TaxTMI 
TaxTMI 
1970 (9) TMI 7
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....ows : " 'net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets , wherever located, belonging to the assessee on the valuation date, in excess of the aggregate value of all the debts owed by the assessee on a the valuation date .... " The definition of " assets" given in section 2(e), as it existed prior to the amendment made by the Finance Act, 1969, was as follows : " 'assets' includes property of every description, movable or immovable, but does not include--- (i) agricultural land and growing crops grass or standing trees on such land ; ... " Charging section is section 3. Section 4 enumerates certain items of assets which are to be included in the " net wealth ". Section 5 provides certain exemptions with which we are not concerned. Section 14 provides for the filing of return by a person whose net wealth on the valuation date was of such an amount as to render him liable to wealth-tax under this Act. This return is to be filed before the thirtieth day of June of the corresponding assessment year Section 18 provides for the penalty for failure to furnish the return without any reas....
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....ate of Punjab and the Union Government regarding the power of Parliament to enact the law imposing wealth-tax on agricultural land which is claimed by the petitioners to be exclusively within the jurisdiction of the State legislatures and that in view of this the dispute was exclusively triable by the Supreme Court of India by virtue of article 131 of the Constitution. On the other hand the position taken up by the State is that matters which can be dealt with by the High Court under article 226 are not necessarily exclusively triable by the Supreme Court under article 131. It would be necessary to reproduce the relevant part of article 131 of the Constitution, which runs thus : " Subject to the provisions of this Constitution, the Supreme Court shall, to the exclusion of any other court, have original jurisdiction in any dispute--- (a) between the Government of India and one or more States ; or... if and in so far as the dispute involves any question (whether of law or fact) on which the existence or extent of a legal right depends : ........ " The dispute, which is the subject-matter of Writ Petition No. 2291 of 1970, filed by the State of Punjab is certainly a dispute betwee....
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....ace of the record of a subordinate tribunal and that, so long as a matter can fall under article 226, this court can take cognizance of the matter notwithstanding the fact that it is an inter-State dispute and of the nature as described in article 131, because article 131 is " subject to the provisions of this Constitution ". I am afraid, in advancing this argument, full effect is not being given to the words " to the exclusion of any other court ". Under article 226 jurisdiction is exercised by a High Court and the High Court would certainly fall within the purview of the words " any other court When article 131 expressly provides that the Supreme Court shall have original jurisdiction to the exclusion of any other court, then full effect has to be given to the wording of the article. It is not possible to give to the words " to the exclusion of any other court " a limited meaning whereby only the original jurisdiction of the three Presidency Courts, namely, Madras, Bombay and Calcutta, was intended to be excluded. I, therefore, feel that there is force in the preliminary objection raised by the learned counsel for the Union of India that the dispute raised in the petition filed b....
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....lf of the private person. Facts detailed in the petition so far as they relate to the particular case of the petitioner were not adverted to and it is not necessary to mention them. The point of law that arises for consideration is whether Parliament has power to legislate so as to include amongst assets the agricultural land for determining net wealth on which tax is payable under the Wealth-tax Act. It was agreed that articles 245, 246 and 248 of the Constitution invest Parliament and the State legislatures with the power of legislation and define their spheres of legislation. Article 245 defines the extent of territorial jurisdiction, of Parliament and the State legislatures, respectively. The legislature of a State is authorised to make laws for the whole or any part , of the State and Parliament can make laws for the whole or any part of the, territory of India. Articles 246 and 248, so far as they are necessary for our purposes, are as under : " 246. (1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the 'Unio....
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....succession to property other than agricultural land. " From the above it is clear that Parliament has the exclusive power to levy taxes enumerated in the four entries mentioned above, namely taxes on income, taxes on capital value of assets, estate duty and duty in respect of succession to all types of property, except so far as they relate to agricultural land. This tax on income can be levied by Parliment but agricultural income cannot be taxed. Similarly, taxes on the capital value of all assets would be within the exclusive jurisdiction of Parliament but assets to be taken into consideration would be exclusive of agricultural land.Same is the case with regard to estate duty and duty in respect of succession to property. Turning to List II, we find that what is excluded from entry 82 of List I, namely, taxes on agricultural income, has been included in entry 46 (List II). Similarly, duty on agricultural land, which is excluded from the purview of Parliament, has been put at entry 47 and the estate duty on agricultural land excluded from the purview of Parliament by entry 87 of List I, is left to the State legislatures by including it in entry 48. Entry 49 of List II is to the ....
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.... not become a tax on the capital value of the assets where the basis is taken to be the capital value of the land. Consequently, it was contended on behalf of the Union Government that the power of the State Government to impose tax on land under entry 49 of List II does, in no way, come in conflict with or entrench upon the sphere of the power of Parliament to impose tax on the capital value of the assets under entry 86 of List I. Reference in this respect may be made to Sudhir Chandra Nawn v. Wealth-tax Officer, Calcutta. This was a case in which inclusion of non-agricultural land in " the net wealth " for the purpose of wealth-tax was challenged on the ground that levy of tax on the capital assets constituted by non-agricultural land came into conflict with entry 49 of List II investing the State legislatures with the power to impose tax on land. Shah J., who delivered the judgment of the court, after referring to entry 86 of List I and the fact that the power to levy tax on lands and buildings is reserved to the State legislatures by entry 49 of List II, observed as follows : " The tax which is imposed by entry 86, List I, of the Seventh Schedule, is not directly a tax on land....
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.... power to legislate on capital value of the assets including lands and buildings, the power of the State Legislature was pro tanto excluded. " In Assistant Commissioner of Urban Land Tax, Madras v. Buckingham and Carnatic Co. Ltd., under the Madras Urban Land Tax Act the State legislature of Madras imposed a tax on non-agricultural land in urban areas at a percentage of the market value. This levy was challenged on the ground that this tax came into conflict with entry 86 of List I. This was negatived both by the Madras High Court and by the Supreme Court. Bringing out the distinction between entry 86 of List I and entry 49 of List II, it was observed as follows : (paragraph 5 at page 175). " The tax under entry 86 proceeds on the principle of aggregation and is imposed on the totality of the value of all the assets. It is imposed on the total assets which the assessee owns and in determining the net wealth not only the encumbrances specifically charged against any item of asset, but the general liability of the assessee to pay his debts and to discharge his lawful obligations have to be taken into account. In certain exceptional cases, where a person owes no debts and is under n....
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....tended that every entry gives a right to levy a tax. The taxes are separately mentioned and in fact contain the whole of the power of taxation ... But however wide that entry (18), it cannot still authorise a tax not expressly mentioned. Therefore, either the pith and substance of the Gift-tax Act fails within entry 49 of the State List or it does not... The pith and substance of the Act is to place the tax on the gift of property which may include lands and buildings. It is not a tax imposed directly upon lands the value of the total gifts made in a year which is above the exempted limit. There is no tax upon lands or buildings as units of taxation. Indeed, the lands and buildings are valued to find out the total amount of the gift and what is taxed is the gift.The value of the lands and buildings is only the measure of the value of the lands and buildings is only the measure of the value of the gift. A gift-tax is thus not a tax on lands and buildings as such(which is a tax resting upon general ownership of lands an buildings), but is a levy upon a particular use, wbich is transmission of title by gift. " The decision of the Mysore High Court was consequently reversed and it wa....
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....and reasonably be said to be comprehended in it. " Lord Atkin in Gallagher v. Lynn observed as follows : It is is well established by Russell v. Queen that you are to look at the true nature and character of the legislation . . . . the pith and substance of the legislation.' If, on the view of the statute as a whole, you find that the substance of the legislation is within the express powers, then it is not invalidated if, incidentally, it affects matters which are outside the authorised field. " Also, see in this respect Navnit Lal Javeri v. K. K. Sen, Appellate Assistant Commissioner of Income-tax , where it was observed a under : " It is hardly necessary to emphasise that the entries in the lists cannot be read in a narrow or restricted sense, and as observed by Gwyer C.J. in the United Provinces v. Atiqa Begum each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it'. What the entries in the Lists purport to do is to confer legislative powers on the respective legislatures in respect of areas or fields covered by the said entries, and it is an elementary rule of construction th....
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....his exclusion. He vehemently argued that the mere fact that the agricultural land was expressly excluded from entry 86 of List I does not mean that the Constituent Assembly had in mind that the conditions in the country would remain static, that at no future time it would be in the interest of the country that Parliament may include the agricultural land also in the assets which are taxable and that for this purpose the residuary entry 97 of List I read with article 248 should be liberlly construed to confer this power on Parliament. With very great respect, I have not been able to follow this argument of convenience. Entry 55 existed in List I in the Government of India Act, and, similarly, an entry more or less corresponding to entry 49 of the State List also provided for taxes on hearths and windows in addition to taxes on lands and buildings. If the Constituent Assembly, in spite of these entries, which existed before, in its wisdom, considered it fit to keep excluded agricultural land from the purview of Parliament, it is very difficult to understand how, later on, without amending the Constitution, for which ample provision is there in the Constitution, Parliament can clothe ....
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....erial Parliament which created it ; and it can, of course, do nothing beyond the limits which circumscribe these powers. ...... The established courts of justice, when a question arises whether the prescribed limits have been exceeded, must of necessity determine that question and the only way in which they can properly do so is by looking to the terms of the instrument by which, affirmatively, the legislative powers were created, and by which, negatively, they are restricted. If what has been done is legislation within the general scope of the affirmative words which give the power, and if it violates no express condition or restriction by which that power is limited....... it is not for any court of justice to inquire further, or to enlarge constructively those conditions and restrictions. " Now List I which gives power under item 97 read with article 248, to impose a tax not mentioned in the other two Lists, contains in itself, entry 96 which provides for an express prohibition or restriction on the powers of Parliament to impose a particular type of tax. As observed by Lord Selborne, we have not only to see the powers given to a legislature affirmatively, but also to see that....
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.... to both, is to hold that in addition to the taxes specifically, enumerated in List I, Parliament can impose other taxes under entry 97, provided two conditions are satisfied : (1) that such a tax is not mentioned in List II or List III ; and (2) that such a tax is not prohibited under any of the entries in List I. It cannot possibly be held that a tax which is specifically prohibited from being imposed by Parliament, can be imposed by it by having resort to the residuary entry. Under entry 86 of List I, the Constituent Assembly clearly withdrew the power from Parliament to impose wealth-tax on agricultural land. The idea could be to give this power to the States and include it in List II. As already discussed, though a general power to tax agricultural land is given to the States, this power of imposing wealth-tax on agricultural land has not been given. The other intention could have been to include this tax in the Concurrent List, but that also has not been done. The only other intention could have been to keep it out altogether. No other intention could reasonably be attributed to the Constituent Assembly. It could certainly not have been the idea behind this exclusion in e....
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....e beyond the limitations within which it has competence to legislate. Another ground of attack taken by the petitioner was based on violation of article 14. This was pressed only in a half-hearted manner. The contention was that the market price of the agricultural land was to be taken into consideration for the purpose of computing the net wealth under the Act. Thus, the yield from the agricultural land is altogether irrelevant. For example, an acre of land, which is fertile and of the best quality, whether situated near a town on far away in a village, is going to produce the same quantity of grain. The basic idea of agricultural land, it urged, is that he same should be used for production of crops. If market value is to be taken, the same would vary with its situation and thus a verv fertile piece of land in a remote village, which produced larger quantity of grain, would be valued at a lower figure, whereas a bad quality of land, which produces very little, in the vicinity of a big town would be valued at a very high price and thus a person owning land in the vicinity of a big town shall be subjected to a larger amount of tax although he can get much less income out of the sa....
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....hallenge the constitutionality of the wealth-tax on agricultural land imposed under the Wealth-tax Act, 1957, as amended by the Finance Acts, 1969 and 1970. I have gone through the judgment prepared by the learned Chief Justice and I agree with him that in the petition filed by the State of Punjab, the preliminary objection raised by Mr. Gokhale, learned counsel for the Union of India, should prevail. The said petition is not maintainable, inasmuch as this is a dispute between the State Government and the Union of India and, therefore, under article 131 of the Constitution the Supreme Court has the exclusive original jurisdiction to decide the same. This court is not competent to entertain such a petition. This writ petition, therefore, deserves to be dismissed on that ground alone. As regards the other writ petition filed by a private party, I have not been able, I say so with respect, to persuade myself to agree with tile judgment of the learned Chief justice. In my opinion, that petition also deserves to be dismissed. I am, therefore, writing my separate judgment. The controversy in this case is ultimately confined within a narrow ambit. It is common ground that Parliament al....
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....chedule contemplates the levy of tax on lands and buildings or both as units. It is normally not concerned with the division of interest or ownership in the units of lands or buildings which are brought to tax. Tax on lands and buildings is directly imposed on lands and buildings, and bears a definite relation to it. Tax on the capital value of assets bears no definable relation to lands and buildings which may form a component of the total assets of the assessee. By legislation in exercise of power under entry 86, List I, tax is contemplated to be levied on the value of the assets. For the purpose of levying tax under entry 49, List II, the State legislature may adopt for determining the incidence of tax the annual or the capital value of the lands and buildings. But the adoption of the annual or capital value of lands and buildings for determining tax liability will not, in our judgment, make the fields of legislation under the two entries overlapping. " In a later judgment reported as Assistant Commissioner of Urban Land Tax, Madras v. Buckingham and Carnatic Co. Ltd. the Supreme Court had again occasion to examine the apparent overlapping of entry 86, List I, and entry 49, Lis....
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....ountry, agricultural land has always formed a provincial or State subject to be dealt with by State legislatures in accordance with the local conditions prevailing within each State. Following the scheme in the Government of India Act, 1935, the Constitution makers have also placed agricultural land in most of its aspects in the State List. But a careful study of these Lists shows that there is no clear-cut allocation of agricultural land in all its aspects in favour of the States. In the instant case, the matter excluded from entry 86, List I, has not been included in the State List or the Concurrent List. I am unable to agree with the argument that the exclusion of agricultural land from entry 86, List I, means rendering Parliament powerless to legislate on the excluded field under all conditions and in all circumstances. Nor do I agree with the suggestion that an amendment of the Constitution is required to enable Parliament to levy wealth-tax on the agricultural lands and buildings. It appears that by, excluding agricultural land from entry 86 List I, the Constitution makers were merely stressing the need for assessing the requirements of the society before including agricultu....
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....he material fact is that the State legislature have not been empowered to levy wealth-tax on agricultural land. Thus, wherever agricultural land has been excluded from the various matters enumerated in List I, there is a corresponding inclusion of the matter so excluded in the State List (e.g., entries 82, 87 and 88 in List I, and the corresponding entries 46, 47 and 48 relating to agricultural land in List II). Thus the matter of " taxes on the capital value of agricultural land " is not mentioned in either List II or List III. Under the circumstances, the provisions of article 248(2) are attracted forthwith and Parliament has exclusive power of making law imposing the tax. As I look at the matter, the power or jurisdiction to legislate is derived from articles 245 to 248 of the Constitution. The entries in the various Lists merely enumerate the matters or topics of legislation, but they do not confer any legislative power on the appropriate legislatures. For the exercise of legislative power, one has to look to the various articles in the Constitution and not to the entries in the three Lists. Under article 245, Parliament can make laws for the whole or any part of the territory....
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....of an individual. It has been repeatedly held that the allocation of the subjects to the Lists in the Seventh Schedule is not by way of scientific or logical definition but by way of a mere simplex enumeratio of broad categories. Legislative power is conferred, restricted or withheld not by these Lists but by various articles of the Constitution appearing not only in Chapter I of Part XI of the Constitution, but elsewhere also at numerous places, e.g., articles 2, 3, 10, 11, 16(3), 22(7), 32(3), 35, 70, 173(c) and so on, which empower Parliament to make laws on various other matters also, which may or may not fall in the entries enumerated in List I. It was contended that since agricultural land has been excluded from the assets mentioned in entry 86 of List I, it acquires immunity from wealth-tax. It was urged that by this exclusion Parliament was prohibited from levying wealth-tax on agricultural assets. It was further argued that what was expressly excluded from entry 86 could not be brought back in the form of a residuary power under entry 97, List I, and that the only way Parliament can levy tax on the capital value of agricultural land is by an amendment of entry 86. I am ....