Shivakantjha.org - 'In a Nutshell' - 3: The nature of the retrospective changes proposed in the Finance Bill, 2012: they say what is obvious
'In a Nutshell' - 3
The nature of the retrospective changes proposed in the Finance Bill, 2012: they say what is obvious
By Shiva Kant Jha
April 2, 2012
Linguistic analysis of any provision, of law or letters, is a plastic art. Words mean, they reasonably mean, they can to persuaded to mean, and they can be coerced to mean. It is well-known that “in a debate on what has become the Statute of Westminster, 1932, Mr. Winston Churchill and the Solicitor-General agreed that there was no obscurity in the provisions concerning the Irish Free State, although they took diametrically opposite views concerning their effect.” Such situations abound illustrating both the beauty and bane of English language. Our Constitutional principle is that the law is what the legislature intends through the words used. The function to explore the legislative intention is of the courts. If the legislature finds that on some legal provisions the judiciary missed to catch the meaning intended by it, it can make clarificatory amendments in the existing provisions by adding explanations. I am not reflecting on the retrospective operation of what is called the substantive provisions. In this short article, I focus only on the changes in the Finance Bill relevant to the Vodafone context. In my assessment the changes are merely clarificatory so that the intent of the law makers is not frustrate under forensic process rich in logomachy and semantic sophistry.
While construing Section 9(1)(i) of the Income-tax Act, the intention of the law makers is clear as the word ‘indirectly’ governed all the four situations, and the word ‘through’ was comprehensive enough ( Shorter Oxford English Dictionary ) to take within its sweep even ‘indirect’ transfers demanding ‘look through’ approach. This is how the CBDT Circular No. 372, dated 8th December, 1983 understood it, and wanted others to understand. It was a contemporaneous exposition so deserved due weight ( Verghese Case AIR 1981 SC 1922).
It is worthwhile to reflect that whilst Sections 4 and 5 contemplate normal situations of tax charge on the conventional basis of territorial jurisdiction of the State, Section 9 (1) pertains to ‘Income deemed to accrue or arise in India’, which is not concerned with ‘territoriality’. This ‘deeming’ colours and controls all the concepts incorporated in Section 9 of the Income-tax Act. The Bill seeks to explain what is obviously fair and just; and are designed to clarify what is obvious in common sense, but often not known to our experts in the forensic process. But such thins keep on happening, and such remedies are frequently provided.
The concepts of “property” in the Section 2(14), ‘capital asset’ in Section 9(1)(i) have been clarified through the insertions of explanations. Whilst all rights are merely legally protected interests, ‘property’ is, in the ultimate analysis, a mere bundle right. The word ‘transfer’ cannot merely mean the transfer of papers, when through that act rights are being vested and divested in India. It matters not how the arrangement is choreographed. The words ‘through’, and ‘situate’ are being legislatively made to mean what they precisely mean even in the Concise Oxford Dictionary. What the words ‘property’ ‘transfer' ‘through’ ‘situated in India’ mean in the legal provisions in the Vodafone context, cannot be understood without taking account of the context that all the prime commercial operations, and contractual obligations, adding value and worth to ‘shares’, had their trajectory in India, had their nexus with the economic matrix in India, and thus had close and vital nexus with the territory of India. The shares, wherever they could be transferred in terms of the Company Law, acquired relevance and value on account of the subjacent capital asset in India. All the ‘Explanations’ introduced in Section 9 of the Act, are clarificatory. We must not forget that sophistry and hyper-technicality cannot highjack what is in all fairness due to the Consolidated Fund of India. Viscount Simonds said in Collco Dealings’ Case  1AllER 762: “I would answer that neither comity nor rule of international law can be invoked to prevent a sovereign state from taking steps to protect its own revenue laws from gross abuse or save its own citizens from unjust discrimination in favour of foreigners.”
And for recovering taxes from such non-residents’, the only just ways is, what constitutes the heart of Section 195 of the Income-tax Act, to collect due share of tax before it vanishes in the thin air. In Clark (Inspector of Taxes) v. Oceanic Contractors Inc. (1983) 1 ALL ER 133, 152, the British Judge rightly said: the right question to be asked was s "who … is within the legislative grasp, or intendment, of the statute under consideration?"’
In short, the aforementioned changes proposed in the Finance Bill simply clarify the legislative intention of our law- as originally. Besides, the legislative effort is fair and just to all conflicting claims.