Exemption Notifications Must Be Interpreted Strictly, and the responsibility is on the assessee to demonstrate that he falls within the four corners of an exemption notification: Allahabad High Court

WRIT TAX NO.194 OF 2022





The Allahabad High Court stated on Wednesday that exemption notifications must be strictly interpreted, and the assessee must demonstrate that he falls within the four corners of the exemption notification. The petition that was being handled by the bench of Justices Rajesh Bindal and J.J. Munir was challenging the order that was issued by the Joint Secretary, State Tax Department, U.P., which denied the petitioner’s claim for a subsidiary grant after he established a cinema hall in a rural area.

In this instance, the government had devised a plan to construct brand-new, long-term cinemas. For the first year of the scheme, these movie theaters were to receive subsidiary grants equal to one hundred percent of the entertainment tax due on the movie shown.

After that, for the second and third years, they were expected to receive payments that were equal to 74% and 50% of the entertainment tax, respectively. Any entrepreneur who applies for a license to operate a cinema hall between January 1, 1984 and March 31, 1990 will be eligible for the benefit, as stated in one of the provisions of the Scheme. The petitioner had submitted an application for a license on February 26, 1990, in the present case.

The petitioner’s case was recommended by various authorities, and liberal construction was required because the Scheme was an exercise by the state to grant certain benefits. Despite the petitioner’s repeated attempts, the benefit was not granted to him. Using the Scheme, the petitioner had set up the cinema hall.

The Scheme also contained a number of additional conditions that need not be discussed in detail because the legal issue that must be considered in this petition does not depend on them. The primary issue in this case is whether the petitioner is qualified to receive benefits from the Scheme.

The bench was to consider the following issue:

Is it justifiable or not that the petitioner’s request for a subsidiary grant after setting up a cinema hall in a rural area was denied by the Joint Secretary of the State Tax Department of the United Provinces?

The bench looked at the inspection report and said that the inspection reports clearly show that the petitioner did not have the necessary permission to get a license to run a cinema hall on the date they filed their application for a license or on the last date specified by the Scheme, even the basic infrastructure was incomplete. The High Court made the observation that the petitioner would not be eligible for the benefits of the Scheme if the requirements for granting a license had not been met simply because he applied for a license within the time frame specified by the Scheme.

“The well-settled principle is that when the words in a statute are clear, plain, and unambiguous and only one meaning can be inferred, the courts are bound to give effect to the said meaning irrespective of consequences,” the bench stated in reference to the case of Commissioner of Customs (Import), Mumbai v. M/s. Dilip Kumar and Company and others. It becomes necessary to explain the words in the statute in their natural and typical sense if they are clear and unambiguous. The words used indicate the legislature’s intention.

“Strict interpretation of a statute certainly involves a literal or plain meaning test,” according to the aforementioned judgment. The other tools of interpretation, such as contextual or purposeful interpretation, cannot be used, and no other supporting material, particularly taxation statutes, is consulted. It is established that a tax statute cannot accommodate any intention.

In the same case, it was also decided that exemption notifications must be strictly interpreted and that the assessee must demonstrate that he falls within the four corners of an exemption notification.


The High Court concluded, in light of the preceding decision, that the petitioner has not been able to demonstrate that he is eligible to receive the benefits provided by the Scheme because he has not satisfied the conditions outlined in it.

In view of the above, the bench dismissed the petition.


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