In case of ambiguity, assessee must prove eligibility for tax exemption: SC

In a judgment that will benefit the revenue department, a Constitution bench of the Supreme Court on Monday said tax assessees will have to show clear proof to the Revenue Department that they are eligible for availing a tax exemption and the benefit of any ambiguity in exemption provision/notification would fall in the favour of the tax man.

The five-member bench, comprising Justices Ranjan Gogoi, NV Ramana, R Banumathi, Mohan M Shantanagoudar and S Abdul Nazeer, was constituted to look into what is the rule to be applied while interpreting a tax exemption provision or notification when there is an ambiguity.

The bench put responsibility on the assessee to prove a tax exemption where the guidelines aren’t clear and said he cannot claim the benefit of any such ambiguity in provisions.

While overruling a judgment in the Sun Export case that had held a contrary view, the bench, in an 83-pages judgement, said “exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification”.