear and unambiguous,
effect should be given to the provisions of a statute whatever
may be the consequence. The idea behind such a principle is
that the legislature, being the supreme law making body must
know what it intends in the words of the statute
Cont’d.
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Interpretation of Statutes
Literal interpretation
The bare words of the law must be construed to get the
meaning of the statute and one need not probe into the
intention of the legislature. The elementary rule of construction
is that the language must be construed in its grammatical and
literal sense
The Golden Rule is that the words of a statute must, prima
facie, be given their ordinary meaning. This interpretation is
supreme and is called the golden rule of interpretation
Cont’d.
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Interpretation of Statutes
Literal interpretation
In Bhavnagar University v. Palitana Sugar Mills Pvt. Ltd., the
Supreme Court of India held that according to the
fundamental principles of construction the statute should be
read as a whole, then chapter by chapter, section by section
and then word by word
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Interpretation of Statutes
Exceptions to the rule of literal interpretation
Generally a statute must be interpreted in its grammatical
sense but under the following circumstances, it may not be
possible –
(a)
ambiguity
(b)
inconsistency
(c)
incompleteness or lacunae
(d)
unreasonableness
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Interpretation of Statutes
Logical interpretation
If the words of a statute give rise to two or more constructions,
the construction which validates the object of the law must be
given effect while interpreting
It is better to validate a thing than to invalidate it or it is better
the law prevails than perish
The purpose of construction is to ascertain the intention of the
parliament
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Interpretation of Statutes
Internal aids of interpretation
The general rule of interpretation is that statutes must prima
facie be given their ordinary meaning. If the words are clear,
free from ambiguity there is no need to refer to other means
of interpretation. But if the words are vague and ambiguous
then internal aid may be sought for interpretation
Cont’d.
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Interpretation of Statutes
Internal aids of interpretation
Context
If the words of a statute are ambiguous then the context
must be taken into consideration. The context includes other
provisions of the statute, its preamble, the existing state of
law and other legal provisions. The intention behind the
meaning of the words and the circumstances under which
they are framed are to be considered
Cont’d.
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Interpretation of Statutes
Internal aids of interpretation
Title
Title is not part of enactment. It cannot be used to restrict
the plain meaning of the words in an enactment
Cont’d.
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Interpretation of Statutes
Internal aids of interpretation
Preamble
The law starts with a Preamble. The main objective and
purpose of the law are found in the Preamble the statute.
Preamble is the Act in a nutshell. It contains the recitals
showing the reason for enactment of the law.
If the language of law is clear, the Preamble must be
ignored. The preamble is an intrinsic aid in the interpretation
of an ambiguous law
Cont’d.
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Interpretation of Statutes
Internal aids of interpretation
Headings
A group of sections are given under a heading which act as
their preamble. Headings are prefixed to sections. They are
treated as preambles. If there is ambiguity in the words of a
statute, headings can be referred
Cont’d.
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Interpretation of Statutes
Internal aids of interpretation
Definition/ Interpretation clause
The legislature can lay down legal definitions of its own
language, if such definitions are embodied in the statute
itself, it becomes binding on the Courts
Cont’d.
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Interpretation of Statutes
Internal aids of interpretation
Conjunctive and Disjunctive words
The word “and” is conjunctive and the word “or” is
disjunctive. These words are often interchangeable. The
word ‘and’ can be read as ‘or’ and ‘or’ can be read as ‘and’
Gender
Words using the masculine gender are deemed to include
feminine also
Cont’d.
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Interpretation of Statutes
Rule of ‘ejusdem generis’
Ejusdem generis means “of the same kind”. If general words
follow particular words pertaining to a class, category or genus
then it is construed that general words are limited to mean the
person or thing of the same general class, category or genus
as those particularly exposed
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Interpretation of Statutes
CONSTRUCTION OF TAXING STATUTES
Explanations
In certain provisions of a statute, explanations may be
needed when doubts arise as to the meaning of that
particular section. Explanations are given at the end of the
section and it is part and parcel of the enactment.
The effect of an explanation is taken to be from the day
when the statute was first enacted
Cont’d.
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Interpretation of Statutes
CONSTRUCTION OF TAXING STATUTES
Introduction
Statutes imposing taxes or monetary burdens are to be
strictly construed. The logic behind this principle is that
imposition of taxes is a kind of imposition of penalty which
can only be imposed if the language of the statute
unequivocally says so. Any kind of intendment or
presumption as to tax does not exist
Cont’d.
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Interpretation of Statutes
CONSTRUCTION OF TAXING STATUTES
Tax and Fee
In case of a fee, there is a specific service rendered to the
fee payer (Quid pro quo), whereas for the taxpayer, no
direct services are rendered but the service assumes the
form of public expenditure rendered to the public at large
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Interpretation of Statutes
RULES OF INTERPRETATION
Charging Section
The section that charges tax must have clear words. Before taxing any
individual it must be clearly established that the person falls within the
purview of the charging section by clear words. If a person cannot be
brought within the four corners of the tax law, he cannot be taxed unless
the law specifies him to be taxable in clear and unequivocal terms
It is a settled proposition that in case of interpreting a taxing statute, one
has to look into what is clearly stated. There is no room for any
intendment, presumptions or equity. Words cannot be added or
substituted to find a meaning in a statute so as to serve the intention of
the legislature. Every taxing statute must contain three aspects; subject
of tax, person to be taxed and the rate of tax
Cont’d.
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Interpretation of Statutes
RULES OF INTERPRETATION
Strict and favourable construction
Taxing enactment should be strictly construed and the right
to tax should be clearly established. Equitable construction
should not be taken into account
Courts should not strain words and find unnatural meaning to
fill loopholes. If the provision can be interpreted in two
ways, then the one favoring the taxpayer must be taken into
consideration
Cont’d.
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Interpretation of Statutes
RULES OF INTERPRETATION
Clear Intention to impose or increase tax
The intention to impose or increase tax must be clear and in
unambiguous language
Prospective operation
The cardinal principle of tax laws is that the law to be applied to a
taxpayer is the law in force in the tax year unless otherwise provided
expressly or by necessary implication
No retrospective effect to fiscal statute is to be given unless the language
of the statute is very clear and plain. It has been held that fiscal statutes
are generally not retrospective unless otherwise provided expressly in
clear words
Cont’d.
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Interpretation of Statutes
RULES OF INTERPRETATION
Meaning in common parlance
In finding out the meaning of a taxing statute, the meaning in
common usage, parlance specially in commercial and trade
circles ought to be considered
Fiscal statute to be read as a whole
The entire provisions of a fiscal statute has to be read as a
whole and not in piecemeal to find out the intent of the
legislature
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Cont’d.
Interpretation of Statutes
RULES OF INTERPRETATION
Spirit of law
A person is not liable to tax on the spirit of law or logic or
reason
Substance over form
The legal aspect of a particular transaction for levy of tax
over the form of the transaction is to be considered
Cont’d.
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Interpretation of Statutes
RULES OF INTERPRETATION
Double taxation
In interpreting a fiscal statute, if one meaning gives rise to
double taxation and other meaning gives rise to single
taxation, the interpretation must be in favour of single
taxation
Benefit of doubt
In case of doubt, it should be decided in favour of the
taxpayer even if such a decision is detrimental to the
Revenue
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Cont’d.
Interpretation of Statutes
RULES OF INTERPRETATION
Plain meaning
When writing statutes, the legislature intends to use ordinary
words in their ordinary senses. The Supreme Court discussed
the plain meaning rule in certain cases and it has been held
that "it is elementary that the meaning of a statute must, in the
first instance, be sought in the language in which the act is
framed, and if that is plain... the sole function of the Courts is
to enforce it according to its terms”. And if a statute's
language is plain and clear, the Court further warned that "the
duty of interpretation does not arise, and the rules which are
to aid doubtful meanings need no discussion”
Cont’d.
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Interpretation of Statutes
RULES OF INTERPRETATION
Rule against surplusage
Where one reading of a statute would make one or more
parts of the statute redundant and another reading would
avoid the redundancy, the other reading is preferred
Specific law prevails over the general law
If in a situation where both specific and general law are
applicable, the specific law should prevail over the general
law
Cont’d.
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Interpretation of Statutes
Thank You