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Total Number of Subscribers: 426 |
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Date: 29 March 2008 |
Compiled by : M. Sathya Kumar |
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interpretation of INTRODUCTION Deeds, agreements and other documents were found
necessary in civilized societies in order to specify the rights and
obligations of each one of the parties in respect signed to regulate inter
personal relationship under general laws. But with the increasing complexities of the
Direct Tax Laws, taxes are imposed on an income when it is earned or at the
end of the period when such income changes into wealth or even at a point
when a part of such wealth is given to another person and ultimately at the
point of time when such property passes on the death of the property holder. Hence every deed defining the title to property
or an agreement regulating contractual relationship between two persons comes
up for the consideration of the income-tax authorities. As such,
complications of taxation laws can at time affect adversely the parties,
deeds, conveyances, agreements and other documents if the language of such writings
is not checked carefully with tax provision laid down by law. It has been judicially observed that it is
legitimate for an assessee so to arrange his affairs as to avoid legally levy
of tax or to reduce the tax burden as much as possible. A proper fiscal administration, therefore,
permits legal avoidance of tax but comes down fiercely against every attempt
at evasion. To successfully avoid the extra burden of tax the need for
accurate knowledge of the up-to-date provisions of the taxation laws as well
as that of the basic general laws of our country and their implications and
true meaning as expounded by the Supreme Court and various High Courts of
India cannot be overstressed. Without such knowledge the draftsman is likely
to commit errors while drafting deed, writings, conveyances etc. The drafting
of deeds is very much relevant for the purposes of leviability of Gift Tax.
Similarly it was also relevant for leviability of Estate Duty before its
repeal.
INTERPRETATION OF DEEDS, DOCUMENTS & WILLS A deed may be defined as a formal writing of a
non-testamentary character which purports or operates to create, declare,
confirm, assign, limit or extinguish some right, title or interest. There is no need to make use of any particular form in the
delivery of a deed. It is well settled; that the mere retention of a deed
after its execution by the maker of the deed does not of itself impair the
validity of the deed or prevent its operating at once. A policy, “signed, sealed and delivered” is complete and binding
as against the party executing it, though in fact, it remains in his
possession unless there is some particular act required to be done by the
other party to declare his adoption of it; nor is it necessary that the
assured should formally accept or take away a policy in order to make the
delivery complete. The registration of a deed of sale constitutes sufficient
delivery of the deed. When parties have deliberately put their mutual
engagements into writing, in language which imports a legal obligation, or,
in other words, a complete contract, it is only reasonable to presume that
they have introduced into the written instrument every material term and
circumstances. “Because he was
neither
minded nor intended to sign a document of that character or class, as, for
instance, a release while intending to execute a lease. Such a deed is void.
It is clear that nothing was said to mislead them as to the nature of the
instrument they were executing. It is doubtful how far they understood the
nature of the deeds, but it is in my opinion clear upon the evidence that they knew that the deeds
dealt in some way with their houses. This contention therefore fails”. The authorities in support of the proposition are, but
unless actual mis-statement of the character of the deed is made the deed is
only voidable. GOLDEN RULE OF INTERPRETATION OF DEEDS The golden rule of construction is to ascertain
the intention of the parties to the instrument after considering all the
words in their ordinary natural sense. (AIR 1969 SC page 9 at page 11 &
12). Sometimes it happens that there is a conflict between what is said in
one part of the document and in another part. In such a case an attempt
should always be made to read the two parts of the document harmoniously, if
possible. In such a case the second part of the document has to be held as
void. (AIR 1963 SC page 890 at page 893 & 894). An
important rule to be remembered while interpreting rules and statutes is: “In drafting it is not
enough to gain a degree of precision which a person reading in good faith can
understand, but it is necessary to attain if possible a degree of precision
which a person reading in bad faith cannot misunderstand”. Further, in revenue cases, regard must be given
to the substance of the transaction than to mere norm. On principle, the two
legal position arising from a transaction alone determines the taxability of
a receipt arising from a transaction (Refer 87 ITR page 407). FUNDAMENTAL RULE OF CONSTRUCTION The fundamental rule is to ascertain the
intention from the words used. The surrounding circumstances are to be
considered but that is only for the purpose of finding out the intended
meaning of the words which have actually been employed (AIR 1951 SC page
139). However, while considering a contract it is legitimate to take into
account the surrounding circumstances for ascertaining the intention of the
party (AIR 1969 SC page 9). RULE OF CONSTRUCTION OF DOCUMENT IN CASE OF
AMBIGUITY If there is ambiguity in the language employed,
the intention may be ascertained from the content of the deed with such
extrinsic evidence as may by law be permitted to be adduced to show in what
manner the language of the deed was related to existing facts. The document
has to be considered as a whole for interpretation of particular word or
direction. (AIR 1966 SC page 902 and AIR 1979 SC page 533 at page 561). It is well settled that legal relationship resulting
from a transaction cannot be substituted by I.T. authorities by any of their
notions about the substance of transaction. (66 ITR page 692 SC). In the case reported in 73 ITR page 702 in the
case of Juggilal Kamalapath, it has been held as under: “It is true
that from the juristic point of view the company is a legal personality, entirely distinct from its members and is
capable of enjoying rights and being subjected to duties which are not the
same as those enjoyed or borne by its members but in certain exceptional
cases the court is entitled to lift the veil or corporate entity and to pay
regard to the economic realities behind the legal facade”. In another judgment reported in 82 ITR page 540
the Hon’ble Supreme Court has
held as follows: “It is true
that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is
not the real. In a case of the present kind, a party who relies on a recital
in a deed has to establish the truth of these recitals otherwise it will be
very easy to make self-serving statements in documents either executed or
taken by a party and rely on those recitals. It all that an assessee who wants to
evade tax is to have some recitals, made in a document either executed by him
or executed in his favour then the door will be left wide open to evade tax.
A little probing was sufficient in the present case to show that the apparent
was not the real. The taxing authorities were not required to put on blinkers
while looking at the documents produced before them. They were entitled to
look into the surrounding circumstances to find out the reality of the
recital made in the documents”. TWO ADMISSABLE CONSTRUCTIONS OF DOCUMENTS It is a settled rule of interpretation that if
there be admissible two constructions of a document, one of which will give
effect to all the clauses therein while the other will render one or more of
them nugatory, it is the former that should be adopted on the principle
expressed in the maxim ut res magis valeat quam pereat. CONFLICT BETWEEN EARLIER AND LATER PROBLEM OF
DOCUMENT If it is not possible to give effect all of
them, the rule of construction is well established that it is the earlier
clause that must override the later clauses and not vice versa (AIR 1969 SC
page 22).
SCOPE OF LEGAL EFFECT
OF PROVISO AND EXCEPTION IN INTERPRETING DEEDS The technical rules of interpretation of provisos and
exceptions, with reference to their scope and legal effect, adopted in
constructing statutes should not ordinarily be imported in interpreting deeds
and documents executed by laymen. In ordinary deeds, a proviso may sometimes
be in the nature of an explanation of the main clause or provisions; and one
must look not merely at the form of the language but its substance, the
governing idea or purpose of the deed, the context and the surrounding
circumstances to father the real meaning or intention of the executant”. Recital
meaning of – Normally, a recital is evidence as against the parties to the instrument and those claiming under then
and in an action on the instrument itself the recitals operate as an estoppel
though that would not be so on a collateral matter. Ram Charan Das vs. Girja Nandini Devi, AIR 1966
SC page 323 at page 327 Expression
“terms”
meaning of - The expression “terms” used in a document would, according to Webster’s New World Dictionary, mean “conditions of
a contract, agreement, sale, etc. that limit or
define its scope or action involved”. Ram Charan Das vs. Girja Nandini Devi, AIR 1966
SC page 323 at page 328 True
legal position in matters of proof of documents – Wills – The party propounding a
will or otherwise making a claim under a will
is no doubt seeking to prove a document and, in deciding how it is to be
proved one must inevitably refer to the statutory provisions which govern the
proof of documents. Sections 67 and 68 of Evidence Act are relevant
for this purpose. These provisions prescribe the requirements and the nature
of proof which must be satisfied by the party who relies on a document in a
court of law. Similarly, sections 59 and 63 of the Indian
Succession Act are also relevant. The question as to whether the will set up
by the propounder is proved to be the last will of the testator has to be
decided in the light of these provisions. Has the testator signed the will? Did he put his signature to the will knowing
what it contained? Stated broadly, it is the decision of these
questions which determines the nature of the finding on the question of the
proof of wills. It would prima facie be true to say that the
will has to be proved like any other document except as in the special
requirements of attestation prescribed by section 63 of the Indian Succession
Act. As in the case of proof of other documents so in
the case of proof of wills it would be idle to expect proof with mathematical
certainty. The test to be applied would be the usual test of the satisfaction
of the prudent mind in such matters. Interpretation of deeds, documents and will is a
subject with vast area. Mr.Rastogi have incorporated in this article only
very important aspects of the same. Courtesy : Mr. Rastogi, Senior Advocate |
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