What is construction of taxing statutes

Noscitur a sociis and Ejusdem generis

State of Bombay v. Hospital Mazdoor Sabha AIR
1960 SC610

Project File Submitted to

Rayat College of Law
In Partial Fulfillment of the Requirement of Course

B.A.LL.B Hons. For Semester Sixth

Subject: Interpretation of Statutes

Under the Supervision of: Submitted by:

Ms. Parveen Joshi Lohita Deora

Assistant Professor Semester 6

Rayat College of Law Section B

Railmajra Roll no. 20089

RAYAT COLLEGE OF LAW (RCL)

 ACKNOWLEDGMENT

I would like to express my special thanks of gratitude to my teacher Ms. PARVEEN JOSHI
as well as our principal Dr. Monika Sharma who gave me the golden opportunity to do this
wonderful project, which also helped me in doing a lot of Research and I came to know about
so many new things I am really thankful to them.
Secondly I would also like to thank my parents and friends who helped me a lot in finalizing
this project within the limited time frame.

LOHITA DEORA

INTRODUCTION
Interpretation is a specialized branch of legal studies, where provisions under statutes are
given a meaning which is free from ambiguities. With the diversifying activities covered
under the ambit of taxation laws, the rules of interpretation are gradually gaining practical
importance in the taxing enactments. Initially, Income Tax and Land Revenues were the two
main taxes which was paid to the State, but now taxes are imposed and paid for every activity
carried by the population, from holding of property to its selling, profits, and gains earned
from properties, and carrying down of businesses, etc. In the case of “deemed income”, it is
taxed not in the hands of the recipient but the hands of spouse, parent, or guardian, like this,
there are other such instances where legal fictions were introduced in taxation laws. The
questions which arose along with these legal fictions, the rules regulating interpretation of
statutes became necessary to eradicate such confusions and ambiguities.
Broadly, there are two sources of interpretations: Legislative Sources and Non-Legislative
sources which contain many protocols and precedents for interpretation of provisions.
However, the statutory sources play a limited role in the process of interpretation of taxing
statutes.
The three principal wellsprings of law in the overall set of laws are legislation, precedent, and
customs. Among this legislation is the most potent. New legislations are brought from
statutes
which are laws established through the votes in legislative assemblies concerning political
demands and later inscribed in a formal manner. Common laws are unwritten laws dictated
by
the Judges while giving judgment for a dispute. Thus, statutes have textual rigidity and
common law has none. In this manner, it can be deduced that statutes have a position to
override customary laws, while common or customary laws cannot override statute laws.
However, statutes must be obeyed to be enforcing, and for this, the Courts often have to give
judgment or order along with the meaning of such legislation, when approached with
disputes.
This is where; non-statutory law of interpretation is born.

THE PROCESS OF ELUCIDATION

During expounding a statute, any court of law considers that statute, but that is not
necessarily
upheld. With the facts of the issues raised before the Court, it considers the words of the
statutes and their meaning. Then, it follows the precedents for its interpretation, and if it has
not been judicially construed, looks into decisions on similar statutes. Keeping in mind equity
and fairness, the Court announces what the legislature (1) intended this or that meaning; and
(2) must have intended this or that meaning. When the decision is pronounced by the Higher
Court, it becomes a precedent for similar cases and will be followed in the future, by the
doctrine of Stare Decisis. It is in this manner uncodified rules of interpretation are born.
The law of statutory interpretation is a body of general rules, as the concrete situations
exhibiting judicial approach to a particular statute are used as a basis for constructing an
abstract rule supposed to be applied to statutes generally. These rules are the consequence of
the enforcement of the particular statute. This is the strength as well as the weakness of
uncodified rules of interpretation, as they are evolved in particular statutory situations and are
not inexorable commands.

INTERPRETATION OF TAXATION STATUTES

Taxation Statute is a fiscal statute imposing a pecuniary burden on the mass population and
thus, the interpretation of the statute must be made with proper care and without any scope of
negligence. The field of statutory interpretation is wide and a convenient way of studying it
would be to understand the general rules for determining legislative intent and to deal with
the
different internal and external aids, to find the most convenient way of interpretation.
In the case of CIT, Karnataka v. Shambulal Nathalal and Company, bar told if any legal
arrangement of expense is equipped for two developments and prompts tax avoidance, should
be evaded.

A. RULES OF INTERPRETATION OF STATUTES TO DETERMINE

LEGISLATIVE INTENT
1. Rule of Literal Interpretation and Strict Construction:
If letters or words of the statute are clear and free from all ambiguities, the Court must give
effect to its literal interpretation. During the judgement of Black Clawson v. Papier Werke
in the year 19752
, Lord Reid said, “We often say that we are looking for the intention of
Parliament, but that is not quite accurate. We are seeking the meaning of the words which
Parliament has used, not what Parliament meant, but the true meaning of what they said”.
Lord Diplock said, “It is not for the Judge to invent fancied ambiguities”, Duport Steels Ltd.
2 Black Clawson v. Papier Werkev. Sire.
3 Thus, while following this rule, the words should have a natural and common
understanding,
without any Judge trying to make sense of the statute, unless it is shown that the words have
been used in a special sense different from their natural meaning.
At the point when the speech of the rule is comprehensible and free from ambiguities, the
literal rule of interpretation is applied and no other considerations or fancied ambiguities are
to be made by the Court, which would change its meaning. However, if the language of the
statute is confusing and unclear, the rule of Strict Interpretation will be applied.
The principle of Strict Construction is applied when the language of the statutory provisions
is ambiguous. In this rule, the ambiguous language is given a technical meaning with no other
equitable considerations.
Taxing enactments are strictly construed as there is no room for intendment, equity, and
presumption in tax. In cases of disputes, the Court has to follow the given rule, to check if the
obligation or expense guaranteed is what the Legislature has established. However, if it has
more than one rule of interpretation available in burdening rules, one which benefits the
evaluation must be acknowledged.
In this standard of translation, a rule ought to be perused in its conventional, regular, and
linguistic significance.

The doctrine of Substantial Compliance is applied when a party has complied with all the
requirements and directions of the statute but failed in some inconsequent aspect that cannot
be described as the “essence” of the requirements. It is the judicial invention that is equitable
and designed to avoid hardship for such a party. However, this doctrine cannot be pleaded.
This rule suggests considering four things before applying the Mischief Rule, which is:
previous rule; the deformity in the previous rule; the present rule; and how the present rule
interfaces with the imperfection in the previous law.
While interpreting taxing statutes, there is no scope for equitable considerations,
presumptions, or assumptions. The statutes must be interpreted in light of what is clearly
expressed. Be that as it may, exacting understanding doesn't mean full impact ought not to be
given to exception notifications. Broadly speaking, this rule means that where a statute,
notification, or provision has been passed as a remedy for the loopholes and the weaknesses
in the law, the interpretation which corrects such weakness is to be adopted. To understand
the real meaning of the provisions, however, one has to understand the aim, scope, and object
of the taxing statutes.
The notifications must be read as a whole along with the provisions and ought to be perceived
in a similar way they are perceived in the conventional speech of the region where the rule
has the power or by individuals managing it. A piece of issued information has statutory force
and validity, and thus, such notifications are to be considered as if they were contained in the
acts themselves.
In K.P.Sons v. Sales Tax Officer and Anr., it was told that “Though the taxing statute has
to be construed strictly, yet, none the less, it must be borne in mind that the construction does
not suffer from any vices of the rigid rule of interpretation.”

B. INTERNAL AIDS TO CONSTRUCTION

Internal aids in resolving ambiguities in construction consist of the following:
2. Long Title.
3. Preamble.
4. The context in which the words appear.
5. The doctrine of ejusdem generis, where a statute uses specific words followed by
general words, which will be interpreted as confined to the objects or concepts of the same
kind as the specific words.

C. EXTERNAL AIDS TO CONSTRUCTION

On the subject of external aids to statutory constructions, the following are considered:
a. Committee Reports.
b. Debates in Parliament.
c. International Conventions or Treaties.
d. Statement of Objects and Reasons.
CONCLUSION
The interpretation of tax laws is strictly interpreted and thus, the legislature must ensure that
the words and texts used in the statute are clear, have clarity, and is broad enough to cover all
the aspects related to the procedure of tax collection. The words must be used with proper
care and sophistication to avoid vagueness.
Laws and regulations often contain terms that may appear ambiguous on the surface, leaving
room for different interpretations. To address this challenge, legal scholars and practitioners
have developed principles and maxims that guide the interpretation of statutes, contracts and
legal documents. Two such principles, Ejusdem Generis and Noscitur a Sociis, play a crucial
role in resolving ambiguities and ensuring that the intent of the law is upheld.

What is noscitur a sociis?

Noscitur a sociis is a Latin legal maxim that means it is known by its associates or it is known
from its companions. In the context of legal interpretation, this principle is used to determine
the meaning of a particular word or phrase in a statute or legal document based on the words
or phrases that surround it or are associated with it.

Here’s how it works:

 Contextual Interpretation: When multiple words or phrases are used together in a

legal provision and one of those words or phrases is ambiguous or unclear in its
meaning, noscitur a sociis suggests that the meaning of that word should be
determined by looking at the context provided by the other words or phrases in the
same provision.

 Restriction or Clarification: The principle helps to clarify or restrict the meaning of

the ambiguous word by considering it in the context of the surrounding words. In
other words, the meaning of the unclear word is influenced or limited by the words it
is associated with.

 Avoiding Ambiguity: The goal of applying noscitur a sociis is to avoid ambiguity in

legal texts by interpreting the words in a way that makes sense within the overall
context of the statute or document.

For example, if a legal provision refers to vehicles, including cars, trucks and other vehicles,
and the term other vehicles is ambiguous, noscitur a sociis would suggest that other vehicles
should be interpreted in the context of the specific examples given (cars and trucks) and
should not include, for instance, bicycles or boats.
What is Ejusdem generis?

Ejusdem generis is a Latin legal principle that means of the same kind or of the same nature.
In the context of legal interpretation, this principle is used to interpret ambiguous or general
words in a statute or contract based on the specific words or phrases that precede them.

Here’s how it works:

 General vs. Specific Words: When a provision or clause in a legal document

includes a list of specific words or phrases followed by a more general or ambiguous
term, ejusdem generis suggests that the general term should be interpreted to be of the
same kind or nature as the specific words listed.

 Restriction or Clarification: The principle helps to restrict or clarify the meaning of

the ambiguous term by considering it in the context of the specific examples provided.
In essence, the general term takes on the characteristics of the specific terms that
precede it.

 Avoiding Overly Broad Interpretations: The purpose of applying ejusdem generis

is to prevent overly broad interpretations of the general term that could lead to
unintended consequences or loopholes in the legal text.

For example, if a contract clause states that employees are prohibited from bringing animals,
including dogs, cats and other animals into the workplace and the term other animals is
ambiguous, ejusdem generis would suggest that other animals should be interpreted to be of
the same kind as the specific animals mentioned (i.e., pets) and it would not include, for
instance, farm animals or exotic wildlife.

Key Differences Between Ejusdem generis and noscitur a sociis

Ejusdem generis and noscitur a sociis are two distinct principles of statutory interpretation in
the field of law. While both principles involve interpreting ambiguous terms in legal
documents based on their context, they differ in their application and purpose.

.
1. Meaning and Purpose

Ejusdem Generis: This Latin term means of the same kind or of the same nature. The
purpose of ejusdem generis is to interpret general or ambiguous words in a statute or contract
by associating them with specific words that precede them. It restricts the meaning of the
general term to be consistent with the specific terms listed.

Noscitur a Sociis: This Latin phrase translates to it is known by its associates. The purpose
of noscitur a sociis is to understand the meaning of a particular word or phrase by considering
the context provided by other words or phrases in the same legal provision. It looks at the
surrounding words to determine the word’s correct interpretation.

2. Application

Ejusdem Generis: This principle is applied when a provision or clause includes a list of
specific words followed by a more general or ambiguous term. Ejusdem generis suggests that
the general term should be interpreted to be of the same kind or nature as the specific words
listed.

Noscitur a Sociis: Noscitur a sociis is applied when two or more words within a legal text
are susceptible to similar or related meanings because they are used together. It advises that
these words should be interpreted in the context of their association with one another.

3. Focus

Ejusdem Generis: The primary focus of ejusdem generis is on limiting or narrowing the
scope of the general term to match the specific terms provided. It prevents overly broad
interpretations.

Noscitur a Sociis: Noscitur a sociis emphasises understanding a word’s meaning based on its
companions in the text. It aims to prevent ambiguity by considering the context created by the
surrounding words.

4. Specific vs. General

Ejusdem Generis: Ejusdem generis deals explicitly with the relationship between specific
and general terms within a list. It addresses the interaction between these terms.

Noscitur a Sociis: Noscitur a sociis applies to any words or phrases that appear together and
may have a related or analogous meaning. It doesn’t focus on specific vs. general distinctions.
5. Nature of Ambiguity

Ejusdem Generis: This principle is typically invoked when there is ambiguity in the
meaning of a general term within a list and it’s unclear how that term should be interpreted
concerning the specific terms.

Noscitur a Sociis: Noscitur a sociis is used when there is ambiguity in the meaning of a word
or phrase in a broader context and its interpretation relies on the words that surround it.

6. Examples

Ejusdem Generis: In a clause stating, No vehicles, including cars, trucks and other vehicles,
are allowed in this area, ejusdem generis would limit the meaning of other vehicles to those
of the same kind as cars and trucks, such as motorcycles or bicycles.

Noscitur a Sociis: In a provision saying, The employee must attend meetings, conferences
and other related events, noscitur a sociis would help interpret other related events by
considering the context of meetings and conferences, restricting it to similar work-related
gatherings.

Here’s a table summarising the key differences between Ejusdem Generis and Noscitur a
Sociis in statutory interpretation:
 Aspect Ejusdem Generis Noscitur a Sociis

Meaning Of the same kind or Of the same nature It is known by its associates

Purpose To interpret general terms in context To understand the meaning of a word in context

Application When specific terms precede a general term When words are susceptible to related meanings

Focus Narrowing the scope of general terms Contextual interpretation to avoid ambiguity

Specific vs. General Deals with specific vs. general terms within lists Applies to any words with related meanings

Nature of Ambiguity Addresses ambiguity within specific vs. general terms Addresses broader ambiguity within context

The employee must attend meetings, conferences and other re

Example No vehicles, including cars, trucks and other vehicles
Events.

In the case of Kavalappara Kottarathil Kochuni v. State of Madras, the legal principle of
ejusdem generis was established and clarified. This principle dictates that it should only be
applied when general terms in a law or statute follow specific words and all those specific
words belong to the same general category or class. However, it’s important to note that this
rule is not an absolute and inflexible law; rather, it is a permissible inference that can be
drawn in the absence of any clear indication to the contrary within the law.

In a similar vein, the case of Powell v. Kempton Park Racecourse Co. exemplifies the
application of the ejusdem generis doctrine. In this case, the court ruled that other items
mentioned in the statute were related to indoor places, while Tattersall’s enclosure was
located outdoors. Therefore, the court concluded that no offense had been committed in this
instance. This decision underscored the importance of interpreting the law in a manner that
aligns with the specific context and details of the statute in question.

Ejusdem generis: A Facet of noscitur a sociis

Ejusdem generis is a legal concept that is related to another concept called noscitur a sociis.
In simple terms, noscitur a sociis means that a word in law or rule gets its meaning from the
words around it. So, when you see a word in a law, you should understand what it means by
looking at the other words nearby.

Ejusdem generis is like a part of noscitur a sociis. It comes into play when there are both
general words and specific words in a law or rule. In such cases, you can’t just look at the
general words on their own. Instead, you need to consider them in the context of the specific
words that are also there.

For example, if a law talks about vehicles, including cars, trucks and other vehicles, ejusdem
generis tells us that other vehicles should be similar to cars and trucks because it’s listed with
them. It’s like saying you can’t bring in any kind of vehicle; it should be a vehicle like a car
or a truck.

This idea has been discussed in court cases, like the one involving Maharashtra University
of Health and others Vs. Satchikitsa Prasarak Mandal & Others. The court pointed out
that when you have general words mixed with specific words, you can’t just focus on the
general words alone. You need to understand them based on the specific words and the
context they’re in. This principle was also mentioned in the case of Attorney General v.
Prince Ernest Augustus of Hanover by Viscount Simonds.

So, in simple terms, ejusdem generis helps us figure out what general words mean when
they’re used alongside specific words in a law or rule.

Conclusion

While both ejusdem generis and noscitur a sociis are principles used for interpreting
ambiguous terms in legal documents, there is a difference between Ejusdem Generis and
Noscitur a Sociis in terms of focus, application and purpose.

Ejusdem generis specifically deals with the relationship between specific and general terms
within a list, while noscitur a sociis applies more broadly to any words or phrases that appear
together and may share related meanings, emphasising the context provided by surrounding
words. Both both ejusdem generis and noscitur a sociis help ensure clarity and consistency in
legal interpretation.

State of Bombay v. Hospital Mazdoor Sabha AIR 1960 SC610

Introduction:

The disputes between the workers and the management of the industry are happening for a
long time. The disputes can be over various things such as wages, dismissal of employees
without proper compensation, etc. Industrial Disputes Act, 1947, was enacted to solve such
disputes and tribunals were established to resolve those disputes by judicial minds. It is
important that only industrial disputes can be referred to such tribunals, which means the Act
only applies to industries. Now the problem arises as to what constitutes industry and what
not. In the present case also i.e. State of Bombay & others v. The Hospital Mazdoor Sabha,[i]
there was a question of interpretation whether Government Hospitals form part of the
industry and can such disputes be referred to tribunal Under Section 10 of Industrial Disputes
Act, 1947.

Background:

The definition of Industry under Section 2(j) of the Act is very wide and extensive. It covers
various governmental functions also but it does not cover the primary functions i.e. sovereign
functions of the government since these functions are for the socio-economic progress of the
State.[ii] In Baroda Borough Municipality v. Its Workmen,[iii] even a municipality was held
to be an industry under this Act. Further, an amendment was made after the present case was
referred to the industrial tribunal which added Defence, Hospital & Dispensary and fire
brigade services within the ambit of the industry under this Act.

Statutory Provisions Discussed:

Section 2(j), 25F(b), 251 of Industrial Disputes Act, 1947.

Facts of the case:

Factual Matrix-

The group of Hospitals consists of five Hospitals. First being established in the year 1845.
Most of the expenses were met by the Appellant. The group is under the administrative
control of the Surgeon- General of the Appellant and its daily affairs are controlled by the
Superintendent who is an employee of the Appellant and their salaries are paid entirely by the
Appellant. This group serves as a clinical training ground for students of a Government
Medical College run of the Appellant. The group is thus run and managed by the appellant to
provide medical relief and to promote the health of the people of Bombay.

Procedural History-

The Hospital administration dismissed 2 of its employees by notice and in their place, two
servants who were discharged from the Civil Supplies Department were appointed. The
employees filed a writ petition before Bombay High Court which held that the retrenchment
orders were not void. The matter was then taken to Court of Appeal which held that the
orders do not comply with Section 25F of the Act and hence they are invalid. The Court also
held that the Industrial Disputes Act applies to Hospitals and issued a writ of mandamus.
Thus, the Appellants have approached the Supreme Court to get the Judgment of the Court of
Appeal Set-aside.

Issues:

a. Whether the Provisions of the Industries Dispute Act, 1947 applies to Hospital meaning
thereby does Hospitals come under the meaning of Industry under this Act?

b. Whether the retrenchment order of two employees is invalid due to non-compliance of

Section 25F of the Act?

Arguments Advanced:
Arguments by the Appellant-

The Appellants contended that provisions of the Act do not apply to them since they are not
industry within the Act. They also contended that the Appellate Court was wrong in holding
them liable for a contravention of Section 25F of the Act. They also claimed that while
construing the words in Section 2(j) of the Act, the doctrine of noscuntur a sociis which
means that, when two or more words which are susceptible to analogous meaning are coupled
together they are understood to be used in their cognate sense. It means that the words which
are close to each other should be interpreted in a general to the less general one. It is also
contended by the Appellant that an undertaking should be analogous to trade or business. The
Appellant also contends that the person who is carrying on such activity must receive some
consideration in return i.e. quid pro quo.

Arguments by the Respondents-

The respondents contended that they had not been paid at the time of retrenchment
compensation as prescribed by Section 25F(b). The respondents contend that the failure to
comply with the said requirement makes the order of retrenchment invalid.

Judgment:

Ratio Decidendi:

The Judgment of the Court was delivered by Justice Gajendragadkar. The Court considered
various arguments and facts of the case. The Court held that Section 2(j) does not define
“industry ” in the usual manner because the second clause deliberately refers to several other
items of industry and brings them in the definition in an inclusive way. The words used in an
inclusive definition denote a wide meaning and it cannot be restricted. The Court also held
that the Doctrine of noscuntur a sociiscannot be applied in the present case because the
Object and Scope of the Act are very wide and the Categories mentioned in Section 2(m) of
the Act makes the Doctrine inapplicable.

The Court also held that the absence of profit motive or absence of capital investment does
not make any material difference. If a hospital is run by a private person without charging any
fee it would still be an undertaking under Section 2(j). It doesn’t matter whether the hospital
is run by a private person or government. The addition of the hospital under Section 2(n)(vi)
also shows the intention of the legislature which means that the hospital is an undertaking
under the Act.

The Court relied upon Sri Vishuddhananda Saraswathi Marwari Hospital v. Their Workmen,
[iv] in which the Labour Appellate Tribunal held that the definition of the industry in s. 2(j)
was of wide amplitude and that there was no good reason for cutting down its natural
meaning to limit its operation to profit-making enterprises only. The tribunal held that
hospitals form part of the industry under this Act.

The Court upheld the judgment of the Court of Appeal and held that hospitals are an industry
under this Act, meaning their provisions of the Act apply to them. The Court also confirmed
the order of the High Court on the 2nd Issue and held the retrenchment of employees invalid
and inoperative.

Obiter Dicta:

On a plain reading of Section 25F (b) of the Act, it is clear that the requirement prescribed by
it is a condition precedent for the retrenchment of the workman. The section provides that no
workman shall be retrenched until the condition in question has been satisfied. Section 251 of
the Act provides for the recovery of monies due from employers under Chapter V. But
Section 25F(b) is a mandatory provision and it cannot be ignored. Any retrenchment order
which does not comply with Section 25F(b) of Act is invalid and inoperative.

Conclusion:

As pointed out by the Supreme Court, the Word Industry under this Act has a very wide
meaning and even government hospitals form part of it. The word ‘industry’ cannot be
construed to its limited sense. The Court, in this case, made it clear that only Sovereign
Government Functions are excluded from the ambit of ‘industry’ and not all the
governmental functions.