JUDGMENT

Shah, J.—The Tribunal has referred the following question for our opinion under section 256(1) of the Income-tax Act, 1961 ('the Act'):

"1. Whether the Appellate Tribunal is right in law and on facts in holding that as far as sales tax liability in respect of the last quarter was concerned, the said liability would be allowable as deduction for the assessment years 1984-85 to 1987-88 provided the assessee establishes that liability was discharged by actual payment before the date applicable in his case for furnishing the return of income under section 139(1) of the Income-tax Act, 1961 in respect of the relevant previous year in which the liability had been incurred?"

Similar question is referred in number of other subsequent matters. For the purpose of this reference, we take the facts from the order passed by the Tribunal. The assessee - Chandulal Venichand - filed a return for the total income of Rs. 41,210. The return was filed on 20-3-1086. During the assessment proceedings, it was noticed that sales tax liability of the assessee was Rs. 4,18,302 (Rs. 3,80,272 sales tax liability + Rs. 38,030 surcharge). After drawing the attention of the assessee, the said amount was added in the total income of the assessee in view of section 43B of the Act and the assessee was directed to pay tax on income of Rs. 4,83,100. Against that order, the assessee preferred an appeal before the Commissioner. That appeal was partly allowed. However, the contention raised by the assessee that Rs. 4,18,302 representing unpaid sales tax liability should not be included under section 43B, was rejected. Against that order, the assessee preferred an appeal before the Tribunal. The Tribunal heard the said appeal along with other two appeals wherein question of interpretation of section 43B was involved. It was pointed out to the Tribunal that all the three assessees were maintaining accounts on mercantile basis. All of them have separate sales tax accounts in which sales tax deducted from the parties is credited and sales tax paid to the Government is debited and the balance amount is taken directly to the balance sheet and is not taken to the profit and loss account. After considering various contentions raised by the parties, and the decisions cited at the Bar, the Tribunal held that, as far as sales tax liability in respect of last quarter was concerned, the said liability would be allowable deduction for the assessment years 1984-85 to 1987-88, provided the assessee establishes that the liability was discharged by actual payment before the due date applicable in his case for furnishing the return of income under section 139(1) of the Act in respect of the relevant previous year in which the liability had been incurred. The Tribunal negatived the contention of the revenue that proviso to section 43B should not be given any retrospective effect and that the Tribunal should follow the decision of the Special Bench of the Tribunal at Delhi in the case of Rishi Roop Chemical Co. Pvt. Ltd. v. Income Tax Officer [1991] 36 ITD 35 (SB) , by holding that the Ahmedabad Bench has consistently taken a view that, if the assessee has paid the amount in question before the due date applicable in his case for furnishing the return of income under section 139(1), the deduction in respect of liability should be allowed and the bar contained in section 43B would not be applicable. The Tribunal further observed that various other High Courts have also taken the same view. Hence, at the instance of the revenue, this reference.

2. For appreciating the contentions raised by the parties, it would be necessary to refer to the provisions of section 43B which are as under:

"Certain deductions to be only on actual payment.—Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of—

(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or
(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or
(c) any sum referred to in clause ( ii) of sub-section (1) of section 36, or
(d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State financial corporation or a State industrial investment corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing,

shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him:

Provided that nothing contained in this section shall apply in relation to any sum referred to in clause (a) or clause (c) or clause (d) which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return:

Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date.

Explanation 1: For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or clause (b) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1983, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.

Explanation 2: For the purpose of clause (a), as in force at all material times, 'any sum payable' means a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law.

Explanation 3: For the removal of doubts it is hereby declared that where a deduction in respect of any sum referred to in clause (c) or clause (d) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him."

3. The objects and purposes of inserting the said section 43B, as per the Budget speech of the Finance Minister for the year 1983-84, which are reproduced in [1983] 140 ITR (St.) 31, are as under:

"Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty, employer's contribution to provident fund, Employees' State Insurance Scheme, for long period of time. For the purpose of their income-tax assessments, they nonetheless claim the liability as deduction even as they take resort to legal action, thus depriving the Government of its dues while enjoying the benefit of non-payment. To curb such practices I propose to provide that irrespective of the method of accounting followed by the taxpayer, a statutory liability will be allowed as a deduction in computing the taxable profits only in the year and to the extent it is actually paid.............." [Emphasis supplied]

4. The relevant portion of the memorandum explaining the provisions in the Finance Bill, 1983 appearing in [1983] 140 ITR (St.) 160, is as under:

"59. Under the Income-tax Act, profits and gains of business and profession are computed in accordance with the method of accounting regularly employed by the assessee. Broadly stated, under the mercantile system of accounting, income and outgo are accounted for on the basis of accrual and not on the basis of actual disbursements or receipts. For the purposes of computation of profits and gains of business and profession, the Income-tax Act defines the word 'paid' to mean 'actually paid or incurred' according to the method of accounting on the basis of which the profits or gains are computed.

60. Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty, employer's contribution to providend fund, Employees' State Insurance Scheme, etc., for long periods of time, extending sometimes to several years. For the purposes of their income-tax assessments, they claim the liability as deduction on the ground that they maintain accounts on mercantile or accrual basis. On the other hand, they dispute the liability and do not discharge the same. For some reason or the other undisputed liabilities also are not paid. To curb this practice, it is proposed to provide that deduction for any sum payable by the assessee by way of tax or duty under any law for the time being in force (irrespective of whether such tax or duty is disputed or not) or any sum payable by the assessee as an employer by way of contribution to any provident fund, or superannuation fund or gratuity fund or any other fund for the welfare of employees shall be allowed only in computing the income of that previous year in which such sum is actually paid by him." [Emphasis supplied]

From the aferesaid objects and reasons, it is apparent that, even if the assessee is maintaining mercantile accounting system to curb the practice of non-payment of undisputed tax and to claim deduction, section 43B was introduced so that deduction for any sum payable by the assessee by way of tax or duty under any law for the time being in force shall be allowed in computing the income only of that previous year in which such sum is actually paid by him.

5. By the Finance Act, 1987, two provisos in section 43B were inserted with effect from 1-4-1988. It is submitted that the first proviso is inserted to mitigate hardship caused to taxpayers because the sales tax for the last quarter cannot be paid during the previous year under provisions of section 43B, unnecessarily payment of sales tax for the last quarter was disallowed.

After the insertion of the aforesaid two provisos by the Finance Act, 1989, Explanation 2 was inserted with retrospective effect from 1-4-1984. In the memorandum explaining the reasons for introducing the said Explanation it has been, inter alia, stated as under - [1989] 176 ITR (St.) 123:

"24. Under the existing provisions of section 43B of the Income-tax Act, a deduction for any sum payable by way of tax, duty, cess or fee, etc., is allowed on actual payment basis only. The objective behind these provisions is to provide for a tax disincentive by denying deduction in respect of a statutory liability which is not paid in time. The Finance Act, 1987, inserted a proviso to section 43B to provide that any sum payable by way of tax or duty, etc., liability for which was incurred in the previous year will be allowed as a deduction, if it is actually paid by the due date of furnishing the return under section 139(1) of the Income-tax Act, in respect of the assessment year to which the aforesaid previous year relates. This proviso was introduced to remove the hardship caused to certain taxpayers who had represented that since the sales tax for the last quarter cannot be paid within that previous year, the original provisions of section 43B will unnecessarily involve disallowance of the payment for the last quarter.

Certain courts have interpreted the provisions of section 43B in a manner which may negate the very operation of this section. The interpretation given by these courts revolves around the use of the words 'any sum payable'. The interpretation given to these words is that the amount payable in a particular year should also be statutorily payable under the relevant statute in the same year. This is against the legislative intent and it is, therefore, proposed, by way of a clarificatory amendment and for removal of doubts, that the words 'any sum payable', be defined to mean any sum, liability for which has been incurred by the taxpayer during the previous year irrespective of the date by which such sum is statutorily payable.

This amendment will take effect from 1st April, 1984.

Under the existing provisions of section 43B of the Income-tax Act, it is also provided that any sum payable by the assessee as an employer by way of contribution to the provident fund or superannuation fund, etc., is not allowable as a deduction unless the same is paid 'during the previous year on or before the due date'. The payment in respect of the last month of a previous year shall have to be made by the due date and cannot possibly be made in the previous year itself. It is, therefore, proposed that the words 'during the previous year' occurring in the second proviso to section 43B be deleted.

This amendment will take effect from 1st April, 1989.

Unlike other payments referred to in section 43B of the Income-tax Act, the deduction regarding employer's contribution, if denied in a year, is not available as a deduction in any subsequent year also. On account of various reasons like postal delay, strikes or long holidays, the payment of employer's contributions to the respective authorities is delayed even though the payment by a cheque or draft is tendered before the due date. To avoid any hardship being caused in such cases, it is proposed to provide that, if any sum payable by an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees, if made by a cheque, draft or any other mode, has been tendered by the due date, and the actual payment has been realised within fifteen days of the due date, deduction shall be allowed.

This amendment will take effect from 1st April, 1989 and will, accordingly, apply in relation to the assessment year 1989-90 and subsequent years." [Emphasis supplied]

6. Apart from the objects and reasons stated above, the scope and effect of the amendment have been elaborated by the departmental Circular No. 550, dated 1-1-1990 (see Taxmann's Yearly Tax Digest and Referencer 1991, p. 5.59) as under:

"Amendment of provisions relating to certain deductions to be allowed only on actual payment

15.1 Under the existing provisions of section 43B of the Income-tax Act, 1961, a deduction for any sum payable by way of tax, duty, cess or fee, etc., is allowed on actual payment basis only. The objective behind these provisions is to provide for a tax disincentive by denying deduction in respect of a 'statutory liability' which is not paid in time. The Finance Act, 1987, inserted a proviso to section 43B to provide that any sum payable by way of tax or duty, etc., liability for which was incurred in the previous year will be allowed as a deduction, if it is actually paid by the due date of furnishing the return under section 139(1) of the Income-tax Act, in respect of the assessment year to which the aforesaid previous year relates. This proviso was introduced to remove the hardship caused to certain taxpayers who had represented that since the sales tax for the last quarter cannot be paid within the previous year, the original provisions of section 43B will unnecessarily involve disallowance of the payment for the last quarter.

15.2 Certain courts have interpreted the provisions of section 43B in a manner which may negate the very operation of this section. The interpretation given by these courts revolves round the use of the words 'any sum payable'. The interpretation given to these words is that the amount payable in a particular year should also be statutorily payable under the relevant statute in the same year. Thus the sales tax in respect of sales made in the last quarter was held to be totally outside the purview of section 43B since the same is not statutorily payable in the financial year to which it relates. This is against the legislative intent and, therefore, by way of inserting an Explanation it has been clarified that the words 'any sum payable', shall mean any sum, liability for which has been incurred by the taxpayer during the previous year irrespective of the date by which such sum is statutorily payable."

From the aforesaid objects and reasons of introducing section 43B and the proviso as well as from the aforesaid circular issued by the department, it can be stated that:

(A) The objective behind these provisions is to provide for a tax disincentive by denying deduction in respect of a statutory liability which is not paid within time:

(i) Broadly stated, under the mercantile system of accounting, income and outgoings are accounted for on the basis of accrual and not on the basis of actual disbursements or receipts.
(ii) Several cases were noticed where taxpayers were not discharging their statutory liability such as in respect of sales tax, excise duty, etc.
(iii) For the purpose of their income-tax assessments, they were claiming deduction in respect of the liability on the ground that they maintain accounts on mercantile basis. They claimed deduction even though they were taking resort to legal action and not paying the amount. Thus, depriving the Government of its dues while enjoying the benefit of non-payment.
(iv) To curb this practice, section 43B was introduced and it provides that deduction for any sum payable by the assessee by way of tax or duty under any law for the time being in force, otherwise allowable as provided in clauses ( a), ( b), ( c ) and ( d), shall be allowed only in computing the income of that previous year in which such sum is actually paid.

(B) The proviso was introduced to remove the hardship caused to taxpayers who had represented that since the sales tax for the last quarter could not be paid within the previous year, the provisions of section 43B will unnecessarily involve disallowance of the payment for the last quarter. Hence, it was added for the purpose of supplying an obvious omission:

(i) In the context of section 43B, it is declaratory in its nature as it provides that nothing contained in section 43B shall apply in relation to any sum referred to in clause ( a), ( c) or ( d ) which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139.
(ii) Explanation 2 was added as certain courts have interpreted the provisions of section 43B in a manner which may negate the very operation of the section.

7. We would now refer to the contentions raised by the learned counsel for the parties. Mr. Shelat, the learned counsel for the revenue, contended as under:

(a) The Parliament has taken care to categorically mention that the proviso was to come into force with effect from 1-4-1988. Therefore, there is no question of giving retrospective effect, as the date is specified consciously by the Legislature;
(b) The first proviso is neither clarificatory nor explanatory nor declaratory. Original section 43B is clear and unambiguous. However, the proviso was inserted by way of concession by extending the time for payment of tax even beyond the period of the assessment year to mitigate the hardship caused in the last quarter of the previous year. But from this, it cannot be held that it is declaratory or a remedial one;
(c) Wherever the Parliament intended to give retrospective effect, it has done so. It is clear from the fact that Explanation 2 has given retrospective effect from 1-4-1984, even though it was introduced by the Finance Act, 1989, while for the first proviso, it is specifically stated that it shall come into effect from 1-4-1988; and
(d) The normal rule of construction is that the substantial provision in a statute would have prospective effect and not retrospective effect. The first proviso is of substantive nature and not in the nature of Explanation to section 43B as it gives concession by extending the period for payment of tax of the last quarter of the previous year by a few weeks.

8. In support of his contention, Mr. Shelat, the learned counsel for the revenue, has relied upon the decisions of the Delhi High Court in the case of Sanghi Motors v. Union of India [1991] 187 ITR 703 and in the case of Escorts Ltd. v. Union of India [1991] 189 ITR 81 .

9. As against this, Mr. Shah, the learned counsel for the assessee has submitted as under:

(a) The first proviso is a remedial one as it cures the inadvertent mistake which has crept in (or cures a disease because of inept language used in section 43B and, therefore, it would have retrospective effect from the date when section 43B was introduced. Section 43B was introduced to curb the practice of some of the taxpayers who were not discharging the undisputed tax liabilities, even though they were getting deduction by maintaining the accounts on mercantile basis. Without there being any intention on the part of the Legislature not to allow deduction to those assessees who were discharging their tax liabilities within the time prescribed under the respective State Sales Tax Laws, because of inept language used in section 43B, the assessees were put to a lot of inconvenience by literal interpretation of section 43B that the amount ought to have been actually paid during the year in which the liability was incurred. Therefore, to obviate this hardship, the first proviso was introduced as a remedial and curative measure.
(b) The first proviso is required to be introduced as a declaratory or remedial measure mainly because it was not possible to imagine that the Legislature would think that the assessee shall perform the impossible task of paying tax for discharging the sales tax liability of the last quarter ending 31st March of that year. It is contended that it is a well recognised rule of construction that the statutory provision must be construed, if possible, in such a manner so as to avoid absurdity and unjust result which could never have been intended by the Legislature. If it is held that the first proviso is operative only with effect from 1-4-1988, then the remedy provided by the Parliament to cure the disease would be frustrated and the assessee would suffer an irreparable loss, which was never contemplated by the draftsman of section 43B or of proviso, and that too for no fault of the assessee. It is contended that it is a well settled rule of interpretation that the courts should, as far as possible, avoid construction which can attribute irrationality to legislation. For this purpose, he relied upon various passages from the decision of the Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597.
(c) Most of the High Courts have taken a view in favour of the assessee by holding that the first proviso would be effective from 1-4-1984 and that the Tribunal in the State has consistently taken the said view since years. By accepting the said view, the revenue is not going to suffer any loss or that the tax liability of the assessee would not in any way be less. As against that, by accepting the contention raised by the revenue, it would put the assessee into a great difficulty. For this purpose, he referred to the facts of the present case and pointed out that income of the assessee as per the return is only Rs. 41,210 and the sales tax liability as calculated by the ITO is Rs. 4,18,302. If the assessee is required to pay income-tax on the said amount, the assessee would be ruined because practically it would be impossible for him to pay tax on the said amount. It was no fault of the assessee that he paid sales tax amount as per the Gujarat Sales Tax Rules within time, no doubt, after the assessment year.

10. As stated earlier, the objective behind section 43B was to provide for a tax disincentive by denying deduction in respect of a 'statutory liability' which is not paid in time. Section 43B was not intended for disallowance of amount of tax liability which has been paid within time prescribed under the respective laws like Sales Tax Act of the respective States. If the tax liability is discharged within time as prescribed by the respective State Sales Tax Act, then it is declared and clarified by adding proviso that section 43B shall not apply if the sum is actually paid on or before the date on which the return of income is due to be furnished under sub-section (1) of section 139 for the previous year, in which the liability to pay such sum was incurred. This aspect was further clarified by adding Explanation 2 to section 43B. By virtue of Explanation 2 to section 43B, any sum payable by way of tax under the relevant law would mean a sum for which liability is incurred by the assessee in the previous year even though the sum might not have been payable within that year under the relevant law. Explanation 2 and the first proviso to section 43B are required to be read together. While introducing Explanation 2 by the Finance Act, 1989, the object of introducing proviso is further clarified by stating that it was introduced to remove the hardship caused to certain taxpayers who had represented that since the sales tax for the last quarter could not be paid within the previous year, the original provisions of section 43B will unnecessarily involve disallowance of the payment for the last quarter. Further, the first proviso itself declares that nothing contained in section 43B shall apply in relation to any sum referred to in clause (a), (c) or (d ), which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under section 139(1) in respect of the previous year in which the liability to pay such sum was incurred. Because of non obstante clause in the proviso, it has overriding effect on section 43B. Further, it is introduced by realising the difficulty that it was impossible to pay the sum referred in clause (a), (c) or (d ) during the year in which the liability to pay such sum was incurred by the assessee. Hence, it is provided that if the said sum is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income, then section 43B shall not be applicable. Therefore, in our view, the provision is remedial and curative in nature to correct the inadvertent omission. It is stated so by the department by issuing Circular No. 550 as quoted above.

11. Once it is held that the proviso is inserted as a remedial and curative measure for removing the difficulties faced by the taxpayers because of inadvertent mistake or omission which has crept in drafting section 43B, it would be just and proper to hold that it would relate back to the time from the date when section 43B was introduced. This interpretation is not likely to cause any loss to the revenue. The interpretation that proviso to section 43B is effective only from 1-4-1988 would defeat the object and purpose of introducing it. It would cause avoidable difficulties to the taxpayers who discharge their liabilities within the permissible time. It can well be illustrated from the facts of the present case. As per the return filed by the assessee, the total income was of Rs. 41,210. The sales tax liability for the last quarter was Rs. 4,18,302. If the said amount is added in the total income of the assessee, in view of section 43B, then the assessee would be required to pay large amount of tax. As per the calculations by the ITO, he has levied firm tax of Rs. 1,09,287 and remaining amount of tax was to be calculated on the basis of share of the partners. This is bound to cause untold hardship to the small taxpayers.

12. For this purpose in our view, Mr. Shah, the learned counsel for the assessee, has rightly relied upon the following passage from Craies Statute Law at page 395:

"Where a statute is passed for the purpose of supplying an obvious omission in a former statute, or as Parke, J. (afterwards Baron Parke) said in R. v. Dursley, to 'explain' a former statute, "the subsequent statute has relation back to the time when the prior Act was passed. Thus, in Att.-Gen. v. Pougett, it appeared that by a Customs Act of 1873 (53 Geo. 3, c. 33) a duty was imposed upon hides of 9s. 4d., but the Act omitted to state that it was to be 9s. 4d. per cwt., and to remedy this omission another Customs Act (53 Geo. 3 c. 105) was passed later in the same year. Between the passing of these two Acts some hides were exported, and it was contended that they were not liable to pay the duty of 9s. 4d. per cwt., but Thomson C.B., in giving judgment for the Attorney-General, said: 'The duty in this instance was in fact imposed by the first Act, but the gross mistake of the omission of the weight for which the sum expressed was to have been payable occasioned the amendment made by the subsequent Act, but that had reference to the former statute as soon as it passed, and they must be taken together as if they were one and the same Act.'

Where an act is in its nature declaratory, the presumption against construing it retrospectively is inapplicable. In Att.-Gen. v. The obald, section 11 of the Customs and Inland Revenue Act, 1889, as to the liability of voluntary settlements to stamp duty, was held retrospective, although the litigation in which its terms were involved had commenced before it was passed, Acts of this kind, like judgments, decide similar cases pending when the judgments are given, but do not reopen decided cases." [Emphasis supplied]

From the aforesaid principles of interpretation, it can be stated that—

(a) where a 'statute' is passed for the purpose of supplying an obvious omission in a former statute, the subsequent statute would relate back to the time when the prior Act was passed. In the present case, it can be held that the first proviso was added for supplying an obvious omission in section 43B, and
(b) where an Act is declaratory in its nature, the presumption against construing it retrospectively is inapplicable. The proviso is declaratory in its nature. It declares that nothing contained in section 43B shall apply in relation to any sum referred to in clause ( a), ( c) or ( d) which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 133 in respect of the previous year in which the liability to pay such sum was incurred.

Further, it is an established law that like all laws tax laws are also required to be interpreted reasonably and in consonance with justice and as far as possible they should be so interpreted that absurdity or mischief which is likely to be caused, could be avoided. For this purpose, it would be worthwhile to refer to the principles laid down by the Supreme Court in the case of K.P. Varghese (supra). In that case, the Court has, inter alia, held as under:

"...This argument was based on a strictly literal reading of section 52, sub-section (2), but we do not think such a construction can be accepted. It ignores several vital considerations which must always be borne in mind when we are interpreting a statutory provision. The task of interpretation of a statutory enactment is not a mechanical task. It is more than a mere reading of mathematical formulae because few words possess the precision of mathematical symbols. It is an attempt to discover the intent of the Legislature from the language used by it and it must always be remembered that language is at best an imperfact instrument for the expression of human thought and, as pointed out by Lord Denning, it would be idle to expect every statutory provision to be 'drafted with divine prescience and perfect clarity'. We can do no better than repeat the famous words of Judge learned hand when he said:

'...It is true that the words used, even in their literal sense, are the primary and ordinarily the most reliable source of interpreting the meaning of any writing: be it a statute, a contract or anything else. But it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning.'

We must not adopt a strictly literal interpretation of section 52, sub-section (2), but we must construe its language having regard to the object and purpose which the Legislature had in view in enacting that provision and in the context of the setting in which it occurs. We cannot ignore the context and the collocation of the provisions in which section 52, sub-section (2), appears, because, as pointed out by Judge learned hand in the most felicitous language:

'...the meaning of a sentence may be more than that of the separate words, as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create.'

Keeping these observations in mind we may now approach the construction of section 52, sub-section (2).

The primary objection against the literal construction of section 52, sub-section (2), is that it leads to manifestly unreasonable and absurd consequences. It is true that the consequences of a suggested construction cannot alter the meaning of a statutory provision but it can certainly help to fix its meaning. It is a well-recognised rule of construction that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided.... "[Emphasis supplied] (p. 604)

The Court has further observed that the Court must obviously prefer a construction which renders the statutory provision constitutionally valid rather than that which makes it void.

13. For advancing his contention further, Mr. Shah relied upon the decision of the Supreme Court in the case of Union of India v. Filip Tiago De Gama AIR 1990 SC 981, wherein the Court has, inter alia, observed that if the strict grammatical interpretation gives rise to absurdity or inconsistency, the Court could discard such interpretation and adopt an interpretation which will give effect to the purpose of the Legislature; if a given case is well within the general purpose of the Legislature but not within the literal meaning of the statute, then the Court must strike the balance. To the same effect there are observations in the case of Surjit Singh Kalra v. Union of India [1991] 2 SCC 87. In that case, the Court interpreted and considered the provisions of sections 14A, 14B, 14C and 14D of the Delhi Rent Control Act, 1958. As per the statutory proviso to section 25B(5), the tenant could contest the application by obtaining leave with reference to the particular claim in the application of the landlord depending upon whether it is under section 14A, 14B, 14C, or 14D or under section 14(1)(e). It was contended that when an application is filed under section 14B, the tenant cannot be allowed to take up defence under section 14(1)(e). In that context the Court observed that it is unlikely that the Legislature intended the result for which the counsel for the tenant contended. It will be a mechanical interpretation of the enactment defeating its purpose. Such an interpretation has never found favour with the Courts which have always adopted a purposive approach in the interpretation of statutes. The Court further observed as under:

"True it is not permissible to read words in a statute which are not there, but 'where the alternative lies between either supplying by implication words which appear to have been accidentally omitted, or adopting a construction which deprives certain existing words of all meaning, it is permissible to supply the words' (Craies Statute Law, 7th edn., p. 109). Similar are the observations in Hameedia Hardware Stores v. B. Mohan Lal Sowcar [1988] 2 SCC 513, 524-25 where it was observed that the Court construing a provision should not easily read into it words which have not been expressly enacted but having regard to the context in which a provision appears and the object of the statute in which the said provision is enacted the Court should construe it in a harmonious way to make it meaningful. An attempt must always be made so as to reconcile the relevant provisions as to advance the remedy intended by the statute."

14. In view of the aforesaid legal position, section 43B read with Explanation 2 and the proviso are required to be read harmoniously and construed so as to advance the remedy intended by the statute:

(i) Firstly, the purpose of section 43B was to curb the practice of some taxpayers of not discharging their statutory liability such as in respect of excise duty, salestax, employer's contribution to P.F., and E.S.I.S. for a long period of time and yet at the same time to take deduction for the said amount by resorting to mercantile method of accounting. Further, the Legislature has never intended that the taxpayers, who discharge their statutory liabilities within the prescribed time, should be placed into a disadvantageous position.
(ii) Secondly, the proviso is inserted to mitigate hardship caused to the taxpayers because of inept language of drafting or accidental omission in section 43B. Hence, it can be stated that the proviso is inserted as a remedial and curative measure.
(iii) Thirdly, by its very nature, the proviso is in declaratory form.
(iv) Fourthly, it is accepted by all concerned that sales tax for the last quarter cannot be paid within the previous year. That is to say, it is impossible to pay the sales tax for the last quarter within the previous year. It would be unreasonable to say that sales tax payment for the last quarter be made within the previous year. If Explanation 2 and clause ( a) of section 43B are read together, it would mean that deduction shall be allowed in computing the income only in the year in which such sum is actually paid in respect of any sum payable by way of tax for which the assessee incurred liability in the previous year, even though such sum might not have been payable within that year ( e.g., under the sales tax law). If the first proviso was not there, it is bound to cause untold hardship to the assessee, because practically it would be impossible for him to discharge sales tax liability of the last quarter in the previous year in which the liability was incurred. To obviate this hardship, as remedial and curative measure, the first proviso is added. The object and purpose of introducing the first proviso was understood in the same manner by the department, as per the departmental Circular No. 550, dated 1-1-1990 quoted above.
(v) Fifthly, this interpretation in any way is not going to cause any loss to the revenue because the assessee is only entitled to get the deduction of the liability incurred and actually paid during the period. As against this, the construction suggested on behalf of the revenue would lead to wholly unresasonable result which was never intended by the Legislature. Hence, even if it is not specifically provided that the proviso would come into operation from 1-4-1984, yet it is required to be held that the said proviso was part and parcel of section 43B from the very beginning.

The aforesaid view taken by us finds support from the decisions rendered by various High Courts.

15. In the case of CIT v. Pyarilal Kasam Manji & Co. [1992] 198 ITR 110 , the Orissa High Court after considering the provisions of section 43B held that proviso was added to remove practical difficulties which were encountered by certain assessees. The assessees who made payments within prescribed time were not intended to be brought into the net of disallowance. The object of section 43B to suppress the mischief of withholding of payment and getting a deduction did not apply to such cases and, hence, it should be held that the first proviso to section 43B would have retrospective effect in its operation. The relevant observations of the Court are as under:

"Where the language of the statute leads to manifest contradiction of the apparent purpose of the enactment, the Court can adopt a construction which will carry out the obvious intention of the Legislature. (See P.K. Unni v. Nirmala Industries AIR 1990 SC 933).

The main function of a proviso is to carve out an exception to the main enactment. It cannot normally be so interpreted as to set at naught the real object of the main enactment. (See A.N. Sehgal v. Raje Ram Sheoram AIR 1991 SC 1406).

The object of section 43B was to refuse deduction to an assessee in respect of certain statutory liability, which the assessee does not discharge or where there is dispute about the liability. In the case of certain assessees, practical difficulties were encountered. With a view to get over them, amendments in section 43B were introduced by the Finance Act, 1987. Under the law as amended, if an assessee has paid sales tax, additional salex tax, Central sales tax, etc., on or before the due date applicable in his case for furnishing his return of income under section 139(1) of the Act, section 43B has no application. With regard to provident fund, family pension, etc., the assessee shall be entitled to claim deduction if the same was paid on or before the due date as defined in the Explanation below clause (va) of section 36(1) of the Act. The assessees who made payments in the aforesaid terms were not intended to be brought into the net of disallowance. The object to suppress the mischief of withholding of payment and getting a deduction did not apply to such cases. Therefore, the first proviso to section 43B is retrospective in its operation. Explanation 2 to the said section is subject to the said proviso and the law as amended is applicable for the assessment year 1984-85. The view in this regard expressed by the Patna High Court in Jamshedpur Motor Accessories Stores' case [1991] 189 ITR 70 has, therefore, our concurrence. We are in respectful disagreement with the view of the Delhi High Court in Escorts Ltd.'s case [1991] 189 ITR 81 . A view similar to ours has been taken by the Calcutta High Court in Commissioner Of Income-Tax v. Sri Jagannath Steel Corporation. [1991] 191 ITR 676 .

It is relevant to mention here that the special leave petition filed by the revenue in respect of the decision of the Patna High Court in Jamshedpur Motor Accessories Stores' case [1991] 189 ITR 70 was dismissed by the Supreme Court by order dated July 19, 1991, in S.L.P. (Civil) No. 11793 of 1991 [see [1991] 191 ITR (St.) 8]. Though dismissal of the special leave petition cannot be construed to be expression of any opinion about the merits, we have felt inclined to indicate that, in view of the cleavage of view, it is also significant because special leave has been granted by the apex court in Special Leave Petition (Civil) No. 6467 of 1991 on May 8, 1991, in the case of Weston Electronics Ltd. v. Union of India - see [1991] 191 ITR (St.) 31 where the Delhi High Court following its decision in Sanghi Motors 'case [1991] 187 ITR 703 and Escorts Ltd.'s case [1991] 189 ITR 81 , had dismissed the writ application." (p. 119)

In the aforesaid decision the Court had relied upon the decision rendered by the Calcutta High Court in the case of Commissioner Of Income-Tax v. Sri Jagannath Steel Corporation.. [1991] 191 ITR 676 , wherein the Court has observed that the provisos and the Explanation added to section 43B supplied an omission and were intended to remove impossibility of performance and, therefore, cannot be said to be prospective in operation. If an assessee has paid the sales tax, etc., on or before the due date applicable in his case for furnishing the return of income, he shall be entitled to claim deduction of that amount, whereas with regard to provident fund, family pension, etc., the assessee shall be entitled to claim deduction if the same has been paid on or before the due date. In the said case, the Court has observed that if the contention raised by the revenue is accepted, it would require the assessee to do an impossible act because the assessee could not have paid its tax liability in the previous year ending on 31-3-1984 as in March 1984 the last quarter would end.

Same view has been taken by the Karnataka High Court in the case of Chief Commissioner (Administration) v. Sanjay Sales Syndicate. [1992] 197 ITR 255 . In that case, the Court held that the proviso is only a machinery provision which could be applied to all pending matters which are not concluded finally.

16. The Patna High Court in the case of Jamshedpur Motor Accessories Stores v. Union of India [1991] 189 ITR 70 , has held that upon a contextual interpretation of statutes, the proviso to section 43B should be construed as retrospective in its operation and Explanation 2 thereto should be held to be subject to the said proviso. The Court has further observed that if section 43B is to be literally interpreted, it must be struck down as it provides for doing an impossible act. But it can be upheld by holding that the assessees who have cleared their tax liability during the prescribed time were entitled to have the benefit of the provisos introduced subsequent to 1984-85.

As against this, the learned counsel Mr. Shelat submitted that the Delhi High Court in the case of Sanghi Motors (supra), has observed as under:

"It was next submitted by Dr. Singhvi that the amendment to section 43B has been made in the year 1987 and this amendment, with effect from April 1, 1988, is clarificatory in nature and by applying the said amendment the petitioner was entitled to relief. We are unable to agree with this submission. The amendment clearly states that it is with effect from April 1, 1988. This being so, it is not possible to give the amending provision retrospective effect with effect from April 1, 1984...." (p. 706)

He further submitted that the same Bench has relied upon the aforesaid decision in the case of Escorts Ltd. ( supra), wherein the Court has observed that it was difficult to agree with the decision rendered by the Patna High Court in the case of Jamshedpur Motor Accessories Stores ( supra). Merely because a provision of the Act is harsh, it is no ground for discarding one of the cardinal principles of interpretation of statutes which is that if the language is clear and unambiguous, then resort cannot be had to the aims and objects or to the Minister's speech with a view to interpret the provisions of an Act. It is only if there is any ambiguity in the language that, in order to understand the intention of the Legislature, aid can be taken of the proceedings in the Parliament including the aims and objects of the Act.

17. We agree that the language of section 43B is clear and unambiguous. Therefore, for interpreting the said section, no resort can be had to the aims and objects or to the Minister's speech with a view to interpret the provisions of the Act. But here, we are not interpreting section 43B. We are considering whether the proviso, which is inserted with effect from 1-4-1988, and which is in its nature declaratory, remedial and curative, should be held to be having retrospective effect. As stated earlier, the literal interpretation of section 43B, without there being proviso, was likely to cause unintended hardship to genuine taxpayers. It becomes impossible for them to discharge their sales tax liability of last quarter within the previous year. It would be too much to hold that the Legislature would require the assessee to discharge the impossible function. Hence, to mitigate the hardship, the proviso was inserted. It is also well recognised rule of construction that a statutory provision must be so construed which avoids absurdity and mischief and that a clarificatory and explanatory provision should normally in context be interpreted to have retrospective effect. The respondent is not likely to suffer any loss by this interpretation. Hence, with greatest respect, it is difficult for us to agree with the view taken by the Delhi High Court in the case of Escorts Ltd. ( supra).

18. In the result, it is held that the first proviso to section 43B is remedial and curative in nature and the proviso was brought into force to remedy unintended hardship which was likely to be caused by section 43B. It is also declaratory in its nature. Hence, the said proviso relates back to the date when section 43B came into operation, i.e., 1-4-1984. Hence, the question is answered in the affirmative, i.e., in favour of the assessee and against the revenue.

19. The reference stands disposed of accordingly, with no order as to costs.

SUMMARY OF THE SUBMISSIONS MADE BY THE ASSESSEE IN THE ABOVE REFERENCE:

1. Proviso to section 43(1 ) of the Income-tax Act is a remedial or a curative provision brought in to remedy the hardship which was not intended by the Legislature and yet was inflicted on the assessees who had to suffer the same in spite of abiding by the law and paying the taxes well within the time permitted by the concerned law in this matter the Gujarat Sales-tax Act, 1969.

2. The relevant portion of the Budget Speech of the Finance Minister while introducing section 43B as at page 31 of the statutes portion of 140 ITR is as follows:

"Several cases have come to notice where taxpayers do not discharge their statutory liability such as in respect of excise duty, employer's contribution to provident fund, Employees' State Insurance Scheme, for long period of time. For the purpose of their income-tax assessments, they nonetheless claim the liability as deduction even as they take resort to legal action, thus depriving the Government of its dues while enjoying the benefit of non-payment. To curb such practices I propose to provide that irrespective of the method of accounting followed by the taxpayer, a statutory liability will be allowed as a deduction in computing the taxable profits in the year and to the extent it is actually paid. This would result in a revenue gain of Rs.100 crores in a full year and Rs. 80 crores in 1983-84." [Emphasis supplied]

Therefore, the objective was to hit hard those assessees who do not discharge their statutory liability for a long period of time whereas the contention which is canvassed by the revenue is that even those assessees who have discharged their statutory liability regarding the last quarter of the accounting year well within time should also be hit by an interpretation canvassed by them for acceptance of the court.

3. The same objective which is explained by the Finance Minister in the Budget Speech as reproduced above is stated in the Memorandum explaining provisions in Finance Bill, 1983 at page 160 of 140 ITR in para 60 of the statutes portion as also by the Circular issued by Central Board of Direct Taxes, being Circular No. 372 of 8-12-1983 starting from page 9 (Statutes) of 146 ITR at page 34 in paragraphs 35.2 and 35.3.

4. Thereafter, the first proviso to section 43B, the point of time of application whereof has been a bone of contention before the Hon'ble Court was introduced by Finance Act, 1987. In the notes on clauses of the Finance Bill at page 125 of the statutes portion of 165 ITR the following is stated:

"...The first proviso seeks to provide that the section shall not apply to any sum referred to in clause (a) if the sum is actually paid on or before the date on which the return of income is due to be furnished under sub-section (1) of section 139 for the previous year in which the liability to pay such sum was incurred...."

5. Thereafter, Explanation 2 was inserted by Finance Act, 1989 with retrospective effect from 1st day of April, 1985. The relevant paragraph of the Memorandum explaining the said Explanation is at page 123 of the statutes portion of 176 ITR which is as follows:

"24. Under the existing provisions of section 43B of the Income-tax Act, a deduction for any sum payable by way of tax, duty, cess or fee, etc., is allowed on actual payment basis only. The objective behind these provisions is to provide for a tax disincentive by denying deduction in respect of a statutory liability which is not paid in time. The Finance Act, 1987 inserted a proviso to section 43B to provide that any sum payable by way of tax or duty, etc., liability for which was incurred in the previous year will be allowed as a deduction, if it is actually paid by the due date of furnishing the return under section 139(1) of the Income-tax Act, in respect of the assessment year to which the aforesaid previous year relates. This proviso was introduced to remove the hardship caused to certain taxpayers who had represented that since the sales tax for the last quarter cannot be paid within that previous year, the original provisions of section 43B will unnecessarily involve disallowance of the payment for the last quarter." (Emphasis supplied)

6. The above paragraph confirms the following:

(i) The objective behind the provisions is to deny a deduction to those who do not pay their statutory liability in time.
(ii) The concerned proviso was introduced to remove the hardship caused, in other words, already caused in the assessment years 1984-85 to 1987-88.
(iii) The Government accepts that the sales-tax for the last quarter cannot be paid within that previous year.
(iv) The original provision unnecessarily involves disallowance of the payment for the last quarter.

7. Explanation 2, which was inserted by the Finance Act, 1989 with retrospective effect from 1-4-1984 lays down that any accrued liability, though not payable in that year, will come within the meaning of the phrase "any sum payable" in clause (a) of section 43B. Now, the provisions of section 43B which came into effect from 1-4-1984 and this Explanation 2, which is a retrospective provision, can be made to work harmoniously only if the proviso is given retrospective operation. Otherwise, the purpose of making the non-payable sum payable will lose all meaning for assessment years 1984-85 to 1987-88, which are admitted to be covered up by Explanation 2 retrospectively. Therefore, apart from the reason of this proviso being curative or remedial provision and, therefore, in the nature of things it must apply retrospectively, even for the additional reason of harmonious construction, the proviso is required to be interpreted retrospectively.

8. Craies on "Statute Law", Seventh Edition, page 395:

"Where a statute is passed for the purpose of supplying an obvious omission in a former statute, or as Parke, J. (afterwards Baron Parke) said in R. v. Dursley, to 'explain' a former statute' the subsequent has relation back to the time when the prior Act was passed. Thus, in Att.-Gen. v. Pougett, it appeared that by a Customs Act of 1873 (53 Geo.3. c. 33) a duty was imposed upon hides of 9s. 4d., but the Act omitted to state that it was to be 9s. 4d.per cwt., and to remedy this omission another Customs Act (53 Geo. 3. c. 105) was passed later in the same year. Between the passing of these two Acts some hides were exported, and it was contended that they were not liable to pay the duty of 9s. 4d. per cwt., but Thomson C.B., in giving judgment for the Attorney-General, said: 'The duty in this instance was in fact imposed by the first Act, but the gross mistake of the omission of the weight for which the sum expressed was to have been payable occasioned the amendment made by the subsequent Act, but that had reference to the former statute as soon as it passed, and they must be taken together as if they were one and the same Act.

When an Act is in its nature declaratory, the presumption against construing it retrospectively is inapplicable."

9. Maxwell on "The Interpretation of Statutes", Twelfth Edition, page 208:

"A sense of possible injustice of an interpretation ought not to induce judges to do violence to well-settled rules of construction, but it may properly lead to the selection of one rather than the other of two reasonable interpretations. Whenever the language of the Legislature admits of two constructions and, if construed in one way, would lead to obvious injustice, the courts act upon the view that such a result could not have been intended, unless the intention to bring it about has been manifested in plain words: 'If the court is to avoid a statutory result that flouts common sense and justice it must do so not by disregarding the statute or overriding it, but by interpreting it in accordance with the judicially presumed parliamentary concern for common sense and justice'. But the possibility of injustice which leads the court to adopt a particular construction must be a real one: if the injustices suggested in argument are purely hypothetical, and may never or only rarely occur in practice, the court will remain unmoved."

10. G.P. Singh in "Principles of Statutory Interpretation", Fifth Edition, at pages 27-28:

"The courts strongly lean against a construction which reduces the statute to a futility. A statute or any enacting provision therein must be so construed as to make it effective and operative 'on the principle expressed in the maxim: ut res megis valeat quam pereat'. It is an application of the principle that courts while pronouncing upon the constitutionality of a statute start with a presumption in favour of constitutionality and prefer a construction which keeps the statute within the competence of the Legislature."

11. Some helpful authorities of the Supreme Court are as follows:

(i) K.P. Varghese v. ITO [1981] 131 ITR 597 , at pp. 604-605:

"The primary objection against the literal construction of section 52, sub-section (2), is that it leads to manifestly unreasonable and absurd consequences. It is true that the consequences of a suggested construction cannot alter the meaning of a statutory provision but it can certainly help to fix its meaning. It is a well-recognised rule of construction that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. There are many situations where the construction suggested on behalf of the revenue would lead to a wholly unreasonable result which could never have been intended by the Legislature."

At p. 617:

"Moreover, if sub-section (2) is literally construed as applying even to cases where the full value of the consideration in respect of the transfer is correctly declared or disclosed by the assessee and there is no understatement of the consideration, it would result in an amount being taxed which was neither accrued to the assessee nor been received by him and which from no view-point can be rationally considered as capital gains or any other type of income. It is a well settled rule of interpretation that the court should as far as possible avoid that construction which attributes irrationality to the Legislature...."

At p. 618:

"The court must obviously prefer a construction which renders the statutory provision constitutionally valid rather than that which makes it void."

(ii) R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570 :

At page 575:

"For a minute, let us look at things from the practical point of view. If the thousands of evacuees who left practically all their properties as well as businesses in Pakistan had been considered as the owners of those properties and businesses as long as the 'Ordinance' was in force, then those unfortunate persons would have had to pay income-tax on the basis of the annual letting value of their properties and on the income, gains and profits of the businesses left by them in Pakistan though they did not get a paisa out of those properties and businesses. Fortunately, no one in the past interpreted the law in the manner Mr. Mahajan wants us to interpret. It is true that equitable considerations are irrelevant in interpreting tax laws. But, those laws, like all other laws, have to be interpreted reasonably and in consonance with justice."

At pages 578-579:

"...No one denies that an evacuee from Pakistan has a residual right in the property that he left in Pakistan. But the real question is, can that right be considered as ownership within the meaning of section 9 of the Act. As mentioned earlier that section seeks to bring to tax income of the property in the hands of the owner. Hence, the focus of that section is on the receipt of the income. The word 'owner' has different meanings in different contexts. Under certain circumstances a lessee may be considered as the owner of the property leased to him. In Stroud's Judicial Dictionary, 3rd Edition, various meanings of the word 'owner' are given. It is not necessary for our present purpose to examine what the word 'owner' means in different contexts. The meaning that we give to the word 'owner' in section 9 must not be such as to make that provision capable of being made an instrument of oppression. It must be in consonance with the principles underlying the Act."

(iii) Union of India v. Filip Tiago De Gama AIR 1990 SC 981:

At page 985:

"...The case like the present one seems to have escaped attention by innocent lack of due care in the drafting. The result would be an obvious anomaly as will be indicated presently. If there is obvious anomaly in the application of law, the Court could shape the law to remove the anomaly. If the strict grammatical interpretation gives rise to absurdity or inconsistency, the Court could discard such interpretation and adopt an interpretation which will give effect to the purpose of the Legislature. That could be done, if necessary, even by modification of the language used. [See Mahadeolal Kanodia v. Administrator-General Of West Bengal [1950] 3 SCR 578: (AIR 1960 SC 936)]. The legislators do not always deal with specific controversies which the Courts decide. They incorporate general purpose behind the statutory words and it is for the court to decide specific cases. If a given case is well within the general purpose of the Legislature but not within the literal meaning of the statute, then the Court must strike the balance.

The criticism that the literal interpretation of section 30(2), if adhered to would lead to unjust result seems to be justified. Take for example; two acquisition proceedings of two adjacent pieces of land, required for the same public purpose. Let us say that they were initiated on the same day - a day sometime prior to 30th April, 1982. In one of them the award of the Collector is made on 23 September, 1984 and in the other on 25 September, 1984. Under the terms of section 30(2) the benefit of higher solatium is available to the first award and not to the second. Take another example: the proceedings of acquisition initiated, say, in the year 1960 in which award was made on 1 May, 1982. Then the amended section 23(2) shall apply and higher solatium is entitled to. But in an acquistion initiated on 23 September, 1984 and award made in the year 1989 the higher solatium is ruled out. This is the intrinsic illogicity if the award made after 23 September, 1984 is not given higher solatium. Such a construction of section 30(2) would be vulnerable to attack under article 14 of the Constitution and it should be avoided...."

(iv) Surjit Singh Kalra v. Union of India [1991] 2 SCC 87:

At page 98:

"True it is not permissible to read words in a statute which are not there, but 'where the alternative lies between either supplying by implication words which appear to have been accidentally omitted, or adopting a construction which deprives certain existing words of all meaning, it is permissible to supply the words' (Craies on Statute Law, 7th Edition, p. 109). Similar are the observations in Hameedia Hardware Stores v. B. Mohan Lal Sowcar where it was observed that the court construing a provision should not easily read into it words which have not been expressly enacted but having regard to the context in which a provision appears and the object of the statute in which the said provision is enacted the court should construe it in a harmonious way to make it meaningful. An attempt must always be made so to reconcile the relevant provisions as to advance the remedy intended by the statute, (see Sirajul Haq Khan v. Sunni Central Board of Waqf)."

(v) S.S. Grewal v. State of Punjab [1993] Supp. (3) SCC 234:

At page 240:

"In this context it may be stated that according to the principles of statutory construction a statute which is explanatory or clarificatory of the earlier enactment is usually held to be retrospective. (See: Craies on Statute Law, 7th Edn., p. 58)."

12. The Full Bench of the Kerala High Court in Pathrose Rice & Oil Milk v. Asstt. Commissioner [1992] 86 STC 274, at pp. 282-283:

"16. The matter can be looked from another angle as well. The law is that the liability to pay penal interest attaches automatically to the demand for tax whether it is provisional or final, when default occurs in payment thereof. Even if the order is erroneous and whether it is disputed or not, the liability to pay penal interest will continue. There was no provision prior to Act 19 of 1980 to make allowances for variation in the tax liability by the appellate or revisional orders. Before the Amendment Act the position was that the assessing authority could assess a dealer according to his best judgment and even if the assessment was subsequently set aside, the liability of the dealer to pay penal interest under the illegal assessment would survive. It is well-settled that a provisional order of assessment will not merge in the final assessment order though for the purpose of tax liability the final order of assessment may be decisive - See Haridas v. Assistant Commissioner, Sales Tax [1979] 44 STC 26 (Ker.)/ [1979] KLT 212 and Hajee Mohammed v. Assistant Commissioner of Sales Tax [1980] 46 STC 134 (Ker.)/[1980] KLT 285. It is to cure this defect or to remove the anomaly that the Sales Tax Amendment Act 19 of 1980 was enacted by introducing sub-sections (4) to (6) of section 23 by which if in appeal or in revision or by a final assessment the liability to tax is reduced, relief has to be given to the assessee in respect of the penal interest for the amount of tax which was reduced in appeal or in revision or by the final assessment.

17. Crawford in giving reasons for the liberal construction of remedial statutes has said as follows:

'Such statutes play an important part in the jurisprudence of an advancing society. They supply the defects and abridge the superfluities in pre-existing law, which arise from the general imperfection of all human laws, from change of time and circumstances, from the mistakes and unadvised determinations of judges, and from any other cause. They serve to keep our system of jurisprudence up-to-date and in harmony with new ideas or conceptions of what constitute justice and proper human conduct. Their legitimate purpose is to advance human rights and relationships. Unless they do this, they are not entitled to be known as remedial legislation nor to be liberally construed. Manifestly, a construction which promotes improvement in the administration of justice and the eradication of defects in our system of jurisprudence, should be favoured over one which perpetuates wrong. It seems proper to assume that the law-makers intended to advance our laws forward as far as our conceptions of justice and proper conduct extend. For this reason, if no other, remedial legislation is entitled to a liberal construction.'

18. A remedial Act though not necessarily retrospective will have retrospective effect if it is clear from the express terms or by necessary intendment as could be seen from the provisions. On the setting and intendment of sub-sections (4) to (6) of section 23, we are clearly of the opinion that the aforesaid provisions will apply to the case of the petitioner and the liability for penal interest, if any, will have to be recomputed in the light of Exhibit P1 order."

13. Now, to recall the facts of the instant case, the other income of the assessee is about Rs. 40,000 and about Rs. 4,20,000 is the sales tax collected in the last quarter of the assessment year 1984-85 and paid off within time to the sales-tax department and, therefore, assessee filed return of Rs. 40,000. So the balance which has remained with the assessee after payment of sales tax is Rs. 40,000 whereas on the interpretation convassed by the revenue the assessee must pay at the time of filing of the return Rs. 1,09,287 and its four partners must pay tax on their share from the said assessed income of Rs. 4,60,000. How can about Rs. 2 lakhs and half be paid from Rs. 40,000 out of which these partners shall have to run their household if that is their only income? It is impossible to think for a moment that the Legislature wanted to impose this type of tax liability. If instead of paying sales tax the assessee pays income-tax, precisely advance tax in the hands of the firm and in the hands of the partners, there will be no balance to pay the sales tex dues. Further in a federal set up which our country has, an additional reason is provided to avoid the interpretation which is canvassed by the revenue.