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1963 (1) TMI 61

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....e petitioner submitted a return and disclosed the two settlement deeds referred to above. By order dated 7th April, 1960, the officer assessed the petitioner to gift-tax of ₹ 8,520 valuing the agricultural lands at ₹ 1,54,000. On such assessment the petitioner was called upon to pay the tax on or before 15th May, 1960. In this petition the petitioner prays for the issue of a writ of certiorari under article 226 of the Constitution to quash the order of assessment to tax. The Gift-tax Act, 1958, is impugned on the ground that the topic of agricultural lands falls within the exclusive competence of the State legislature, that the said topic is outside the purview of the powers of Parliament and that a tax on agricultural lands which is no doubt permissible under the Act cannot be levied by Parliament but only by the State legislature. The short point that arises for consideration is whether Parliament is competent to legislate imposing tax on gifts or transfers of agricultural lands. We shall first examine the scope and ambit of the Gift-tax Act. In substance the design of the Act is to levy and collect tax on gifts. Gift is defined as the transfer by one person to anot....

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....ded family and those of discontinued firms or association of persons. Sections 22 to 28 provide the machinery for appeals from one officer to another superior officer, reference to the High Court and appeal to the Supreme Court. The gift-tax is payable by the donor but where in the opinion of the Gift-tax Officer, the tax cannot be recovered from the donor, it may be recovered from the donee. Section 32 prescribes the mode of recovery of tax and penalties. Section 34 gives the power to the department to rectify mistakes and section 35 enables prosecution of the delinquents in cases where there has been a failure on his part to furnish a return or to produce accounts, records, documents, etc., or other statements or information. The rest of the provisions of the Act are of a miscellaneous nature, and are merely intended to ensure the effective working of the Act. The central theme of the Act is, therefore, to levy tax on transactions which are defined as gifts under the Act, at a particular rate and to collect the tax and the penalties that might be imposed for non- observance by the assessee of the statutory formalities. It is of course clear that transfer of agricultural lands if ....

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....jects in regard to which both the Union and the State can legislate. In their respective spheres, each, Parliament and the State legislatures, has got plenary powers of a sovereign legislative body. There is no specific entry or subject in any of the three Lists providing for a tax on transfer of property or gift. The Union claims the power to enact the Gift-tax Act even with reference to agricultural lands only under entry 97 of the Union List, and that reads :, " Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists." Now entry 97 has to be read along with article 248(2) of the Constitution which provides that Parliament has exclusive power of making any law imposing a tax not mentioned in the State or Concurrent Lists. There are specific entries in the Union List providing for taxation like entry 82 (taxes on income other than agricultural income); entry 86 (taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies ; taxes on the capital of companies); entry 89 (Terminal taxes on goods or passengers carried by railway, sea or air ; taxes on railway fares and freig....

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....t matter for purposes of legislative competence. And this distinction is also manifest in the language of article 248, clauses (1) and (2), and of entry 97 in List I of the Constitution. Construing entry 42 in the light of the above scheme, it is difficult to resist the conclusion that the power of Parliament to legislate on inter-State trade and commerce under entry 42 does not include a power to impose a tax on sales in the course of such trade and commerce." The main contention urged by learned counsel for the petitioner is that a scrutiny of the various subjects in the Lists appended to Schedule VII would clearly indicate that the framers of the Constitution were anxious to keep out agricultural lands from the purview of Parliament and to keep them within the State's power possibly because the tenures of agricultural lands vary from State to State and that legislation in regard to such lands should be left to the respective States as they would be fully conversant with the nature and conditions of those tenures. There is some foundation for this argument as we shall presently show. Entry 82 of List I provides for tax on income other than agricultural lands. Entry 46 o....

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....l with the question of the proper interpretation of the entries in the Lists to find out whether entry 18 of List II is truly elastic enough to include a taxing power. The accepted rule is that the entries in the Lists should receive a liberal construction bearing in mind that the enumeration and the distribution of the subjects have not been done with a mathematical nicety or scientific precision but on quite a broad basis. The Constitution marks the outlines of the powers granted to the legislature, Union or State, but does not specify or enumerate sub-divisions of the power. Heads of legislative power in a written Constitution of enumerated subjects should be interpreted as being symbolic of comprehensive power including many things not apparent on the face but really within its pith and substance. This mode of interpretation of the constitutional provisions has been pressed upon us by the learned counsel for the petitioner, and we have no difficulty in accepting it as a sound rule. But we must mention that it would be incorrect to assume that anything which can be related to the subject of the power would fall within it. There cannot be a greater misconception of the proper in....

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....hat it incidentally trenches upon or intrudes upon another power of another legislature would not impair its validity or vires. It would of course be open to the court to examine the degree of intrusion or invasion into the field of another legislature as there may be cases in which the magnitude of the encroachment may be so great that the pith and substance of the legislation may not be that comprised in the specified power, the true object of such legislation being to usurp power and not to exercise the specified power. This doctrine of pith and substance is described in Canada as the doctrine of "Aspect of legislation". The British North America Act, by sections 91 and 92, provides for the distribution of legislative powers between the Dominion and the Provinces. Viscount Haldane dealing with a case from the Dominion of Canada in John Deere Plow Co. v. Wharton [1915] AC 330 observed thus, at page 339: " It must be borne in mind in construing the two sections (91 and 92) that matters which in a special aspect and for a particular purpose may fall within one of them may in a different aspect and for a different purpose fall within the other. In such cases the na....

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....gislature. The Privy Council made this very clear by their judgment in Russell v. Queen [1882] 7 App. Cas. 829 (9 AC at p. 130)." In the scheme of the drawing up of the Legislative Lists under Schedule VII of the Indian Constitution there is hardly any scope to imply a taxing power from the language of the general subjects. There is clear internal evidence manifest from the entries in the Lists themselves that the Constitution has distributed and allocated taxing powers distinctly under each of the Lists and has given Parliament the power to legislate tax measures in respect of all matters not falling within List II or III. It is impossible to spell out that the State legislatures have any power of taxing by implication repugnant to the omnibus power of Parliament under entry 97 of List I. Learned counsel for the petitioner next submitted that entry 47 of List II would apply and exclude the jurisdiction of Parliament. Entry No. 46 is " Duties in respect of succession to agricultural land ". The submission of the learned counsel is that a transfer of property or alienation by way- of gift is succession within the meaning of the expression under this entry. Reliance i....