Citation: 1971 2 SCC 779
Case Type: Civil Appeal
Case No: 2172 of 1970
Appellants: Union of India
Respondents: H. S. Dhillon
Decided On: 21-10-1971
Statues Referred: Constitution of India, Wealth Tax Act, 1957
Case Referred:
- Harakchand Ratanchand Banthia V. Union of India.
- Russel V. Queen.
- Sudhir Chand Nawa V. Wealth Tax Officer.
Bench: Sikri,S.M.(CJ),Shelat.J.M., Ray.A.N, Dua.I.D, Mitter.G.K, Roy Subimal Chandra, Palekar, D.G.
Facts:
The case is an appeal from the Punjab and Haryana High Court, where the Court by 4:1 majority judgement held that the Wealth Tax Act as amended by the Finance Act, 1969 which include the capital value of the agriculture land for the purpose of computing net wealth was ultra vires of the Constitution of India.
Wealth Tax Act, 1957 was amended by section 24 of the finance Act, 1969 to include the Capital value of agriculture land for the purpose of computation of net wealth. It was held by the Punjab and Haryana High Court that the impugned Act was not law with respect to Entry 49, List II of the 7th Schedule of the Constitution of India.
Issue:
Whether the Wealth Tax Act, 1957 as amended by Section 24 of the Finance Act,1969 was valid.
Contentions by Parties-
Appellant’s Arguments:
The impugned Act does not fall within the ambit of Entry 49 of List II, but within the ambit of Entry 86 read with Entry 97 or Entry 97 read with Article 248 of the Constitution. Also that the words “exclusive of agriculture land” does not hinder the scope of Article 248 or Entry 97 of List I.
The proper way of testing the validity of the Parliamentary Statute is first to see whether it is consonance with the matters enlisted in List II, if not then no further objection or question arises.
Respondent’s Arguments:
It is the scheme of the Constitution to give exclusive power to the State Legislature to make laws with respect to agriculture land, Income on agriculture land and taxes thereon. Also that the
High Court was wrong in stating that impugned Act was not law within the ambit of Entry 49, List II.
The words “exclusive of agriculture land” in Entry 86 of List I are the words of prohibition whereby the Parliament is restricted to make law levying tax on capital value of assests. Regarding Entry 97 of List I it can be apparently interpreted that if any matter is specifically excluded from Entry in List I then it should mean that it was not intended to be included in Entry 97 also.
Judgment:
The Apex Court’s bench comprising of Sikri,S.M.(CJ),Shelat.J.M., Ray.A.N, Dua.I.D, Mitter.G.K, Roy Subimal Chandra, Palekar, D.G., held the following:
Article 246 enumerates the three list of 7th schedule whereby it is clear that the Parliament has exclusive power to make laws with respect to all the matters as enlisted in List I and that this notwithstanding anything contained in clause (2) and (3) of Article 246.
While the State Legislature can make laws with respect to matters enumerated List II but it is subject to clause (1) and (2) of Article 246. This subjection shows that the power of the Parliament to make laws with respect to matters enumerated in List I and II are paramount.
Article 248 and Entry 97 of List I makes it clear that the constitutional makers wanted to handover the residuary powers of legislation to the Union Parliament.
Hon’ble Court expounded that if the Central Act does not fall within the ambit of matter enlisted in List II then it is fruitless to inquire whether it falls within the ambit of List I or III.
There is a difference between “net wealth tax” and “tax on property”, based upon which the court held that the impugned Act was not law under Entry 49, List II.
No part of the impugned legislation falls within Entry 86, List I and hence valid and by majority it was held that the appeal be allowed without order to cost.
Shelat, Ray and Dua, JJ.(dissenting), held that the residuary power conferred by Article 248 and Entry 97 must include matter not included in any of the three lists. The tax under Wealth Tax Act was within the arena of List I Entry 86 and not under the residuary power of Parliament U/A 248 or Entry 97, List I and hence suffered lack of competence.
Rule of Law:
Article 246 provides that;
- (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.
- (2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule.
- (3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule.
- (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List.
Article 248 provides that;
- (1) Parliament can make laws with respect to any matter not enumerated in the state or concurrent list.
- (2) Such power includes the power to make laws imposing tax not mentioned in any of the three list.
Conclusion:
The Supreme Court upheld the proverb that Principle of Justice do not change with calendar. Significance of appealing to Supreme Court becomes far-reaching when the subordinate Court fails in its rudimentary business of delivering Justice.
Since it is not just the system but a system of justice, the Supreme Court stands ready with its Supreme and exclusive power to keep a check upon the arbitrary power of any of the organs of the Government.
Kaushal Agarwal.
