Summarize the following court judgment. vil Appeal Nos.1177 to 1184 (NT) of 1990. From the Judgments and Order dated 5.3.85	 21.1.85	 25.2.85	 11.2.85	 14.10.85	 11.2.85 and 20.10.86 of the Madras High Court in T.C. Nos.694/82	565/80	 1404/80	 637/81	638/81	521/81	429/83 and 572/83. T.A. Ramachandran and Mrs. Janki Ramachandran for the Appellant. S.C. Manchanda	 B.B. Ahuja and Ms. A. Subhashini for the Respondent. The Judgment of the Court was delivered by VENKATACHALIAH	 J. These Special Leave Petitions arise out of and are directed against the orders of the High Court of Judicature at Madras disposing of references made under Section 256(1) of the Income Tax Act 1961 (Act for short) in Tax Case Nos. 694 of 1982	 565 of 1980	 1404 of 1980	 637 and 638 of 1981	 521 of 1981	 429 of 1983 and 572 of 1983. The High Court following its earlier pronouncement of that Court in Commissioner of Income tax vs O.M.S.S. Sankaralinga Nadar & Co.	 answered the question of law	 similar in all the cases	 in favour of the revenue. The question was whether in making a disallowance for the inter est paid by a partnership firm to a partner under Section 4O(b).of the Act the interest	 in turn	 paid by the partner on his borrowings from the firm should be taken account of and deducted and only the balance disallowed under Section 40(b). On this question	 there is a sharp divergence of judi cial opinion in the High Courts. In Sri Ram Mahadeo Prasad vs C.I.T.	 1; C.I.T. vs Kailash Motors	 ; C.I.T. vs T.V. Roman sigh & Sons	 ; C.I.T. vs Kothari & Co.	 ; C.I.T. vs Balaji Commercial Syndicate	 ; C.I.T. vs Motiisi Ramjiwan and Co.	 ; C.I.T. vs Precision Steel and Engg.Works	 & Har.)	 the High Courts have taken the view that where a firm pays interest to its partner and the partner also pays interest to the firm	 only the net amount of interest paid by the firm to the partner is liable to disallowance under Section 40(b) of the Act. However	 in C.I.T. vs O.M.S.S. 250 Sankaralinga Nadar & Co.	 	 the High Court of Madras has taken a contrary view. We have heard Shri Ramachandran	 learned senior counsel for the appellants and Sri Manchanda	 learned Senior Counsel and Sri B.B. Ahuja for the revenue. Special Leave is granted. The appeals are taken up for final hearing	 heard and are disposed of by this common judgment. We may refer to the facts in SLP(C) No. 14291/1985 which is representative of and typifies the context in which the question arises. The appellant	 M/s. Keshavji Ravji & Co. is a registered firm consisting of 6 partners and car ries on a business in the manufacture and export of stain less steel articles. In the accounting year ended 13.11.1974	 corresponding to the assessment year 1975 76	 the firm paid interest to the partners on the amounts standing to their respective credits in the firm. The firm also received from the partners interest on their borrowings from the firm. For the relevant assessment year	 the appellant filed a return disclosing a total income of Rs.2	55	225. The Income tax Officer while disallowing the amount of interest paid to partners did not set off the interests received from the partners on their own borrowings. With this disallow ance	 the income of the firm was assessed at Rs.2	79	730. In the assessee 's appeal	 the Appellate Assistant Commissioner of Income Tax by his order dated 18.10.1977 allowed the claim of the appellant that only the net interest paid to the partners	 after setting off the interest received from them	 was to be disallowed. The Revenue took up the matter in further appeal before the Income Tax Appellate Tribunal which by its order dated 6.1.1979 dismissed the appeal and affirmed the appellate order of the Assistant Commissioner. The Tribunal	 as did the Appellate Assistant Commissioner	 placed reliance on the decision of the Allahabad High Court in Sri Ram Mahadeo Prasad vs C.I.T.	 At the instance of the revenue the Tribunal stated a case and referred the following question of law for the opinion of the High Court. "Whether	 on the facts and in the circumstances of the case	 the Appellate Tribunal was correct in holding that net interest should be disallowed under section 40(b) of the Income tax Act	 1961 ?" This reference under Section 256(1) of the Act was registered in 251 the High Court as Tax Case No. 694/82 and the High Court by its order dated 5.3.1985 answered the question in the negative and against the appellant relying	 as stated earli er	 on its earlier pronouncement in Sankaralinga Nadar 's case. Broadly	 similar are the circumstances under which the other appeals arise. Before we advert to and evaluate the merits of the contentions	 it is appropriate to refer to the statutory provision as it then stood. Section 40 of the Act provided: "40. "Notwithstanding anything to the contrary in sections 30 to 39	 the following amounts shall not be deducted in computing the income chargeable under the head 'Profits and gains of business or profession"	 (a) ] (1) ] to ] Omitted as unnecessary (v) ] (b) in the case of any firm	 any payment of interest	 salary bonus	 commission or remuneration made by the firm to any partner of the firm." (c) ] ] Omitted as unnecessary (d) ] By the Taxation Laws (Amendment) Act	 1984	 several amend ments were introduced in the body of Section 40. One of them was the introduction of Explanation 1 in clause (b) of Section 40. That Explanation reads: "Explanation 1: Where interest is paid by a firm to any partner of the firm who has also paid interest to the firm	 the amount of interest to be disallowed under this clause shall be limited to the amount by which the payment of interest by the firm to the partner exceeds the payment of interest by the partner to the firm. " Referring to the new Explanation inserted in clause (b) of Section 40 by the amendment	 the "Notes on Clauses" say: 252 "This clause seeks to insert three new Explanations to section 40(b) of the Act. Explanation 1 seeks to provide that where interest is paid by a firm to a partner who has also paid interest to the firm	 the amount of interest to be disallowed under section 40(b) of the Act shall be limited to the net amount of interest paid by the firm to the part ner	 that is	 the amount by which the payment of interest by the firm to the partner exceeds the payment of interest by the partner to the firm." "The proposed amendments will take effect from 1st April	 1985	 and will	 accordingly	 apply in relation to the as sessment year 1985 86 and subsequent years. " The Explanation I	 which was introduced in 1984	 proprio vigore	 does not apply to the assessment relating	 as here	 to an earlier year. Whether the Explanation brings about a change in	 or admits of being understood as an exposition of	 the law is	 however	 a different matter. It is	 perhaps	 also appropriate here to refer to the circular No. 33 D (XXV 24) of 1965 of the Central Board of Direct Taxes	 the operative part of which provides: "However where a firm pays interest to as well as receives interest from the same partner	 only the net interest can be stated to have been received or paid by the firm	 as the case may be	 and only the net interest should be taken into consideration. This view also finds support in the decision of the Allahabad High Court in the case of Sri Ram Mahadeo Prasad	 In view of the above	 the in structions contained in Board 's Circular No. 55 of 1941 may be treated as modified accordingly . Section 40 imposes a restriction on the deductibility of certain outgoings and expenses which are	 otherwise	 enabled under Sections 30 39 of the Act and constitutes an exception to these sections. Clause (b) of Section 40 is analogous	 with some enlargement	 to Section 10(4)(b) of the predecessor Act of 1922. The prohibition in Section 40 against the deductibility of certain outgoings is in mandatory terms. It is this aspect that has loomed large in the reasoning supporting the view accepted by the Madras High Court in Sankaralinga Nadar 's case and emphasised by the learned counsel for the Revenue. The reasoning of the Madras High Court in that case and of the Andhra Pradesh High Court in Commissioner of Income tax vs T.V. Ramanaiah & Sons	 157 illustrate the rival points of view. The Madras High Court held: "The collocation of the words shows that what is disallowed in the matter of payment of interest cannot be the net interest	 but can only be interest paid with refer ence to a given account relating to payment of interest by the firm to the partner. This is because the subject of disallowance in the matter of payment of interest appears in section 40(b) cheek by jowl with salary	 bonus	 commission or remuneration made by the firm to the partner. There cannot be any net salary or net bonus or net remuneration as mat ters of disallowance. They can only be salary	 as such	 or bonus	 as such	 or commission	 as such	 or remuneration as such which are the subject of disallowance. In like manner	 when the section speaks of payment of interest by the firm to a partner as the subject of disallowance	 it can only be payment of 'gross ' interest in the particular account in which interest is payable. Salary	 bonus	 commission or remuneration do not have what may be characterised as a two way traffic . " " . . In the earliest of the cases	 the Allahabad High Court endorsed the Tribunal 's decision to disallow only the net interest. The court did so	 not on a construction of the words of the section	 but on equitable grounds of fairness". " (P. 336) The Andhra Pradesh High Court	 however	 taking the contrary view relied on	 what it considered	 the revenue 's own understanding of the legal position as made manifest in the Board 's circular that the "real purpose of Section 40(b) of the Act was to add back only the net amount of interest and not the gross amount". On the interpretation of Section 40(b)	 the High Court in Rarnanaiah 's case said: "As a matter of interpretation of section 40(b) of the Act	 we find that there is nothing in the provision which expressly states that the amount to be added back is either gross or net. The provision requires that "any pay ment of interest" by a partnership firm to a partner shall not be deducted in computing the income of the partnership firm. For the purpose of finding out the amount paid by way of 254 interest	 it is necessary for the Income tax Officer to find out the amount of interest paid by the partnership firm to the partner and also see if the same partner paid any inter est to the partnership firm and ascertain the amount of interest effectively paid by the partnership firm to the partner . " at p. 304] 5A. The arguments of the learned counsel on both sides covered a wide range of contentions. The submissions of Sri Ramachandran in support of the appeals admit of being formu lated thus: (a) The scheme of Section 40 of the Act does not evince any intention to penalise a firm for the outgoings which are rendered non deductible; but the sole object of Section 40(b) is	 having regard to the special features and legal incidents of a partnership	 to enable the assessment of the 'real income ' of the firm. The outgoings disallowed by Section 40(b) are not really outgoings at all	 but constitute what are	 otherwise	 ingredients or components of the real income of the firm. Therefore	 the ascertainment of the real income or the real commercial profits does not require or compel the exclusion of the cross interest paid by a partner in determining the quantum to be disallowed under Section 40(b). (b) The extent of the embargo under Section 10(4)(b) of the 1922 Act on the disallowance of "interest" paid to a partner was judicially interpreted and ascertained in Sri Ram Maha deo Prasad vs Commissioner of Income tax	 and when the legislature re enacted those provisions in Section 40(b) of the 1961 Act in substantially the same terms	 legislature must be held to have used that expression with the same implications attributed to it by the earlier judicial exposition. (c) Interest payable by the partners to the firm pursuant to an agreement between the partners is of the same nature as that payable by the firm to the partners on the capital	 brought in by them. Interest paid to and received from a partner are both integral parts of a method adopted by the partners for adjusting the division of profits and in that sense both payments partake of the same character. In identifying and quantifying the 'interest ' for purposes of 255 Section 40(b) it would be permissible to take both the payments into consideration and treat only such excess	 ii any	 paid by the firm as susceptible to the exclusionary rule in Section 40(b). (d) The circular No. 33 D(XXV 24) of 1965 of the Central Board of Direct 'Faxes	 which is statutory in character	 is binding on the authorities. The High Court was in error in taking a view of the legal position different from the one indicated in it. (e) The amendment of 1984 inserting Explanation I in Section 40(b)	 though later in point; of time	 constitutes a legis lative exposition of the correct import of the provision and so construed offers a guide to the correct understanding of the provisions in Section 40(b) in its application to the earlier years as well. Re: Contention (a) The premises of the argument is good in parts; but the inference does not logically follow. Section 40(b)	 it is true	 seeks to prevent the evasion of tax by diversion of the profits of a firm; but the legislative expedience adopt ed to achieve that objective requires to be given effect on its own language. Section 40 opens with the non obstante clause and directs that certain outgoings specifically enumerated in it "shall not be deducted" in computing the income chargeable under the head "profits and gains of business or profession": As long as there is no ambiguity in the statutory language	 resort to any interpretative process to unfold the legislative intent becomes impermissible. The supposed intention of the legislature can not then be ap pealed to whittle down the statutory language which is otherwise unambiguous. If the intendment is not in the words used it is nowhere else. The need for interpretation arises when the words used in the statute are	 on their own terms	 ambivalent and do not manifest the intention of the Legislature. In Doypack Systems Pvt. Ltd. vs Union of India	 ; it was observed: "The words in the statute must	 prima facie	 be given their ordinary meanings. Where the grammatical construction is clear and manifest and without doubt	 that construction ought to prevail unless there are some strong and obvious reasons to the contrary . " (p. 33 1) 256 "It has to be reiterated that the object of interpretation of a statute is to discover the intention of the Parliament as expressed in the Act. The dominant purpose in construing a statute is to ascertain the intention of the legislature as expressed in the statute	 considering it as a whole and in its context. That intention	 and therefore the meaning of the statute	 is primarily to be sought in the words used in the statute itself	 which must	 if they are plain and unam biguous	 be applied as they stand . " (Emphasis Supplied) (p. 332) Artificial and unduly latitudinarian rules of construc tion which	 with their general tendency to "give the tax payer the breaks"	 are out of place where the legislation has a fiscal mission. Indeed	 taxation has ceased to be regarded as an "impertinent intrusion into the sacred rights of private property" and it is now increasingly regarded as a potent fiscal tool of State policy to strike the required balance required in the context of the felt needs of the times between citizens ' claim to enjoyment of his property on the one hand and the need for an equitable distribution of the burdens of the community to sustain social services and purposes on the other These words of Thomas M. Cooley in 'Law of Taxation ' Vol.2 are worth mentioning; "Artificial rules of construction have probably found more favour with the courts than they have ever deserved." Their application in legal controversies has often times been pushed to an extreme which has defeated the plain and mani fest purpose in enacting the laws. Penal laws have sometimes had all their meaning construed away and in remedial laws	 remedies have been found which the legislature never intend ed to give. Something akin to this has befallen the revenue laws . . " (Emphasis Supplied) There are	 indeed	 strong and compelling considerations against the adoption of the test suggested by Sri Ramachan dran. Limiting of the ambit of Section 40(b) on the supposed 'real income ' test would	 perhaps	 lead to positions and results	 whose dimensions and implications are not	 to say the least	 fully explored. The test suggested by Sri Rama chandran	 might on its own extended logic	 validate a set off of the interest paid to one partner against interest received from another and likewise 'interest ' received from one partner on some other deal 257 ings between him and the firm against interest paid to another partner on his or her capital contribution. The test of 'real income ' as one on which the operation of Section 40(b) could be sought to be limited is not a reliable one. Indeed	 the following observations of this Court on the concept of 'Real Income ' in State Bank of Travancore vs C.I.T. ; at 155	 though made in a different context	 are apposite: . The concept of real income is certainly applicable in judging whether there has been income or not but	 in every case	 it must be applied with care and within well recognised limits. We were invited to abandon legal fundamentalism. With a problem like the present one	 it is better to adhere to the basic fundamentals of the law with clarity and con sistency than to be carried away by common cliches. The concept of real income certainly is a well accepted one and must be applied in appropriate cases but with circumspection and must not be called in aid to defeat the fundamental principles of the law of income tax as developed". This contention of Sri Ramachandran rests on generalisation which incur the criticism of being too broad and have cer tain limitations of their own. Contention (a) does not advance appellants ' case. Re: Contention (b) The submissions of Sri Ramchandran on the point are that where the meaning of a word used in a statute had been judicially ascertained by a court and where the legislature	 while re enacting the law on the subject	 uses the same word	 it must be taken to have been aware of the meaning so judicially ascertained earlier and not to have used the word with a different content. This is	 no doubt	 a well recog nised guide to construction. When words acquire a particular meaning or sense because of their authoritative construction by superior courts	 they are presumed to have been used in the same sense when used in a subsequent legislation in the same or similar context. This principle was stated by the Judicial Committee in H.H. Ruckmaboye vs Lulloobhoy Mottic hund	 Moore 's Indian Appeals	 Vol. 5	 p. 234 at 250 thus: 258 " . it is	 therefore	 of considerable importance to ascertain what has been deemed to be the legal import and meaning of them	 because	 if it shall appear that they have long been used	 in a sense which may not improperly be called technical	 and have been judicially construed to have a certain meaning	 and have been adopted by the Legislature in that sense	 long prior to the Statute	 21 James I.	 c. 16	 the rule of construction of Statutes will require	 that the words in the Statute should be construed according to the sense in which they had been so previously used	 al though that sense may vary from the strict literal meaning of them." This principle has been reiterated by this Court in several pronouncements. But the limitations of its application in the present cases arise out of the circumstance that the decision of the Allahabad High Court in Sri Ram Mahadeo Prasad vs Commissioner of Income tax	 did not proceed or rest on any special or technical connotation of the word "interest" nor any special legal sense which that word could be said to have acquired by the earlier judicial ascertainment of its amplitude. The decision proceeded on a construction of the relevant provision i.e. Section 10(4)(b) of the 1922 Act and on what the High Court considered as affording to the assessee a fair treatment. Nothing particu lar stemmed from the interpretation of the expression "interest". The appeal to this principle of construction is	 in our opinion	 somewhat out of place in this case. The rules of interpretation are not rules of law; they are mere aids to construction and constitute some broad pointers. The interpretative criteria apposite in a given situation may	 by themselves	 be mutually irreconcilable. It is the task of the Court to decide which one	 in the light of all relevant circumstances	 ought to prevail. The rules of interpretation are useful servants but quite often tend to become difficult masters. It is appropriate to recall the words of Lord Reid 's in Maunsell vs olins	 "Then rules of construction are relied on. They are not rules in the ordinary sense of having some binding force. They are our servants not our masters. They are aids to construction	 presumptions or pointers. Not infrequently one 'rule ' points in one direction	 another in a different direction. In each case we must look at all relevant circumstances and decide as a matter of judgment what weight to attach to any particular 'rule '. " 259 This passage was referred to with approval by this Court in Utkal Contractors and Joinery vs State of Orissa	 ; at 330. Contention (b) is	 therefore	 not of any assistance to the appellants. Re: Contention (c) There are certain aspects of the legal relationship amongst partners which do impart a special complexion to the question under consideration. The point raised in these appeals in confined to a situation where a partner receives interest on the capital subscribed by him and the same partner pays interest on the drawings made by him. A firm under the general law is not a distinct legal entity and has no legal existence of its own. The partner ship property vests in all the partners and in that sense every partner has an interest in assets of the partnership. However	 during the subsistence of the partnership no part ner can deal with any portion of the property as his own. In Narayanappa vs Krishtappa	 ; 	 this Court referred to the nature of the interest of a partner in the firm and observed: " . .The whole concept of partnership is to embark upon a joint venture and for that purpose to bring in as capital money or even property including immovable property. Once that is done whatever is brought in would cease to be the exclusive property of the person who brought it in. It would be the trading asset of the partnership in which all the partners would have interest in proportion to their share in the joint venture of the business of the partnership. The person who brought it in would	 therefore	 not be able to claim or exercise any exclusive right over any property which he has brought in	 much less over any other partnership property. He would not be able to exercise his right even to the extent of his share in the business of the partnership . In CIT vs Chidambaram	 at 295 & 296 this Court observed: "Here the first thing that we must grasp is that a firm is not a legal person even though it has some at tributes of personality. Partnership is a certain relation between 260 persons	 the product of agreement to share the profits of a business. 'Firm ' is a collective noun	 a compendious expres sion to designate an entity	 not a person. In income tax law	 a firm is a unit of assessment	 by special provisions	 but is not a full person which leads to the next step that since a contract of employment requires two distinct persons viz. the employer and the employee	 there cannot be a con tract of service	 in strict law	 between a firm and one of its partners. So that any agreement for remuneration of a partner for taking part in the conduct of the business must be regarded as portion of the profits being made over as a reward for the human capital brought in. Section 13 of the Partnership Act brings into focus this basis of partnership business." " . . It is implicit that the share income of the part ner takes in his salary. The telling test is that where a firm suffers loss	 the salaried partner 's share in it goes to depress his share of income. Surely	 therefore	 salary is a different label for profits	 in the context of a partner 's remuneration" (Underlining Supplied) In Lindley on Partnership (14th Edn.)	 we find this statement of the law: " . . In point of law	 a partner may be the debtor or the creditor of his co partners	 but he cannot be either debtor or creditor of the firm of which he is himself a member	 nor can he be employed by his firm	 for a man cannot be his own employer." (p. 30) The position as stated above was approved by this Court in Chidabaram 's case. In Regional Director Employees State Insurance Corpora tion	 Trichur vs Ramanuja Match Industries	 	 this Court dealing with the question whether there could be a relationship of master and servant between a firm on the one hand and its partners on the other	 indicated that under the law of partnership there can be no such relationship as it would lead to the anomalous position of the same person being both the master and the servant. The following observations of Justice Mathew in Ellis vs Joseph Ellis & Co.	 were referred to with approval: 261 "The argument on behalf of the applicant in this appeal appears to involve a legal impossibility	 namely	 that the same person can occupy the position of being both master and servant	 employer and employed." (p. 126) And observed: ". . A partnership firm is not a legal entity. This Court in Champaran Cane Concern vs State of Bihar and Anr.	 pointed out that in a partnership each partner acts as an agent of the other. The position of a partner qua the firm is thus not that of a master and a servant or employee which concept involves an element of subordination but that of equality. The partnership business belongs to the partners and each one of them is an owner thereof . " (p. 123) "It is thus clear that in the United States	 Great Britain and Australia	 a partner is not treated as an employee of his firm merely because he receives a wage or remuneration for work done for the firm. This view is in complete accord with the jurisprudential approach. In the absence of any statutory mandate	 we do not think there is any scope for accepting the view of the Rajasthan High Court." (p. 127) Sri Ramachandran 's contention is that both the capi tal brought in by the partners to the firm and the amounts that may be drawn by them from the partnership firm partake of the same nature and character as the funds of the partnership. This may be so. But in effectuating the conse quences of the recognition of this position	 it is necessary to ensure that express provisions of the statute departing from the general law are not whittled down. To the extent that the statute expressly or by necessary implication departs from the general law	 the latter cannot be invoked to displace the effect of the statute. But	 if there is no such statutory departure the general principles operating in that branch of the law determine the nature of the legal relationship. Sir Francis Bennion in his Statutory Interpretation observes: "Unless the contrary intention appears	 an enactment by 262 implication imports any principle or rule of law (whether statutory or non statutory) which prevails in the territory to which the enactment extends and is relevant to its opera tion in that territory." (p. 350) "Unless the contrary intention appears	 an enactment by implication imports the principle of any legal maxim which prevails in the territory to which the enactment extends and is relevant to the operation of the enactment in that terri tory." (p. 354) What follows is that	 to the extent not prohibited by the statute	 the incidents of the general law of partners are attracted to ascertain the legal nature and character of a transaction. This is quite apart from distinguishing the 'substance ' of the transaction from its 'from '. In Sargaison vs Roberts	 [1969] 45 Tax Cases 612 at 617 & 618	 Megarry	 J.	 observed: "I appreciate that what I have to do is to construe the words used	 and not to insert words which are not there	 or to resort to a so called "equitable construction" of a taxing statute. But even when I have given full weight to this consideration	 I think that I am entitled to distin guish between the substance of a transaction and the machin ery used to carry it through . . " ". . "Substance" and "form" are words which must no doubt be applied with caution in the field of statutory construction. Nevertheless	 where the technicalities of English conveyancing and land law are brought into juxtaposition with a United Kingdom taxing statute	 I am encouraged to look at the realities at the expense of the technicalities. In Commissioner of Income tax vs Gillanders Arbuthnot & Co.	 at 418	 this Court said: ". .The taxing authority is entitled and is indeed bound to determine the true legal relation resulting from a trans action. If the parties have chosen to conceal by a device the legal relation	 it is open to the taxing authority to unravel 263 the device and to determine the true character of the relationship. But the	 legal effect of a transaction cannot be displaced by probing into the substance of the transaction" (Emphasis Supplied) The Court is not precluded from treating what the trans action is in point of fact as one in point of law also. How do these principles operate on the present controversy? It appears to us that if in substance interest paid by the firm to a partner and the interest	 in turn	 received from the partner are mere expressions of the appli cations of the funds or profits of the partnership and which	 having regard to the community of interest of the partners	 are a mere variations of the method of adjustment of the profits	 there should be no impediment in treating them as part of the same transaction if	 otherwise	 in general law they admit of being so treated. The provisions of Section 40(b) do not exclude or prohibit such an approach. If instead of the transactions being reflected in two separate or distinct accounts in the books of the part nership they were in one account	 the quantum of interest paid by the firm to the partner would to the extent of the drawings of the partner	 stand attenuated. The mere fact that the transactions are split into or spread over to two or more accounts should not by itself make any difference if	 otherwise	 the substance of the transaction is the same. One of the relevant tests would be whether the funds on which interest is paid or received partake of the same character. A broad analogy	 though in itself may not be conclusive	 is furnished by the idea of "mutual dealings" and the prin ciple of set off statutorily recognised in bankruptcy pro ceedings under Section 46 of the Provincial Insolvency Act and attracted also to proceedings for winding up of compa nies by virtue of Section 529 of the 	 where the 'mutual credit ' clause steps in to avoid the injustice	 which would otherwise	 arise	 of compelling a creditor to pay the official assignee the full amount of the debt due from him to the insolvent	 while the creditor would	 perhaps	 only receive a small dividend on the debt due from the insolvent to him under a pari passu payment. This principle was recognised by this Court in Official Liquidator vs Lakshmikutty	 ; The set off in this case is	 no doubt	 the result of a statutory provision. In the case of partners	 the special legal incidents of their relationship would substitute for the statutory provi sion and govern the situation. Indeed	 even the idea of 264 a set off itself	 which presupposes a duality of entities	 may be out of place in the very nature of the relationship between a firm and its partners where the former is a mere compendious reference to the latter. But even to the extent the income tax law which identifies the firm as a distinct entity and unit of assessment goes	 the idea of set off may be invoked in view of the mutuality implicit in the putative duality inherent in deeming the firm as a distinct entity under the Act for certain purposes. The fiction may have to be pushed to its logical conclusions. The decision of the Madras High Court in Sankaralin ga Nadar 's case speaks of income tax and equity being strangers. To say that a Court could not resort to the so called "equitable construction" of a taxing statute is not to say that where a strict literal construction leads to a result not intended to subserve the object of the legisla tion	 another construction	 permissible in the context	 should not be adopted. In Commissioner of Income tax vs J.H. Gotla	 	 this Court said: " . . we should find out the intention from the language used by the Legislature and if strict literal construction leads to an absurd result	 i.e.	 a result not intended to be subserved by the object of the legislation found in the manner indicated before	 then if another construction is possible apart from strict literal construction	 then that construction should be preferred to the strict literal construction. Though equity and taxation are often strang ers	 attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice	 then such construction should be preferred to the literal construction. Furthermore	 in the instant case	 we are dealing with an artificial liability created for coun teracting the effect only of attempts by the assessee to reduce tax liability by transfer . " (p. 339 40) In this respect taxing statutes are not different from other statutes. In A. G vs Carlton Bank	 	 Lord Russel of Killowen	 CJ said: "I see no reason why any special canons of construction should be applied to any Act of Parliament	 and I know of no authority for saying that a taxing Act is to be construed 265 differently from any other Act. The duty of the court is	 in my opinion	 in all cases the same	 whether the Act to be construed relates to taxation or any other subject	 viz. to give effect to the intention of the legislature . " We	 accordingly	 accept the submission of Sri Rama chandran on this point. In our opinion	 where two or more transactions on which interest is paid to or received from the partner by the firm are shown to have the element of mutuality and are referable to the funds of the partnership as such	 there is no reason why Section 40(b) should be so construed as to exclude in quantifying the interest on the basis of such mutuality. In such circumstances the interest	 if any	 paid to a partner by the firm in excess of what is received from the partner could alone be excluded from deduction under Section 40(b). Contention 'c ' is held and answered accordingly. Re: Contention (d) Sri Ramachandran contended that circular of 1965 of the Central Board of Direct Taxes was binding on the authorities under the Act and should have been relied upon by the High Court in support of the Court 's construction of Section 40(b) to accord with the understanding of the provision made manifest in the circular. This contention and the proposition on which it rests	 namely	 that all circulars issued by the Board have a bind ing legal quality incurs	 quite obviously	 the criticism of being too broadly stated. The Board cannot pre empt a judi cial interpretation of the scope and ambit of a provision of the 'Act ' by issuing circulars on the subject. This is too obvious a proposition to require any argument for it. A circular cannot even impose on the tax prayer a burden higher than what the Act itself on a true interpretation envisages. The task of interpretation of the laws is the exclusive domain of the courts. However	 this is what Sri Ramachandran really has in mind circulars beneficial to the assessees and which tone down the rigour of the law issued in exercise of the statutory power under Section 119 of the Act or under corresponding provisions of the predecessor Act are binding on the authorities in the administration of the Act. The Tribunal	 muchless the High Court	 is an authority under the Act. The circulars do not bind them. But the benefits of such circulars to the assessees have been held to be permissible even though the circulars might have departed from the strict tenor of the statutory provision and mitigated the 266 rigour of the law. But that is not the same thing as saying that such circulars would either have a binding effect in the interpretation of the provision itself or that the Tribunal and the High Court are supposed to interpret the law in the light of the circular. There is	 however	 support of certain judicial observations for the view that such circulars constitute external aids to construction. In State Bank of Travancore vs C.I.T.	 ; 	 however	 this Court referring to certain circulars of the Board said: "The earlier circulars being executive in character cannot alter the provisions of the Act. These were in the nature of concessions and could always be prospectively withdrawn. However	 on what lines the rights of the parties should be adjusted in consonance with justice in view of these circulars is not a subject matter to be adjudicated by us and	 as rightly contended by counsel for the Revenue	 the circulars cannot detract from the Act." (Emphasis Supplied) (p. 139) The expression 'executive in character ' is	 presumably	 used to distinguish them from judicial pronouncements. The circulars referred to in that case were also of the Central Board of Direct Taxes and were	 presumably also	 statutory in character. However	 this contention need not detain us	 as it is unnecessary to examine whether or not such circulars are recognised	 legitimate aids to statutory construction. In the present case	 the circular of 1965 broadly accords with the view taken by us on the true scope and interpretation of Section 40(b) in so far as the quantification of the inter est for purposes of Section 40(b). Contention (d) is disposed of accordingly Re: Contention (e) Sri Ramachandran urged that the introduction	 in the year 1984	 of Explanation I to Section 40(b) was not to effect or bring about any change in the law	 but was intend ed to be a mere legislative exposition of what the law has always been. An 'Explanation '	 generally speaking	 is in tended to explain the meaning of certain phrases and expres sions contained in a statutory provision. There is no gener al theory as 267 to the effect and intendment of an Explanation except that the purposes and intendment of the 'Explanation ' are deter mined by own words. An Explanation	 depending on its language	 might supply or take away something from the contents of a provision. It is also true that an Explanation may this is what Sri Ramachandran suggests in this case be introduced by way of abundant caution in order to clear any mental cobwebs surrounding the meaning of a statutory provision spun by interpretative errors and to place what the legislature considers to be the true meaning beyond controversy or doubt. Hypothetically	 that such can be the possible purpose of an 'Explanation ' cannot be doubted. But the question is whether in the present case	 Explanation I inserted into Section 40(b) in the year 1984 has had that effect. The notes on clauses appended to the Taxation Laws (Amendment) Bill	 1984	 say that Clause 10 which seeks to amend Section 40 will take effect from 1st April	 1985 and will	 accordingly	 apply in relation to the assessment year 1985 86 and subsequent years. The express prospective opera tion and effectuation of the 'Explanation ' might	 perhaps	 be a factor necessarily detracting from any evincement of the intent on the part of the legislature that the Explana tion was intended more as a legislative exposition or clari fication of the existing law than as a change in the law as it then obtained. In view of what we have said on point (c) it appears unnecessary to examine this contention any further. Contention (e) is disposed of accordingly. In the result	 for the foregoing reasons these appeals are allowed; the orders of the High Court under appeal set aside and the question of law referred for opin ion is answered in the affirmative in terms of para 12 (supra). In the circumstances	 there will be no orders as to the costs in these appeals. P.S. S Appeals allowed.

Section 40(b) of the Income Tax Act	 1961	 as it stood at the relevant time	 prohibited deduction of interest	 salary	 bonus	 commission or remuneration paid by the firm to the partner. Explanation 1 introduced thereto by the Taxation Laws (Amendment) Act	 1984	 which took effect from 1st April	 1985	 provided that where interest is paid by a firm to a partner who has also paid interest to the firm	 the amount of interest to be disallowed shall be limited to the net amount of interest paid by the firm to the partner. Circular No. 33D(XXV 24) of 1965 issued by the Central Board of Direct Taxes provided that where a firm pays interest to as well as receives interest from the same partner	 only the net interest can be stated to have been received or paid by the firm. The assessee appellant	 a registered partnership firm	 in the accounting year for the assessment year 1975 76	 paid interest to the partners on the amounts standing to their respective credits. It also received from the partners interest on their borrowings from the firm. The Income tax Officer 244 while disallowing the amount of interest paid to the part ners did not set off the interest received from them on their borrowings. The Appellate Assistant Commissioner allowed the claim of the appellants that only the net inter est paid to the partners after setting off the interest received from them was to be disallowed. The Appellate Tribunal affirmed the appellate order. The High Court an swered the reference in favour of the Revenue on the view that the Tribunal was not justified in holding that net interest should be disallowed under section 40(b) of the Act. In these appeals by special leave it was contended for the appellants that: (a) the sole object of section 40(b) was	 having regard to the special features and legal incidents of a partnership	 to enable the assessment of the 'real income ' of the firm and did not require or compel the exclusion of the cross interest paid by a partner in determining the quantum to be disallowed; (b) the extent of the embargo under section 10(4)(b) of the 1922 Act on the disallowance of interest paid to a partner was judicially interpreted and ascertained in Sri Ram Mahadeo Prasad vs CIT	 All. and when the legislature re enacted those provisions in section 40(b) of the 1961 Act in substantially the same terms	 legislature must be held to have used that expression with the same implications attributed to it by the earlier judi cial exposition; (c) the interest paid to a partner on the capital brought in by him and the interest received from a partner on his borrowings from the firm were both integral parts of a method adopted by the partners for adjusting the division of profits and in that sense both payments partook of the same character and it would be permissible to take both the payments into consideration in quantifying the interest and treat only such excess	 if any	 paid by the firm as susceptible to the exclusionary rule in section 40(b); (d) the circular of the Central Board of Direct Taxes	 which was statutory in character	 was binding on the authorities and the High Court was in error in taking a view of the legal position different from the one indicated in it; and (e) the amendment of 1984 inserting Explanation 1 in section 40(b)	 though later in point of time	 constitutes a legisla tive exposition of the correct import of the provision and so construed offers a guide to the correct understanding of the provisions in section 40(b) in their application to the earlier years as well. Allowing the appeals	 the Court	 HELD: 1.1 As long as there is no ambiguity in the statu tory language	 resort to any interpretative process to unfold the legislative intent becomes impermissible. The supposed intention of the legislature cannot then be ap pealed to whittle down the statutory 245 language. If the intendment is not in the words used it is nowhere else. [255E F] Doypack Systems Pvt. Ltd. vs Union of India	 ; 	 referred to. 1.2 Section 40 of the Income Tax Act	 1961 opens with the nonobstante clause and directs that outgoings such as interest	 salary	 bonus	 commission or remuneration specifi cally enumerated in cl. (b) shall not be deducted in comput ing the income chargeable under the head "profits and gains of business or profession". The words used therein on their own terms	 are plain and unambiguous. They manifest the intention of the legislature and must	 therefore	 be applied as they stand. [255D E	 F G	 256B] 1.3 Artificial and unduly latitudinarian rules of con struction	 with their general tendency to 'give the tax payer the breaks '	 are out of place where the legislation has a fiscal mission. Taxation is regarded as a potent fiscal tool of State policy to achieve equitable distribu tion of the burdens of the community to sustain social services. [256C D] Thomas M. Cooley: Law of Taxation	 Vol. 2	 referred to. 1.4 The test of 'real income ' as one on which the opera tion of section 40(b) could be sought to be limited is not a reliable one. It might on its own extended logic validate a set off of the interest paid to one partner against interest received from another and likewise	 interest received from one partner on some other dealings between him and the firm against interest paid to another partner on his or her capital contribution and thus lead to positions and results	 whose dimensions and implications are not fully explored. It must not	 therefore	 be called in aid to defeat the funda mental principles of the law of income tax. [257 A	 256A	 256G	 257D1 State Bank of Travancore vs CIT	 ; at 155	 referred to. 2.1 When words acquire a particular meaning or sense because of their authoritative construction by superior courts	 they are presumed to have been used In the same sense when used In a subsequent legislation In the same or similar context. [257G] H.H. Ruckmaboye vs Lulloobhoy Mottichund	 Moore 's Indian Appeals	 Vol. 5	 p. 234 at 250	 referred to. 2.2 However	 the rules of interpretation are not rules of law. they 246 are mere aid to construction and constitute some broad pointers. The interpretative criteria apposite in a given situation may	 by themselves	 be mutually irreconcilable. It is the task of the court to decide which one	 in the light of all relevant circumstances	 ought to prevail. [258E F] Maunsell vs Olins	 and Utkal Contrac tors & Joinery vs State of Orissa	 ; at 330	 referred to. 2.3 The decision in Sri Ram Mahadeo Prasad vs CIT	 All.) proceeded on a construction of the relevant provision i.e.s. 10(4)(b) of the 1922 Act and on what the High Court considered as affording to the assessee a fair treatment. It did not rest on any special or technical connotation of the word 'interest ' nor any special legal sense which that word could be said to have acquired by the earlier judicial ascertainment of its amplitude. The appeal to this principle of construction in the instant case is	 therefore	 out of place. [258D E] 3.1 To the extent the statute expressly or by necessary implication departs from the general law	 the latter can not be invoked to displace the effect of the statute. But if there is no such statutory departure the general principle operating in that branch of law would determine the nature of legal relationship. [261F H] Sir Francis Bennion	 on Statutory Interpretation	 p. 350	 354	 referred to. In the case of partners	 therefore	 to the extent not prohibited by section 40(b) of the Act	 the incidents of the general law of partners would be attracted to ascertain the legal nature and character of a transaction. This is quite apart from distinguishing the 'substance ' of the transaction from its 'form '. But the legal effect of a transaction	 cannot be displaced by probing into the substance of the transaction. The Court	 however	 is not precluded from treating what the transaction is in point of fact as one in point of law also. [262C D	 263A B] Sargaison vs Roberts	 [1969] 45 Tax Cases 612; CIT vs Gillanders Arbuthnot & Co.	 ; Narayanappa vs Krishtappa; 	 ; CIT vs Chidambaram	 ; Lindley on Partnership	 (14th Edn.) p. 30; Regional Director Employees State Insurance Corporation	 Trichur vs Ramanuja Match Industries	 and Ellis vs Joseph Ellis & Co.	 referred to. 3.2 If interest paid by the firm to a partner and the inter est	 in 247 turn	 received from the partner are mere expressions of the application of the funds or profits of the partnership and which	 having regard to the community of interest of the partners	 are mere variations of the method of adjustment of the profits	 they could be treated as part of the same transaction if	 otherwise	 in general law they admit of being so treated. The provisions of section 40(b) do not exclude or prohibit such an approach. [263B D] If instead of the transactions being reflected in two separate or distinct accounts in the books of the partner ship they were in one account	 the quantum of interest paid by the firm to the partner would	 to the extent of interest on drawings of the partner	 stand attenuated. The mere fact that the transactions were split into or spread over to two or more accounts would not by itself make any difference if	 otherwise. the substance of the transaction was the same. [263D E] Official Liquidator vs Lakshmikutty	 ; 	 referred to. Even the idea of a set off itself	 which presupposes a duality of entities may be out of place in the very nature of the relationship between a firm and its partners where the former is a mere compendious reference to the latter. But even to the extent the income tax law which identifies the firm as a distinct entity and unit of assessment goes	 the idea of set off may be invoked in view of the mutuality implicit in the putative duality inherent in deeming the firm as a distinct entity under the Act for certain pur poses. The fiction may have to be pushed to its logical conclusions. [263H 264B] 3.3 Where a strict literal construction leads to a result not intended to subserve the object of the legisla tion another construction	 permissible in the context should be adopted. Therefore	 though equity and taxation are often strangers	 attempts should be made that these do not remain always so. More so	 a taxing statute being not different from other statutes it is not to be construed differently. The duty of the Court is to give effect to the intention of the legislature. [264C	 E F	 G H	 265A] CITv. J.H. Gotla	 and A.G.V. Carlton Bank	 	 referred to. 3.4 Accordingly	 where two or more transactions on which interest is paid to or received from the partner by the firm are shown to have the element of mutuality and are referable to the funds of the 248 partnership as such	 section 40(b) should not be so construed as to exclude in quantifying the interest on the basis of such mutuality. If that be so	 the interest	 if any paid to a partner by the firm in excess of what is received from the partner could alone be excluded from deduction under section 40(b). [265B C] C.I.T. vs T.V. Ramanaiah & Sons	 A.P.	 approved. C.I.T. vs O.M.S.S. Sankaralinga Nadar & Co.	 Mad.	 overruled. The Central Board of Direct Taxes cannot pre empt a judicial interpretation of the scope and ambit of a provi sion of the Income Tax Act by issuing circulars on the subject. A circular cannot even impose on the tax payer a burden higher than what the Act itself on a true interpreta tion envisages. Nor can it detract from the Act. The task of interpretation of the laws is the exclusive domain of the courts. The circulars do not bind them. [265E F	 266D	 265F	 G H] State Bank of Travancore vs CIT	 ; 	 re ferred to. Since the circular of 1965 broadly accords with the view taken on the true scope and interpretation of section 40(b) as regards qualification of interest it is unnecessary to examine whether or not such circulars are recognised legiti mate aids to statutory construction. [266E F] 5. An 'Explanation ' is generally intended to explain the meaning of certain phrases and expressions contained in a statutory provision. There is no general theory as to the effect and intendment of the Explanation except that the purpose and intendment of the Explanation are determined by its own words. An Explanation depending on its language	 might supply or take away something from the contents of a provision. An Explanation may also be introduced by way of abundant caution in order to clear the meaning of a statuto ry provision and to place what the legislature considers to be the true meaning beyond controversy or doubt. [266G 267B] In the instant case	 the notes on clauses appended to the Taxation Laws (Amendment) Bill	 1984 say that clause 10 which seeks to amend section 40will take effect from 1st April	 1985 and will	 accordingly	 apply in relation to the assess ment year 1985 86 and subsequent years. In view of the express prospective operation and effectuation of the Expla nation 249 it is not necessary to examine its possible purpose any further. [267C E]