Invoking Doctrine of Manifest Arbitrariness and Positive Obligation in the Field of Taxation

Karan Kumar Khetani – [2021] 129 taxmann.com 283 (Article)

A basic understanding of the jurisprudence revolving around taxation statues would show that there is a fundamental difference1 between ‘tax’ and ‘fee’, and hence, the distinction made in Article 265 of the Constitution of India, 1950 [in short the “Constitution”] The taxonomy is premised on the fact that the levy of tax is to further a public purpose of raising the general revenue of the State. As to how far can the State go in order to achieve this purpose [or to protect the interest of the revenue], and what are the constraints imposed via judge-made-law, is the mainstay of this piece.

General principles governing the discernment of taxation statutes state that such laws are liable to be construed ‘strictly’. These principles have been reiterated and brought into play by various courts of our country from time to time. Arguably, the plausible explanation in support of these general principles is that there is no ‘equity’ in taxation statutes, which broadly, means that if, under a particular taxation statute, the benefit is extended to a class of subjects, that does not, necessarily, mean that the benefit must also attract the other classes of subject. So far so good! However, the coronavirus disease – 2019 [in short “COVID-19”] pandemic has, undoubtedly, been the most unparalleled and unprecedented crisis of all times. It is in this context, we need to anatomize as to whether, the aforesaid ‘general’ principles, would stand firm, in these, not so general times.

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