1. INTERPRETATION OF STATUTES
By: Syed Hassaan Naeem
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14 November 2014

2. 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

3. 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

4. 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.

5. Constitution of Pakistan, 1973
Article 7 defines ‘State’ to read –
"…..the State" means the Federal Government, Majlis-e-Shoora (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.

6. 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.

7. 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 -
the members of both Houses (the National Assembly and the Senate); and
the members of the Provincial Assemblies
Article 51 describes the constituents of the National Assembly whereas Article 59 describes the Senate

8. 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.

9. 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

10. 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.
Cont’d.

11. 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.

12. 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 –
Taxes on income other than agricultural income;
Taxes on corporations

13. 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

14. Structure of a Tax law
The generic structure of a fiscal law is as under –
Preamble
Definitions
Charging provisions
In nutshell, the framework of tax law consists of –
Levy
Assessment
Recovery A
Cont’d.

15. 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.

16. 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.

17. “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!

18. 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

19. 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
Cont’d.

20. 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

21. Kinds of Interpretation
There are generally two kinds of interpretation –
literal interpretation; and
logical interpretation

22. 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.

23. 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.

24. 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

25. 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 –
ambiguity
inconsistency
incompleteness or lacunae
unreasonableness A

26. 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

27. 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.

28. 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.

29. 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.

30. 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.

31. 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.

32. 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.

33. 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.

34. 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

35. 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.

36. 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.

37. 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

38. 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.

39. 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.

40. 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.

41. 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 S T
Cont’d.

42. 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.

43. 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
Cont’d.

44. 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.

45. 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.

46. Thank You