NARASIMHAM, J. - This is a reference under section 29 (2) of the Orissa Agricultural Income-tax Act, 1947, by the Member, Board of Revenue, Orissa, in which the following question of law has been raised :
'Whether in the facts and circumstances of the case the sum of Rs. 13,416 paid to the petitioners son as maintenance allowance is legally admissible under sub-rule (2) of rule 3 of the Orissa Agricultural Income-tax Rules, 1948 ?'
2. The admitted facts are as follows :
The petitioner Sri Ram Chandra Mardaraj Deo was, at all material times, the proprietor of the impartible estate of Khallikote in Ganjam District. In respect of the assessment year 1950-51 he claimed a deduction of Rs. 13,416 out of his total agricultural income on the ground that the said sum was actually paid by him as maintenance allowance to his son (known as Yubaaraj Sahib) who was then studying in Madras. The Income-tax authorities, however, rejected his claim holding that clause (a) of sub-rule (2) of rule 3 of Orissa Agricultural Income-tax Rules, 1948, on which he relied would not apply to the maintenance allowance paid by the proprietor of an impartible estate to his son.
3. Section 6 of the Orissa Agricultural Income-tax Act specifies various items of expenditure which may be lawfully deducted from the total agricultural income, in computing the new income liable to agricultural income-tax. The last clause of that section, clause (k), however, confers power on the Government to make rules specifying some other deductions which may also be lawfully allowed. In exercise of the power conferred by this clause, the Government of Orissa made sub-rule (2) of rule 3 of the Orissa Agricultural Income-tax Rules, 1948, which runs thus :
'3. (2) In addition to the deductions specifically allowed under section 6, the following deduction provided under clause (k) of that section shall be allowed :
Maintenance allowance, actually paid to the following members of the proprietors family owning an impartible estate, provided that the aggregate of the allowances so paid shall not exceed one-fifth of the net income of the estate, namely :-
(a) the son, grandson, or great grandson in the male line, born in lawful wedlock or an adopted son of any previous proprietor of the impartible estate;
(b) the widow of a previous proprietor so long as she does not remarry;
(c) the widow of the son, grandson, or great grandson of the proprietor so long as she does not remarry or the widow of the son, grandson or great grandson of any previous proprietor so long as she does not remarry, provided that in all cases the widow has no son or grandson;
(d) the unmarried daughter born in lawful wedlock of any previous our proprietor; (e) the unmarried daughter born in lawful wedlock of a son or grandson of the proprietor or of any previous proprietor, provided that she has neither father, not mother nor a brother living.'
4. Mr. K. Patniaks argument on behalf of the Raja Bahadur of Khallikote is simple. The previous proprietor of the impartible estate was the father of the petitioner. Therefore, the petitioners son is the 'grandson' of the previous proprietor. Clause (a) of sun-rule (2) of rule 3 of the said Rules expressly says that maintenance allowance actually paid to the grandson of the previous proprietor shall be deducted from the total agricultural income liable to assessment. Mr. Patnaik relied on the well-known canon of construction that a taxing statute should be strictly construed and if there is any ambiguity the construction in favour of the subject should be made and urged that the mere fact that the grandson of the previous proprietor also happened to be the son of the present proprietor would not render clause (a) inapplicable.
5. The argument of Mr. Patnaik is very plausible; but it cannot bear close scrutiny.
6. It is true, as rightly stressed by Mr. Patnaik, that taxing statues should be strictly construed and if there is any ambiguity the construction in favour of the subject should be preferred. But as pointed out in Simons Income Tax, Vol. I, page 53 relying in Inland Revenue Commissioners v. Scott-Ellis : 'It must be remembered that difficulty is construing a statute is not the same thing as ambiguity. It is the Courts duty to construe and the fact that construction is difficult does not relieve the Court of that duty. If the Court in such a case comes to a decision as to the meaning, there is no ambiguity. Moreover, as pointed our in Colquhoun v. Brooks the Court is bound when construing the terms of any provision found in a statue to consider any other parts of the Act which throw light upon the intention of the Legislature and which may serve to show that the particular provision ought not to be construed as it would be if considered alone and apart from the rest of the Act.' To similar effect is the following observation of Lord Davey, in Canada Sugar Refining Co. v. R :
'Every clause of a statute should be construed with reference to the context and other clauses in the Act so as, as far as possible, to make a consistent enactment of the whole statute or series of statutes relating to the subject-matter.'
7. Hence, in construing clause (a) of sub-rule (2) of rule 3 of the Orissa Agricultural Income-tax Rules we must carefully examine the other clauses also of that sub-rule and see whether the construction put on clause (a) by Mr. Patniak will lead to any absurdity if applied to the other clauses of that sub-rule. It will be noticed that in clauses (a), (b) and (d) the relations (male and female) of the 'previous proprietor' of an impartible estate alone are mentioned. Clauses (c) and (e), however, mention the relations not only of the previous proprietor but also of the present proprietor. In clause (c) there is reference to (i) the widow of the son, grandson or great grandson of the proprietor; and (ii) the widow of the son, grandson or great grandson of any previous proprietor. The connecting word is the disjunctive word 'or' and hence the reasonable construction would be that the relations mentioned in (i) were excluded from (ii). If the proprietor of an impartible estate happens to be the son of the previous proprietor (as in the present instance) the widow of the son of the present proprietor is also the widow of the grandson of the previous proprietor. It will not be proper to assume that the makers of the Rules were guilty of using tautologous expressions and that they described the maintenance-holders twice in the same clause - firstly as relations of the present proprietor, and again as relations of the previous proprietor. The more reasonable construction for which great support is found in the use of the disjunctive expression 'or' is that the widows of male descendants of the present proprietor were grouped in one class; whereas the widows of the male descendants of the previous proprietor excluding those who are also the descendants of the present proprietor, were grouped in another class. Similarly, in clause (e) also the unmarried daughters of the male descendants of the present proprietor were classified separately from the unmarried daughters of the male descendants of the previous proprietor. If, therefore, the intention of the makers of the Rules was to include in clause (a) also the made descendants of the present proprietor, they would surely have used words similar to those found in clauses (c) and (e) and expressly referred to the son, grandson or great grandson of the proprietor. On the other hands, the significant omission of these words in clause (a) and their express insertion in clauses (c) and (e) must lead to the necessary inference that in clause (a) it was not intended to include the son, grandson, or great grandson in the male line of the present proprietor. Hence, the words 'son, grandson or great grandson of the previous proprietor' used in clause (a) must be so construed as to exclude those persons who are direct descendants in the male line of the present proprietor.
8. This view is further strengthened if we examine the law regarding the right of maintenance of the various near relations of the proprietor of an impartible estate as it stood before the Rules were made and the legal history of the said Rules. In South Orissa impartible estates were all governed by the well-known statute - The Madras Impartible Estates Act, 1904. Section 9 of that Act enumerates various persons entitled to maintenance our of the impartible estate and that section is as follows (omitting immaterial portions) :
'9. Where for the purpose of ascertaining the succession to an impartible estate, the estate has to be regarded as the property of a joint Hindu family, the following persons shall have a right of maintenance our of the impartible estate and its income, namely;
(a) the son, grandson, or great grandson, is the male line, born in lawful wedlock or adopted, of the proprietor of the impartible estate or of any previous proprietor thereof;
(b) the widow of any previous proprietor of the impartible estate so long as she does not remarry;
(c) the wide of the son, grandson, or great grandson of the proprietor of the impartible estate or of any previous proprietor thereof, so long as she does not remarry, provided she has no son or grandson living;
(d) the unmarried daughter born in lawful wedlock of the proprietor of the impartible estate or any previous proprietor thereof; and
(e) the unmarried daughter born in lawful wedlock of a son or grandson of the proprietor of the impartible estate or of any previous proprietor thereof, provided she has neither father nor mother nor a brother living.'
In North Orissa, however, there is no statutory law dealing with the impartible estates and the right of the persons entitled to maintenance out of the impartible estates is based mainly on the general principles of Hindu law governing impartible estates as explained in several judicial decisions. But it is reasonable to hold that when the Government of Orissa made the Orissa Agricultural Income-tax Rules, 1948, they were aware of the provisions of section 9 of the Madras Impartible Estates Act, 1904. Such an inference arises not only from the general principles of statutory construction which require that it should be assumed that 'Legislature knows the existing state of law' (see Craies on Statute Law, page 92, 5th edition) but also from a close comparison of the various clauses of section 9 of that Act with the various clauses of sub-rule (2) of rule 3 of the Orissa Agricultural Income-tax Rules, 1948. It will be noticed that in the said Rules, the clauses in the said act have been repeated verbatim omitting some words in clauses (a) and (d). Clauses (b), (c) and (e) are identical. In clauses (a) and (d), however, while the Act expressly refers to the relations of the previous proprietor and omit any reference to the present proprietor. It seems, therefore, clear that when the Government of Orissa framed sub-rule (2) of rule 3 they adopted the language of the various clauses of section 9 of the Act but designedly omitted all reference to the present proprietor in clauses (a) and (d). Full effect must be given to this deliberate omission. 'Sometimes if the meaning of an enactment is not plain, light May be thrown upon it by observing that certain words have been designedly omitted' (see Craies on Statute Law, 5th edition, page 101). Following this principle of construction it seems clear that in clause (a) and (d) of sub-rule 3 Government intended deliberately to exclude those persons who are also the descendant in the male lime of the present proprietor or unmarried daughters of that proprietor.
9. It is now necessary to examine whether Mr. Patniaks argument about the strict construction of a taxing statute in favour of a subject would apply in construing the various clauses of sub-rule (2) of rule 3 of the Orissa Agricultural Income-tax Rules. As already pointed our, those clauses deal with the deductions permissible our of the total agricultural income of an assessee for the purpose of assessing agricultural income-tax. It is well settled that the principle of strict construction of fiscal statutes will not apply in construing those provisions which deal with exemption from taxation because such exemptions increase the burden on the other members of the community and should be therefore be deprecated (Maxwell on Interpretation of Statutes, 10th Edition, p. 291). It was pointed our in Commissioner of Income-tax v. Maharaja Visweswar Singh :
'As was observed in In re Scottish Widows Fund and Life Assurance Co. in one sense it is true that a taxing statute should be construed liberally and favourably to the subject but, on the other hand, equality and impartial justice in the incidence of taxation are of greater moment and the statute should be construed so as to promote that equality and that impartiality of justice. There is no presumption in favour of the exemption of the few from the incidence of a general tax. The presumption is for equality and rather against the partiality which is involved in special exemptions; (see also In re Young p. 61 per Lord Deas and p. 62 per Lord Macmillan).'
This principle has been reiterated by Cohen, L. J. in a very recent decision reported in Littman v. Barron (Inspector of Taxes) :
'In view of an argument addressed to us by Mr. Hills, I would add that I agree with him that the principle that in case of ambiguity a taxing statute should be construed in favour of a taxpayer does not apply to a provision giving a taxpayer relief in certain cases from a section clearly imposing liability.'
10. The American decisions also are to the same effect. In Grawford on Statutory Construction it is observed :
'Provisions providing for an exemption may be properly construed strictly against the person who makes the claim of an exemption. In other words, before an exemption can be recognised, the person or property claimed to be exempt must come clearly within the language apparently granting the exemption.'
Three reasons have been given for this rule. Firstly, exemption from taxation is an exception to the general rule, that all property is liable to tax and consequently those who claim under an exception must show themselves within its terms. Secondly, exemption laws are in derogation of equal rights and this is an equally important reason for construing them strictly. Thirdly, tax being the sole means by which sovereignties can maintain themselves, any claim of the part of any one to be exempt from the full payment of his share of taxes on any portion of his property must on that account be clearly defined and founded on plain language. There must be no doubt or ambiguity used upon which the claim to the exemption if sounded. (161 U. S. 134).
11. These principles have been applied in India as will be clear from a perusal of Commissioner of Income-tax, Bihar & Orissa v. Maharaj Visweswar Singh. I may also cite the following passage in the Full Bench decision of the Bombay High Court reported in Inn re Nirabai :
'An enactment imposing a burden requires a strict construction in favour of the subject. But this is an exemption and must therefore be strictly construed in favour of the State.'
12. Mr. Patnaik, however, made a fine distinction between 'exemption' and 'deduction' and urged that though the aforesaid principles may apply where an exemption is claimed they cannot apply in respect of deductions. It is true that in the Orissa Agricultural Income-tax Act and the rules framed thereunder a distinction is made between 'exemptions' and deductions'. 'Exemptions are in respect of the income received by the assessee (see sections 8 and 9) whereas 'deductions' relates to the expenditure incurred by him (see section 6). But this distinction does not affect the principle of statutory construction discussed above. In fact, Littman v. Barron (Inspector of Taxes) related to a case of deduction and though the learned judges allowed the deduction, the principle that a provision giving a taxpayer relief in certain cases from a section clearly impossibility should not be construed strictly in favour of a taxpayer, was reiterated. Whether a particular sum is claimed as an exemption or as a deduction, the new result is its immunity from taxation if the calm is allowed and the reasons given above for not construing such a provision in favour of the taxpayer apply with full force.
13. Mr. Patnaiks last contention may be summed up as follows :
Rule 3 of the Orissa Agricultural Income-tax Rules was made in exercise of the powers conferred by clause (k) of section 6 of the Act and should, therefore, be construed as forming part of the Act itself. Sections 3 and 6 of the act should be construed together for the purpose of determining the liability of an assessee to pay agricultural income-tax. Hence, my ambiguity in the construction of those two sections (which may be taken to be the charging section) must tell in favour of the taxpayer. This argument though ingenious is not sound. The charging section is section 3 of the Act which runs as follows :
'3. Agricultural Income-tax at the rate or rates specified in the schedule shall be charged for each financial year and subject to the previous year of every person'.
The first part of section 6 is as follows :
'6. The agricultural income referred to in sub-clause (1) of clause (a) of section 2 shall be deemed to be the sum realised in the previous year on account of the agricultural income mentioned in the said sub-clause (1), after making the following deductions :....'
Then deductions are specified in various clauses of that section and by virtue of clause (k) (as already intimated) power is taken to include some other items in the deductions by making appropriate rules. If there is any doubt as to whether a portion of an income is agricultural or not, then applying the well-known canon of construction the benefit of any ambiguity would undoubtedly go to the taxpayer. But there it is admitted that the entire income is agricultural income and the only question is whether a particular item of expenditure can be lawfully deducted from the income liable for assessment, the burden will shift on the assessee and if there is any ambiguity in the construction of the various clauses of section 6 or of the rules made under that section, a construction in favor of the state should be made.
14. I would therefore hold that in clause (a) of sub-rule (2) of rule 3 of the Orissa Agricultural Income-tax, Rules, descendant in the male line of the present proprietor were designedly omitted and that the maintenance allowance given to the son of the present proprietor cannot be taken as a permissible deduction merely because that son also happens to be the grandson of the previous proprietor within the meaning of that clause. The answer to the question raised by the Member, Board of revenue, is there for in the negative. The reference is disposed of accordingly. The petitioner should pay hearing fee of Rs. 100 to the Department.
MOHAPATRA, J. - I agree.
Reference answered accordingly.