Shashikant Laxman Kale v. Union of India

EXTERNAL AIDS TO INTERPRETATION (Constitutional Validity)

INTRODUCTION

Words are the skin of language. Language gives its own meaning and interpretation of the law. Here, when the language of the statute is plain and unambiguous it would not be open to the courts to adopt a hypothetical construction. But where such a plain reading leads to anomalies, injustices and absurdities, the court may look into the purpose for which the statute was enacted and try to interpret it so as to adhere to the purpose of the statute.

To sustain the presumption of Constitutionality, the consideration may be had, even to the matters of common knowledge, the history of times and every conceivable fact existing at the time of legislation, that can be assumed. Even though it is not permissible to use these aids for literal construction, it is possible to look into the historical facts and circumstances to ascertain the evil sought out to be remedied. This process is crucial for understanding the purpose or object of the enactment, which relates to the mischief the law seeks to remedy, as distinct from its legislative intention (legal meaning).

{7.1 introduction to internal aids, by N.S. Bindra}

FACTS

Petitioner 1 (an employee of Peico Electronic and Electricals Limited, a private sector company) and Petitioner 2 (a trade union) challenged the Constitutional validity of Clause (10-C) inserted in Section 10 of the Indian Income Tax Act, 1961 by the Finance Act, 1987. The challenge was based on hostile discrimination, arguing that the tax exemption benefit was limited only to public sector employees and should apply equally to private sector employees as well.

ISSUE

The question dealt with in the present case is whether there is any hostile discrimination as alleged by the Petitioners and, if not, is it possible to construe the provision to apply it equally to the employees of the public and private sectors.

RULE

• Section 10 of the Income Tax Act, 1961 deals with incomes not included in total income for the purpose of taxation.

• Clause 10-C of Section 10 states that: “any payment received by an employee of a public sector company at the time of his voluntary retirement in accordance with any scheme which the Central Government may, having regard to the economic viability of such company and other relevant circumstances, approve in this behalf.”

JUDGEMENT AND ANALYSIS

• Principles of Classification: The court reiterated that the latitude for classification in a taxing statute was much greater, and to tax something it was not necessary to tax everything. The Constitutional validity must be determined by looking beyond the ostensible classification and applying the test of ‘palpable arbitrariness’.

• External Aids for Purpose: The court noted that to discern the true purpose and object of the impugned enactment, it was important to look into the circumstances which prevailed at the time when the law was passed. It confirmed the use of the Statement of Objects and Reasons accompanying a Bill for the limited purpose of understanding the background and the antecedent state of affairs leading up to the legislation.

• Distinct Class: Considering these external aids and historical context, the court held that the public sector has historically been treated as a distinct class separate from the private sector. The public sector's role is that of an 'instrument of development' and 'catalyst of social change' toward a Welfare State. The profit earned is for public benefit, providing an intelligible differentia from the private sector from a social and national economy point of view.

• Justification for Classification: Clause (10-C) was enacted to address the issue of excess manpower and economic viability in the public sector. The employees of the public sector were rightly left out of the ambit of the impugned provision and they do not fall within the same categories as the employees of the private sector for this specific legislative purpose. The benefit was aimed at restructuring the public sector.

• Conclusion on Validity: Since the classification (public sector vs. private sector) was based on an intelligible differentia, and the differentia had a rational relation to the object sought to be achieved (economic viability of public sector companies), the provision was not discriminatory or arbitrary.

• Conclusion on Interpretation: In view of the simultaneous definition of ‘public sector company’ in the Act and the clear legislative purpose, it was not possible to construe the impugned provision (while upholding its validity) in such a manner as to include a private sector company also within its ambit. The challenge to the Constitutional validity was rejected.