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Articles 285 to 289 certainly affect legislative competence but that is because they make provision in express terms in that behalf. Ratio |
Articles 290 and 291 deal with certain financial adjustments and privy purses of Rulers. Ratio |
Chapter 11 relates to borrowing and has nothing to do with legislative competence. Ratio |
Then comes Chapter 111, which deals with property, contracts, rights, liabilities, obligations and suits. Ratio |
Article 294 provides for the devolution of property and assets, and rights, liabilities and obligations as between the Union and the previous Provinces which became Part A States when the Constitution came into force. Ratio |
Similarly article 295 provides for devolution of property and assets, and rights, liabilities and obligations between the Union and what were Part B States when the Constitution came into force. Ratio |
These provisions as to devolution of property and assets, and rights, liabilities and obligations were necessary when the Republic of India came into existence. Ratio |
But there is nothing either in article 294 or article 295 which in any way fetters the legislative competence either of the Union or of the State legislatures. Ratio |
These provisions had to be made in view of List I and List 11 which defined the ambit of the power of the Union and the States respectively '. Ratio |
but the effect of these provisions so far as rights, liabilities and obligations are concerned, was only to substitute the Union or the States, as the case may be, in place of the old British Indian Provinces or the old Indian States which became respectively Part A and Part B States under the Constitution. Ratio |
These provisions relating to devolution of rights, liabilities and obligations were therefore made only to substitute in place of the old British Indian Provinces and the old Indian States either the Union or Part A or Part B States in accordance with the scheme of division contained in List I and List 11 of the Sevent... |
They did not confer any greater sanctity on contracts, for example, entered into by an old Indian State with other persons, and did not cast any fresh obligation on the Union or the new Part A or Part B State over and above what was already cast on the previous States by contracts when they were made. Ratio |
The defences which would have been open to the old Indian States or the old British Indian Provinces would still be open I to the Union or Part A or Part B States against such contracts and the fact that articles 294 and 295 provided for devolution made no change in their essential nature as contracts merely. Ratio |
We have not therefore been able to understand what exactly 910 is meant by saying that contracts existing from before were converted into constitutional obligations which could only be changed by an amendment of the Constitution and could not be affected even by law validly passed after the Constitution came into force... |
Stress has particularly been laid on the words "shall be the rights, liabilities and obligations of the Government of India" in article 295 (1) (b) and it is suggested that that means that there was clear positive instruction that the obligations so devolving shall be fulfilled, We do not read any such meaning in these... |
If contracts entered into by the Union could be overborne or nullified by law competently enacted, the obligations devolving on the Union under article 295 (1) (b) do not enjoy any higher sanctity or immunity from the effect of legislation. Ratio |
Similar words occur in article 294 (b), and what we have said about article 295 (1) (b) may be illustrated with respect to article 294 (b). Ratio |
Suppose a contract had been entered into by the Dominion of India which was not in accordance with section 175 of the Government of India Act, 1935, corresponding to article 299 of the Constitution. Ratio |
Surely it cannot be contended that simply because article 294 (b) says that liabilities and obligations of the Dominion of India shall be the liabilities and obligations of the Government of India, under the Constitution, it would not be open to the Government of India to raise the defence that the contract was not bin... |
We have no doubt therefore that neither article 294 nor article 295 cast any such obligation to the effect that the obligation shall be fulfilled, even though it might not have been binding on the previous Indian State which entered into it and even though the previous State might have the right to affect the contract ... |
The position in our opinion is the same even after the devolution provided in articles 294 and 295, and all that these Articles have done is to substitute in place of the previous States or the British Indian Provinces, the Government of India or Part A or Part B States, as the case may be. Ratio |
The devolution of the rights and liabilities prescribed by article 295 does not involve and is not intended to involve any change in the character of the said rights and liabilities; and 911 so pleas which could have been raised in respect of the said rights and liabilities prior to the devolution remain entirely unaff... |
There is therefore no question of any constitutional obligation being cast by the provisions contained in ,article 295 (1) (b) on the Government of India to fulfil the contracts irrespective of whether they were binding on the original State which entered into them and whether they can be affected by law validly passed... |
We may in this connection refer to the decision in Maharaja Shree Umaid Mills Ltd.(1) where it was held that there was nothing in article 295 to show that it fettered for all time to come, the power of the Union legislature to make modifications or changes in the rights, liabilities and obligations which bad vested in ... |
The legislative competence of the Union legislature or even of the State legislature could only be circumscribed by express prohibition contained in the Constitution itself and unless and until there was any provision in the Constitution expressly prohibiting legislation on the subject either absolutely or conditionall... |
There is nothing in article 295 which expressly prohibits Parliament from enacting a law as to income tax in territories which became Part B States and which were formerly Indian States, and such a prohibition cannot be read into article 295 by virtue of some contract that might have been made by the then Ruler of an I... |
Further in State of Rajasthan vs Shyam Lal(2), this Court pointed out that even though liability or obligation may be cast on the Government of India or Part A or Part B State by articles 294 and 295 of the Constitution, such liability or obligation was always subject to any law made by the new State repealing the old ... |
The fact that the obligation of the Ruler of Gwalior under the agreement of April 7, 1947, devolved on the Government of India eventually by virtue of article295 (1) (b) therefore would not take away the power of parliament to pass a valid law within its competence which does not transgress the constitutional limitatio... |
We have therefore to see what happened after the Consti tution came into force and whether any law was passed by Parliament which in any way affected the agreement of 1947. Ratio |
Reliance in this connection has been placed on behalf of the company on the agreement of February 25, 1950 between the President of India and the State of Madhya Bharat to which we have already referred. ARG |
That agreement accepted the recommendations of the Enquiry Committee. Ratio |
Our attention is drawn to Part 11, Chapter 11 of the recommendations, where the following recommendation was made in para.11 (4) (ii): "Any special financial privileges and immunities affecting federal revenues conferred by the State upon other individuals and corporations should ordinarily be continued on the same ter... |
" This recommendation is undoubtedly part of the agreement made between the President of India and the State of Madhya Bharat on February 25, 1950. Ratio |
It is therefore urged that in view of this recommendation in the agreement it was not open to the Government of India to take away the exemption ranted by the agreement of April 7, 1947. ARG |
The agreement between the President of India and the State of Madhya Bharat was entered under articles 278, 291, 295 and 306 of the Constitution. Ratio |
It may be accepted that the provision to which we have referred above was entered into by virtue of article 295 (1) which provided for devolution of property and assets. Ratio |
and rights, liabilities and obligations subject to any agreement entered into in that behalf by the Government of India with the Government of that State, and to that extent the Government of India was bound to honour the agreement of February 25, 1950. Ratio |
But we have to see what exactly this agreement provides with respect to any special financial privileges and immunities conferred on corporations by the old Indian States. Ratio |
The provision is that privileges and immunities should ordinarily be continued on the same terms by the Centre subject to a maximum period of ten (or fifteen) years. Ratio |
We may emphasise the word "ordinarily" in this provision which shows that the Centre was not bound to continue the privileges and immunities exactly in the same form though '.ordinarily" it was expected to do so. Ratio |
Even so, the use of the word "ordinarily" shows that it was open to the Centre to examine the privileges and immunities and decide for itself whether they should be continued and if so in what form and to what extent. Ratio |
Further the provision as to the continuance of the privileges and immunities was subject also to the power of 913 the Government of India to limiting in other ways any such ,concession as might appear to it to be extravagant or against the public interest. Ratio |
There was thus a double limitation on the continuance of the privileges and immunities of corporations. Ratio |
Firstly, these privileges and immunities were ordinarily to be continued and that in itself imports that in some cases they might not be continued. Ratio |
In the second place the Government of India was given power to limit these privileges and immunities if it was of the opinion that the privileges and immunities were extravagant or against the public interest. Ratio |
This again is a very wide power which the Government of India had even under the agreement of February 25, 1950. Ratio |
Therefore, the argument that the Government of India was bound to continue the privileges and immunities without any modification because of the agreement of February 25, 1960 cannot prevail. Ratio |
Let us therefore see if any provision was made by the Government of India in this behalf, to carry out this recom mendation of the Enquiry Committee. Ratio |
It may be mentioned that the recommendation was made on July 22, 1949 though it was brought into the agreement on February 25, 1950. Ratio |
Section 60 A was introduced in the Income tax Act by section 19 of the Taxation laws (Extension to Merged States and Amendment) Act, (No. LXVII of 1949). Ratio |
Originally it only applied to merged territories, but when the Income tax Act was extended to part B States on April 1, 1950 by the Finance Act, 1950, section 60 A was amended from the same date and applied to part B States also. Ratio |
Thus it seems to us clear that the provision with respect to immunities and privileges of corporations to which we have already referred was given effect to by the application of section 60 A which we have already set out above to Part B States. Ratio |
That section provides that if the Central Government consiciers it necessary or expedient so to do for avoiding any hardship or anomaly or removing any difficulty that may arise as a result of the extension of the Income tax Act to Part B States, the Central Government may, by general or special order, make an exemptio... |
Section 60 A therefore clearly provides for the continuance of exemptions where the Central Government thought it necessary so to do. Ratio |
This provision is clearly in accord with the recommendation of , the Enquiry Committee to which we have already referred above. Ratio |
This was followed by the Concessions Order, cl. 16 of which specifically referred to concessions to industrial undertakings and provided that the Central Government having regard to all the circumstances of the case might grant such relief if any as it thought appropriate. Ratio |
It may be mentioned further that the same Order 914 provided for lower rates of income tax for some time with respect to all incomes accruing in a Part B State. Ratio |
The position therefore which emerges on April 1, 1950 is that the income tax Act was extended to Part B States as from that date by the Finance Act, 1950, and thus income tax became payable on all income accruing in Part B States subject to the terms of the Finance Act, 1950. Ratio |
Further by the Concessions Order relief was given generally to all income tax payers in Part B States by reducing the rates of income tax and there was a special provision in cl. 16 of the Concessions Order with respect to industrial undertakings situated in Part B States which had been ranted any exemption from or any... |
It is not in dispute that it was within the competence of Parliament to extend the Income tax Act to Part B States and to subject incomes accruing in Part B States to income tax and super tax by the Finance Act of 1950. Ratio |
A specific provision was also made in the Income tax Act by section 60 A to provide for exemption, reduction in rates or other modifications in respect of income tax accruing in Part B States, in order to avoid any hardship or anomaly or removing any difficulty which might arise as a result of the extension of the Inco... |
Lastly by the Concessions Order issued under section 60 A of the Income tax Act rates were reduced generally for sometimes and special provision was made with respect to concssions to industrial undertakings in cl. 16. Ratio |
These provisions were all within the competence of parliament and it is not the case of the company that they transgress any constitutional limitation. Ratio |
Therefore as soon as these provisions came into force from April 1. 1950, the result must be that the exemption claimed by the company under the agreement of April 7, 1947 must fall in the face of these legislative provisions and the company would only be entitled to (i) reduction in rates provided by the Concessions O... |
These provisions of law therefore clearly affect the exemption granted by the agreement of April 7. 1947 and after these provisions came into force from April 1, 1950 the company could only get such concessions as were allowable generally under the Concessions Order or specifically under cl. 16 thereof to Industrial un... |
These provisions clearly affect and supersede the agreement and it is not the case of the company that these provisions are not valid. Ratio |
The agreement must therefore be held to have been superseded and the company could only get such benefits as it was entitled to under the Concessions Order. Ratio |
The argument therefore that the obligation arising out of the agreement of 1947 could 915 not be affected by the extension of the Income tax Act to Part B State of Madhya Bharat read with Finance Act of 1950 must fail. Ratio |
We have already pointed out what the scope of article 295 (1) (b) is and we are of opinion that it was not necessary to amend the Constitution in order to affect the agreement of April 7, 1947. Ratio |
The argument that the Union of India was still bound by the agreement of April 7, 1947 in spite of the legislative provisions made from April 1, 1950 to which we have already referred must therefore fail. Ratio |
The company is therefore not entitled to rely on the agreement of April 7, 1947 for the purpose of exemption and that it can only take advantage of the Concessions Order with respect to income accruing to it in Madhya Bharat. Ratio |
It may be mentioned that the company applied under cl. 16 of the Concessions Order and was given certain exemptions with respect to the weaving section and that is all that the company is entitled to. Ratio |
As to the staple fibre section, the company did apply for exemption under cl. 16, but in all the circumstances the Government of India did not think it fit to grant exemption in that behalf. Ratio |
As that order was in accordance with law the company cannot rest on the agreement of April 7, 1947 which must be deemed to have been superseded by legislative provisions made from April 1, 1950 with respect to income tax and super tax in the Part B State of Madhya Bharat. Ratio |
In this connection our attention is drawn to The South India Corporation Ltd. vs The Secretary, Board of Revenue(1) on behalf of the company. ARG |
We find nothing in that case which in any way militates against the view that we have taken and it is therefore unnecessary to consider that case in detail. Ratio |
We are therefore of opinion that the High Court was not correct in holding that the Government of India was bound to fulfil the obligation undertaken by the Ruler of Gwalior and was bound to grant exemption to the company under the agreement of April 7, 1947, irrespective of the legislative provisions made with respect... |
This brings us to the last contention based on article 278, of the Constitution. Ratio |
In this connection the company relies on the agreement of February 25, 1950 to which we have already referred and on the recommendation of the Enquiry Committee. Ratio |
which was made part of the agreement and to which also we have already referred. Ratio |
The argument is that that recommendation must be treated to be an agreement under article 278 and would therefore be binding for ten years under that Article and thus the company would be entitled to exemption for at least ten years by virtue of the agreement. Ratio |
We are of opinion that there is no force in this argument. Ratio |
In the first place, the agreement of February 25, 1950 was not merely under article 278; it was a composite agreement under articles 278, 291, 295 (1) ; 916 and 306. Ratio |
We have already pointed out while dealing with the argument based on article 295 (1) (b) that this provision of the agreement relating to corporations as to exemptions and concessions to be granted to them may be treated as an agreement under article 295 (1), for it dealt with matters of obligation devolving on the Gov... |
But we are unable to see how the provision relating to exemptions or concessions to corporations can be said to be an agreement under article 278. Ratio |
The relevant part of article 278 (1), on which reliance is placed on behalf of the company isas follows: "(1)Notwithstanding anything in this Constitution, the Government of India, may, subject to the provisions of clause (2), enter into an agreement with the Government of a State specified in Part B of the First Sched... |
Clause (2) of article 278 to which cl.(1) is subject merely prescribes the period for which the agreement will remain in force, the maximum being ten years in all. Ratio |
Article 278 appears in Ch.I of Part XII with which we have already dealt with briefly. Ratio |
As we read article 278 (1) (a) we find nothing in it which has any relevance with respect to any agreement between Ruler of an Indian State and a corporation. Ratio |
Article 278(l)(a) provides for an agreement between the Government of India and the Government of a Part B State for the levy or collection of any tax or duty leviable by the Government of India in such State and for the distribution of the proceeds thereof otherwise than in accordance with the provisions of Chapter 1 ... |
" The earlier provisions in this Chapter provide for the levy and collection of certain taxes and duties leviable by the Government of India and for their distribuion between the Government of India and the States. Ratio |
Article 268 (1) deals with such stamp duties and such duties of excise on medicinal and toilet preparations as are mentioned on the Union List and provides that they shall be levied by he Government of India but shall be collected by the States within which such duties are leviable and the proceeds of such duties are t... |
Similarly article 69 deals with certain other duties and says that they shall be levied and collected by the Government of India but shall 917 be assigned to the States as provided therein. Ratio |
Article 270 speaks of taxes on income other than agricultural income and lays down that they shall be levied and collected by the Government of India and distributed between the Union and the States in the manner provided thereunder. Ratio |
Article 272 speaks of Union duties of Excise other than such duties of excise on medicinal and toilet preparations as are mentioned in the Union List and lays down that they shall be levied and collected by the Government of India, but, if Parliament by law so provides, there shall be paid out of the Consolidated Fund ... |
It will be clear therefore that the earlier part of the Chapter has provided for levy and collection of certain taxes and duties leviable by the Government of India and the distribution of the proceeds between the Government of India and the States. Ratio |
All that article 278 (1) does is to permit by agreement variation in the manner of levy and collection as compared to the provision in the earlier part of the Chapter and also variation in the manner of distribution of the proceeds as compared to the provision in the earlier part. Ratio |
Article 278 (1) (a) only deals with levy and collection of certain public revenues and their distribution between the Government of India and the States. Ratio |
It gives power to the Government of India to enter into agreement with any Government of a State specified in Part B of the First Schedule by which variation may be made in the manner of levy and collection of any tax or duty leviable by the Gov ernment of India and the distribution of the proceeds, even though that mi... |
Article 278 (1) (a) thus has nothing to do with any obligation arising out of agreements between Rulers of former Indian States and other persons with respect to exemption from any tax or duty. Ratio |
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