are three basic rules of interpretation of tax law, namely:
The Literal Rule:
Words must be given their literal, grammatical meaning. Words in old statues
are given the meaning they had when it was enacted. Words appearing more
than once in the same Ordinance must usually be given the same meaning. The
duty of court is to interpret the words that the legislature has use. If a
statute so interpreted is clear and produces hardship, the remedy is a new
statue; it is not the duty of a judge to fill in the gaps.
Golden Rule: Words should be construed in their grammatical and ordinary
sense. In the case Becke versus Smith 1836, the judge said: “It is very
useful in the construction of a statute to adhere to the ordinary meaning of
the words used, and to the grammatical construction, unless that is at
variance with the intention of the legislature to be repugnance, in which
case the language may be varied or modified so as to avoid such
inconvenience, but no further”. In other words, words should not be
construed out of its context; nor should their meaning be twisted to fit in a
The Mischief Rule: The court should look
at the mischief for which the Ordinance was to remedy. This rule may be
adopted in considering a relief or an exemption --- that is to look at the true
intent of the legislation --- what relief or exemption is to grant. This rule
of interpretation was adopted in an Estate Duty case, Foo Ying v
Commissioner of Estate Duty 3 HKTC 363, which concerned Quick Succession
Relief. Note: this rule is inapplicable when considering a legislation
imposing a duty or a charge.
There is no equity in
the interpretation of tax law.
Click here to read what the judge said in
the case Wong Tai Wai David versus CIR.
Can the IRD be estopped
from carrying out its statutory obligations? In the Board of Review case
D30/04, the taxpayer asked the Board of Review to stop IRD from carrying out
Section 61 of the Inland Revenue Ordinance.
Press here for the Board's decision.
for more on interpretation of tax law .