JUDGMENT
J.B. Koshy, J.
1. While challenging the order of the Income-tax Appellate Tribunal for the assessment year 1996-97, the appellant-assessee filed this appeal with the following substantial questions of law :
“(i) Whether the provisions of the Double Taxation Avoidance Agreement between India and Malta are applicable to income arising in India within the previous year relevant to the assessment year 1996-97 ?
(ii) Whether on the facts and circumstances of the case, the Tribunal went wrong in denying the benefits of the DTAA between India and Malta to the appellant ?”
2. Before answering the questions and deciding the appeal, we may refer to the short facts of the case. The assessee is a non-resident company engaged in the business of shipping in international traffic and registered in the Republic of Malta. The appellant, though paid income-tax due in India, filed its return of income on March 25, 1997, for the assessment year 1996-97 claiming relief available under the Double Taxation Avoidance Agreement (in short “the DTAA” or “the agreement”) entered into between the Republic of Malta and the Republic of India as per Section 90 of the Income-tax Act (hereinafter referred to as “the Act”). The appellant claimed refund of the entire tax paid for the assessment year 1996-97 amounting to Rs. 1,60,34,863 (rupees one crore sixty lakhs thirty-four thousand eight hundred and sixty-three only). The DTAA was signed on September 28, 1994, and it came into force with effect from February 8, 1995. A formal notification was also published on November 22, 1995, under Section 90 of the Income-tax Act. Annexure A-7 is the notification which also stated that the DTAA has entered into force on February 8, 1995, after the notification by the contracting States to each other of the completion of the procedure required under their laws for bringing into force the said agreement in accordance with paragraph 1 of Article 29 of the said agreement. The Assistant Commissioner rejected the claim of the appellant. The Commissioner of Income-tax reversed the decision of the Assistant Commissioner and held that the assessee is entitled to the relief under the Double Taxation Avoidance Agreement for the assessment year 1996-97. On appeal, the Appellate Tribunal agreed with the assessing authority and held that the assessee can avail of the benefit of the agreement only from the assessment year 1997-98 (that is, fiscal year 1996-97). The facts are not in dispute.
3. We may now refer to the provisions of the agreement as the questions raised can be answered only on the interpretation of its clauses. The relevant provisions are extracted in annexure A-6 to the appeal. Article 29 of the agreement reads as follows (see [1996] 218 ITR (St.) 13, 38) :
“(1) The Governments of the Contracting States shall notify each other that the legal requirements for the entry into force of this agreement have been complied with.
(2) The agreement shall enter into force thirty days after the date of the later of the notifications referred to in paragraph (1) and its provisions shall have effect :
(a) in India :
as regards income for any ‘fiscal year’ beginning on or after the first day of April of the calendar year next following that in which this agreement enters into force ;
(b) in Malta :
as regards income for any ‘fiscal year’ beginning on or after the first day of January of the calendar year next following that in which this agreement enters into force.”
4. The contention of the assessee is that since the agreement came into force in February, 1995, the benefit should be given from the next fiscal year, that is, the year starting from April 1, 1995 to March 31, 1996. So, the assessee claimed the benefit for the assessment year 1996-97. According to the Revenue, it will start only in the fiscal year starting from April in the next calendar year, that is, from 1996-97. So, the assessee can claim the benefit only from the assessment year 1997-98. The first contention of the assessee is that even though the clauses are not happily worded, two views are possible, in such cases, a view in favour of the assessee should be taken especially in view of Section 90(2) of the Act wherein it is stated that the provisions shall apply to the extent it is more beneficial to the assessee. Section 90(2) of the Act reads as follows :
“90. Agreement with foreign countries.–
(2) Where the Central Government has entered into an agreement with the Government of any country outside India under Sub-section (1) for granting relief of tax, or, as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee.”
5. It is also submitted that the words “calendar year next following that” used in the agreement have to be read in the context and “calendar year next” is not the next calendar year. The expression “calendar year next” is not grammatically correct. Learned counsel for the appellant also submitted that in the absence of punctuations, the word “that” refers to the “fiscal year” and not to the “calendar year.” In other words, the words “next following that in which this agreement enters into force” means the next fiscal year following the date on which this agreement enters into force. It cannot mean the next calendar year as the words used are not “next calendar year” but “calendar year next.” It was also pointed out that the assessee’s request for clarification from the Central Board of Direct Taxes (the CBDT) was referred to the Chief Commissioner of Income-tax and the Chief Commissioner advised the assessee that the benefit under the DTAA is available to the assessee for the fiscal year starting from April 1, 1995. Learned counsel also referred to an official publication of the Income-tax Department wherein the same opinion was given. Then, it is argued that the theory of “contemporanea expositio” is applicable in this case and hence the interpretation favourable to the assessee should be adopted. It was also argued that the absence of punctuations resulted in ambiguity and confusion, and consequent benefit should be given to the assessee. No punctuation is used before or after the word “next” and as stated in Crazes Statute Law, once the sentence is not being punctuated properly, it is difficult to decide whether the words apply to a particular branch of the sentence and are to be read distributively, as it is called. Finally, it was argued that the treaties should be respected and a rigid interpretation should not be adopted to take away the intended benefit and the apex court held in Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 (SC); [2003] 1 RC 742 (SC) that the single object of the DTAA is to give immediate relief.
6. First, we shall consider the submissions regarding strict interpretation of taxing statutes. There is no dispute for the proposition that a taxing statute is to be strictly construed. Lord Simonds in St. Aubyn (L. M.) v. Attorney-General (No. 2) [1951] 2 All ER 473 (HL) at page 485, reiterated the following well established principle laid two centuries ago :
“… the subject is not to be taxed without clear words for that purpose ; and also, that every Act of Parliament must be read according to the natural construction of its words.”
7. No tax in terms of Article 265 of the Constitution of India can be imposed except by the authority of law. But, if it is taxable an equitable construction cannot be pleaded as one has to simply adhere to the words of the statute as held by the House of Lords in Ransom (Inspector of Taxes) v. Higgs [1974] 3 All ER 949 at page 970. The same principle was adopted in India as can be seen from the decision of the apex court in A. V. Fer-nandez v. State of Kerala . In Cape Brandy Syndicate v. IRC [1921] 1 KB 64 at page 71, it is stated by Rowlatt J. as follows :
“… in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”
8. The above view was followed in State of West Bengal v. Kesoram Industries Ltd. and CCE v. Acer India Ltd. (No. 2) . In Mathuram Agrawal v. State of M. P. , the law is stated in the following terms (page 673 para. 12) :
“The intention of the Legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and umambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation which does not follow from the plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning of the statute which will serve the spirit and intention of the Legislature.”
9. It is true that if the words are ambiguous and reasonably open to two interpretations benefit of interpretation is given to the subject. Central India Spinning and Weaving and Manufacturing Co. Ltd. v. Municipal Committee, . But it is well-settled that in the field of taxation, hardship or equity has no role to play in determining exigibility to tax and it is for the Legislature to determine the same (Kapil Mohan v. CIT ).
10. Section 90 of the Income-tax Act is not a charging Section. The above Section gives relief to the taxpayers from paying tax in two countries if the conditions in the Section are fulfilled. It empowers the Central Government to enter into an agreement with the foreign countries for the granting of reliefs in respect of double taxation. By the agreement or treaty made under this Section, no tax liability is created ; but, the assessee can resort to the agreement for reducing or negativing the tax liability provided that his claim is coming within the four corners of the agreements as held by the apex court in Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706–see pages 723, 724. In the above case, the court also held that the principles to be adopted for the interpretation of treaties are not the same as those governing the interpretation of the statute. In any event, the interpretation rules need be looked into only if the wording is ambiguous or reasonably capable of two meanings.
11. The next contention is one based on the theory of “contemporanea expositio”. It refers to interpreting a statute or any other document by referring to the exposition it has received from contemporary authority “Optima est legum interpres consuetude. Contemporanea expositio est optima et fortissima in lege.” This principle was used originally to explain ancient statutes. In Maxwell on the Interpretation of Statutes, Twelfth edition, at page 264, it is stated as follows :
“It is obvious that the language of a statute must be understood in the sense in which it was understood when it was passed, and those who lived at or near the time when it was passed may reasonably be supposed to be better acquainted than their descendants with the circumstances to which it had relation, as well as with the sense then attached to legislative expressions. Moreover, the long acquiescence of the Legislature in the interpretation put upon its enactment by notorious practice may, perhaps, be regarded as some sanction and approval of it.”
12. In Crazes on Statute Law, Seventh edition , at page 80, it is stated as follows :
“The earlier statutes were in the form of charters, and no difference was at first made between the construction of a statute and that of any other instrument. Coke’s rule has been adopted by the English courts, and for modern use is best expressed by Lord Esher in Sharpe v. Wakefield [1889] 22 QBD 239, 241 : ‘the words of a statute must be construed as they would have been the day after the statute was passed, unless some subsequent Act has declared that some other construction is to be adopted or has altered the previous statute’.”
13. But, this principle has no application while explaining modern Acts. In Campbell College Belfast (Governors) v. Commr. of Valuation for Northern Ireland [1964] 1 WLR 912 (HL), it was held that the doctrine has to be applied only to the construction of ambiguous language in very old statutes. If the language is plain and unambiguous it has no application even if the Act was passed 100 years ago. Administrative construction, that is, contemporaneous construction placed by administrative or executive officers is commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight and it is highly persuasive.
14. In K. P. Varghese v. ITO , this rule was adopted. The Calcutta High Court in Baleshwar Bagarti v. Bhagirathi Dass [1908] ILR 35 Cal 701, 713 held as follows :
“It is a well-settled principle of interpretation that courts in construing a statute will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it.”
15. The Supreme Court in Desh Bandhu Gupta and Co. v. Delhi Stock Exchange Association Ltd. also reiterated the same. Apart from the above provisions, the circulars issued by the Central Board of Direct Taxes are binding on the Department in view of Section 119 of the Income-tax Act even if it is wrong. Other clarifications, etc., issued by the statutory authorities have got only persuasive value. But, courts are not bound to accept the same as held by the apex court in V/O Tractor export, Moscow v. Tarapore and Co. [1970] 40 Comp Cas 447 ; AIR 1971 SC 1, it was held by Grover J., as follows (page 9) :
“We are aware of no rule of interpretation by which rank ambiguity can be first introduced by giving certain expressions a particular meaning and then an attempt can be made to emerge out of semantic confusion and obscurity by having resort to the presumed intention of the Legislature to give effect to international obligations.”
16. In this case, no clarification was issued by the CBDT under Section 119 of the Act. In fact, the Chief Commissioner of Income-tax by letter dated October 13, 1997, informed the asscssee as directed by the CBDT that the provisions of the agreement are operative in India with effect from the fiscal year beginning on April 1, 1996, i.e, for the assessment year 1997-98 and onwards (annexure D to the statement dated May 30, 2005, filed by the respondent) and instructions received from the Board were also given to the assessee. The clarification given by the Assessing Officer and the Chief Commissioner is not contemporaneous with date of the agreement ; but, issued much later and such information and clarification are not binding on the Revenue. In fact, the assessee did not enter into contract based on such wrong clarification. The assessee paid the tax as if double taxation benefit was not available to it. Therefore, the principle of promissory estoppel is not applicable. The assessee approached for refund based on some clarifications issued by the Department which was subsequently corrected by the CBDT. Therefore, the principle of contemporanea exposition is not applicable in this case. Even if the above principle has any application, it is not always decisive on the question of construction and a wrong construction placed by the administrative authorities need not be followed by the court.
17. With regard to the contention of absence of punctuation, we are of the opinion that even if a comma or any other punctuation mark is put after the words “calendar year next” in Article 29(2) of the treaty, it will not convey a meaning helpful to the assessee. The expression “calendar year next following that” cannot qualify the words “fiscal year”: even if a comma is put anywhere else. Counsel for the assessee referred to us the maxim “reddendo singula singulis”. It is only a guide of interpretation by applying or assigning “each to each”. This rule was formulated in an Irish case M Neill v. Crommelin [1858] 9 Ir CLR 61 as follows :
“Where there are general words of description, following an enumeration of particular things such general words are to be construed distributively reddendo singule singulis ; and if the general words will apply to some things and not to others, the general words are to be applied to those things to which they will, and not to those to which they will not apply ; that rule is beyond all controversy.”
18. In Koteswar Vittal Kamath v. K. Rangappa Baliga and Co., , the Supreme Court quoted the rule from Black’s Interpretation of Laws as follows :
“‘Where a sentence in a statute contains several antecedents and several consequences, they are to be read distributively; that is to say each phrase or expression is to be referred to its appropriate object’.”
19. If the words used in the treaty are taken distributively, the interpretation adopted by the Revenue is correct. We are of the view that the absence of punctuation in the relevant clause, creates no ambiguity and hence the absence of punctuation is irrelevant to interpret Article 29(2) of the treaty. It is only a desperate attempt of the assessee to show that there is some ambiguity in the sentence.
20. The golden rule of construction is to adhere to the ordinary meaning of the words used and sentences are construed accordingly unless that leads to some ambiguity. The above is approved by the apex court in Jugalkishore Saraf v. Raw Cotton Co. Ltd., AIR 1955 SC 376, at page 381, and Harbhajan Singh v. Press Council of India, . In Kanai Lal Sur v. Paramnidhi Sadhukhan, , Gajendra-gadkar J. observed (page 910) :
“The words used in the material provisions of the statute must be interpreted in their plain grammatical meaning and it is only when such words are capable of two constructions that the question of giving effect to the policy or object of the Act can legitimately arise.”
21. A Constitution Bench of the apex court in Union of India v. Hansoli Devi, held as follows (page 3245) :
“It is a cardinal principle of construction of statute that when the language of the statue is plain and unambiguous, then the court must give effect to the words used in the statute and it would not be open to the courts to adopt a hypothetical construction on the ground that such construction is more consistent with the alleged object and policy of the Act.”
22. After a careful and close reading of Article 29(2) of the treaty in question, we are of the view that it gives only one meaning and there is no ambiguity in the wording used. It is very clear that in India, benefit can be availed of only for the fiscal year starting from April 1, 1996 to March 31, 1997, starting after the first day of the next calendar year following in which the agreement came into force (February 1995). Here the agreement came into force in the year 1995. The next calendar is 1996-97. Hence, benefit can be availed of for the fiscal year starting from April 1,’ 1996. Benefit can be availed of in the fiscal year starting from April 1, 1996, i.e, the next calendar year (assessment year 1997-98). The words “fiscal year” in India and in Malta are also explained in the agreement. If the interpretation preferred by the assessee is taken, the words “calendar year” were unnecessarily used in the agreement. Further, as per the normal English grammar, the relative pronoun “that” will only refer to the nearest proximate subject otherwise it will be an error of proximity and “that” cannot refer to the fiscal year, but, only to “calendar year next” which was used immediately before the same. Even if the word “that” used immediately after “calendar next” refers to “fiscal year”, we are of the opinion that we cannot come to the meaning attributed by the assessee. We cannot rewrite the words in the agreement merely because it will be more beneficial to the assessee. Here, when the words are clear, there is no necessity to go into the intention of the Governments in making the treaty. There is no scope for any equitable interpretation. No absurdities or anomalies will result from placing such an interpretation. The plain meaning has to be adopted in taxation matters especially when there is no ambiguity. We agree with the view adopted by the Tribunal and the Revenue. Therefore, the questions are answered in favour of the Revenue and the appeal is dismissed.