I have noted with respectful amusement ,the young and the enthusiastic engage in spirited debate about morality considerations ,legality and equity in tax law.
The spirit of the youth is encouraging and gives a country ,hope for the future.
That said ,what about ,morality ,equity ,legality-and truth, on one side and income tax on the other?

Taxation is the most holistic ,liberal and all embracing of laws.’’Vasudhaiva kutumbakam’’ is realised in no other law as closely as income tax.Law has nothing to do per se, with morality or righteousness.Income tax law more so.

Let me start with truth.The most venerated of the words – truth –per se –does not prevail in law.What prevails is LEGAL TRUTH.

But aren’t they the same?
I am afraid not.
“Legal truth is defined as facts proved according to the procedures of law.”
The young and the idealistic may find this revolting.But that is the way it is.
From a philosophical pov ,’’your truth is your perception’’.Reflect on this.You may find the concept of legal truth more palatable.

Let us come to equity and intendment.The following quote has been utilised in hundreds of decisions ever since it came into being in 1921.Rowlatt J. in The Cape Brandy Syndicate v The Commissioners of Inland Revenue [1921] 1 KB 64 famously wrote:

“In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”
Our Constitution Bench followed it in the case of Dilip Kumar AIR 2018 SUPREME COURT 3606 (para 26 therein).
Courts cannot fill gaps in tax laws based on what they think is “fair” or “equitable”

In CIT v. Ramaraju Surgical Cotton Mills Ltd. (1967) 63 ITR 478 (SC) it was held that “in interpreting a taxing statute, equitable considerations are entirely out of place.’’.
In Raja Jagdambika Pratap Narain Singh v. CBDT (1975) 100 ITR 698 (SC),it was held that “Equity and income-tax are strangers’’
In Prashanti Medical Services & Research Foundation v. Union of India*[2019] 416 ITR 485 (SC) it was held in para29. ‘’We find no merit in this submission. In a taxing statute, a plea based on equity or/and hardship is not legally sustainable. The constitutional validity of any provision and especially taxing provision cannot be struck down on such reasoning.’’

CIT v. J.H. Gotla (1985) 156 ITR 1 (SC) carved a narrow exception: while “equity and taxation are often strangers,” interpretations yielding equity over injustice may be adopted provided they comport with unambiguous statutory text. The Court held that this exception operates only to prevent patent absurdities, not to introduce benevolent constructions at odds with legislative language.

Two done.Let us now move to morality. It is the universally accepted view that there are in-built limitations in the fiscal process. The Revenue can rightly take every advantage which is open to it under the taxing statutes for the purpose of depleting the taxpayer’s pocket. And the taxpayer is, in like manner, entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Revenue. Ayrshire Pullman Motor Service v. IRC [1929] 14 TC 754, 763, 764, per Lord Clyde): ‘’Moral precepts are not applicable to the interpretation of revenue statutes.’’

In same vein there is no such thing as ILLEGAL income.Income tax law is very holistic and rightly so.Income is either taxed or untaxed ,taxable or untaxable.Its source may matter as to the rate of tax e.g.erstwhile s 115 BBE ,but income from practicing medicine or smuggling –they are all one. [SEE CIT vs. PIARA SINGH(1980) 124 ITR 0040(SC) ]
What we strive for ,in law ,is the legal truth.In tax law we look for taxability.That is about it.

Posted on: June 14th, 2026