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TMI Blog1970 (9) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ividual, Hindu undivided family and company . Clause (m) of section 2 defined net wealth . Relevant part of the definition necessary for the purpose of the controversy before us is as follows : '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-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the effect that the matter in dispute could not be raised before this court under articles 226 and 227. The argument was that the writ petition filed by the State of Punjab raised a dispute between the State 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinary supervisory jurisdiction under this article only in a very limited sphere, namely, where the question raised is one of jurisdiction, as in the present case, or where there is some mistake apparent on the face 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, Bomba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the Act and, therefore, this petition cannot be said to be premature. This preliminary objection raised, therefore, has also to be repelled. The Advocate-General for the State of Punjab argued the case on behalf 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cultural income. 86. Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies : . . . . . . . 87. Estate duty in respect of property other than agricultural land. 88. Duties in respect of 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) the annual rental value of the land, or (d) the capital value of the land. In all these cases the tax will remain a tax on land and would not become a tax on income from the land where the basis of assessment is the annual rental of the land ; and it would 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 en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning. Shah J. then went on to observe as under : Apparently, an entry 'taxes on lands and buildings' is a more general entry than the entry in respect of a tax on the annual value of assets of an individual or a company, and by conferring upon Parliament the 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 wea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land and under entry 49, taxes on land, are exclusively reserved for the State legislatures. Referring to the division of the topics of the legislatures into three broad categories,enumerated in the Lists, Hidayathullah C.J., speaking for the court, observed as under : It is not intended 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the powers to legislate are plenary. In United Provinces v. Atiqa Begum it was observed as follows : .... none of the items in the Lists is to be read in a narrow or restricted sense, and that 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. 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try 86 of List I power to include agricultural land in the assets is expressly excluded. He, however, urged that, looked from the historical aspect, entry 86 is a verbatim copy of entry 55 in List I in the Seventh Schedule of the Government of India Act, 1935, and that not much emphasis should be laid on this 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 sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an apparent conflict, an effort should be made to resolve the same. Their Lordships of the Federal Court referred to Queen v. Burah and quoted with approval the following observations of Lord Selborne at pages 193 and 194 : ........ The Indian Legislature has powers expressly limited by the Act of the Imperial 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 impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, though Parliament cannot impose wealth-tax under entry 86, because it is prohibited from doing so, yet it can impose the tax so prohibited, by purporting to act under the residuary entry 97. I have not the least doubt in my mind that the only proper way of reading entries 86 and 97, List I, together, to give effect 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ... The effect of the impugned legislation in its pith and substance is to impose a tax on the capital value of the assets, including agricultural land. Thus, in effect, the words of prohibition in entry 86, namely, excluding agricultural land , have been treated as non-existent. In doing so, Parliament has altogether gone 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 large ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GH J.-I also agree with Hon'ble Chief justice. R. S, NARULA J.-entirely agree with my Lord the Chief justice, and have nothing to add. PREM CHAND PANDIT J.-These two writ petitions, one filed by the State of PUNJAB (Civil Writ No. 2291 of 1970) and the other by a private party, namely, Harbhajan Singh Dhillon (Civil Writ No. 2673 of 1970), challenge 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter of computation bear similarity to a tax on lands and buildings levied on the capital or annual value under entry 49, List II. But the legislative authority of Parliament is not determined by visualizing the possibility of exceptional cases of taxes under two different heads operating similarly on taxpayers. Again entry 49, List II, of the Seventh Schedule 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 bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objects and reasons or debates in the Constituent Assembly throwing any light on the subject. It is true that India is an agricultural country, historically and traditionally. Agricultural land has always occupied a special position in the economy of this country. Keeping in view the radical differences in agricultural conditions and land tenures in various parts of the country, 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws is absolute in call the fields allotted to it under the Constitution and riot specifically allocated to the State legislatures. Admittedly, the matter of taxes on the capital value of assets in the form of agricultural land is not enumerated in either of the Lists II or III. It is wholly irrelevant to say that agricultural land has been excluded in entry 86, List I. The 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , with respect to that List, I have already held that the State legislature has no power to impose a tax on the capital value of the assets, in the form of agricultural land, of an individual under entry 49. It follows, therefore, that there is no prohibition in the way of Parliament making a law imposing a tax on the capital value of the assets, in the form of agricultural laud, 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. I ..... 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