1967 (10) TMI 3 - SC - Income Tax

Power of President to extend IT Act to Pondicherry was validly exercised - Petitions of assessee is dismissed

Summary

Issues Involved:

1. Vires of the Taxation Laws (Extension to Union Territories) Regulation No. 3 of 1963.
2. Power of the President under Article 240 of the Constitution.
3. Legislative power of Parliament regarding Union Territories.
4. Distribution of income-tax attributable to Union Territories.

Issue-wise Detailed Analysis:

1. Vires of the Taxation Laws (Extension to Union Territories) Regulation No. 3 of 1963:

The petitioners challenged the vires of the Taxation Laws (Extension to Union Territories) Regulation No. 3 of 1963, contending that the President had no power to promulgate the Regulation under Article 240 of the Constitution. The court examined the legislative history and constitutional provisions to determine the validity of the regulation. It was concluded that the President could indeed promulgate such regulations for the Union territories, including Pondicherry, under the powers conferred by Article 240.

2. Power of the President under Article 240 of the Constitution:

The court analyzed Article 240, which allows the President to make regulations for the peace, progress, and good government of specified Union territories. The contention that the President's power was limited to law and order was rejected. The court referenced historical legislative powers, indicating that the phrase "peace, order, and good government" grants wide discretion. It was affirmed that the President could make regulations on all subjects on which Parliament can legislate for the territory, including taxation laws.

3. Legislative power of Parliament regarding Union Territories:

The court discussed Article 246(1) and Article 246(4), which confer plenary legislative powers on Parliament for Union territories, without the distribution of legislative power that exists between the Centre and States. It was established that Parliament can legislate on any matter for Union territories, including those in the State List. Consequently, the President, under Article 240, can make regulations with the same force and effect as an Act of Parliament, thus validating the extension of the Income-tax Act, 1961, to Pondicherry.

4. Distribution of income-tax attributable to Union Territories:

The argument that there is no provision for the distribution of income-tax attributable to Union territories was dismissed. The court pointed to Article 270, which indicates that income-tax attributable to Union territories forms part of the Consolidated Fund of India. Since Union territories are centrally administered through the President, there is no need for a separate distribution mechanism for income-tax.

Conclusion:

The Supreme Court dismissed the writ petitions, holding that the President had the authority to extend the Income-tax Act, 1961, to Pondicherry through Regulation No. 3 of 1963. The President's power under Article 240 was affirmed to be broad and inclusive of all legislative matters, including taxation, for Union territories. The petitions were dismissed with costs, and the court upheld the validity of the Taxation Laws (Extension to Union Territories) Regulation No. 3 of 1963.