Bench: Chief Justice S.M. Sikri Justice J.M. Shelat Justice A.N. Ray Justice I.D. Dua Justice G.K. Mitter Justice S.C. Roy Justice D.G. Palekar Facts: The Wealth Tax Act of 1957 imposed a tax on the net wealth of individuals and companies, explicitly excluding agricultural land from its ambit. However, the Finance Act of 1969 amended the Wealth Tax Act to include the capital value of agricultural land in the computation of net wealth. H.S. Dhillon, an assessee affected by this amendment, challenged its constitutionality in the Punjab and Haryana High Court. The High Court, by a majority, held that the amendment was ultra vires, stating that Parliament lacked the competence to tax agricultural land, as this subject fell under the State List (Entry 49, List II) of the Seventh Schedule of the Constitution. The Union of India appealed this decision to the Supreme Court. Issues: Whether the amended Wealth Tax Act, which included agricultural land in the computation of net wealth, was within the legislative competence of Parliament. Whether the tax imposed by the amended Act fell under Entry 86 of List I (Union List) or Entry 49 of List II (State List) of the Seventh Schedule. Whether Parliament could exercise its residuary powers under Entry 97 of List I and Article 248 of the Constitution to impose a wealth tax on agricultural land. Arguments: Appellant (Union of India): The tax imposed by the amended Wealth Tax Act did not fall under Entry 49 of List II, which pertains to “Taxes on lands and buildings,” but rather under Entry 86 of List I, which deals with “Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies.” The exclusion of agricultural land in Entry 86 of List I does not preclude Parliament from taxing it under its residuary powers granted by Entry 97 of List I and Article 248. Parliament possesses comprehensive residuary powers to legislate on matters not enumerated in any of the three lists, including taxation of subjects not specified elsewhere. Respondent (H.S. Dhillon): The power to tax agricultural land is vested exclusively in the State Legislature under Entry 49 of List II. The exclusion of agricultural land from Entry 86 of List I indicates the framers’ intent to keep taxation of agricultural land within the States’ domain. The amendment to include agricultural land in the Wealth Tax Act encroaches upon the States’ legislative powers and is thus unconstitutional. Ratio Decidendi: Scope of Entry 86, List I: The Supreme Court held that Entry 86 of List I authorizes Parliament to tax the capital value of assets, excluding agricultural land. The explicit exclusion signifies that Parliament cannot tax agricultural land under this entry. Interpretation of Entry 49, List II: Entry 49 of List II pertains to taxes directly on lands and buildings, such as property taxes. The Court clarified that a tax on the capital value of assets, including agricultural land, is distinct from a direct tax on land and does not fall under Entry 49. Residuary Powers under Entry 97, List I, and Article 248: The Court emphasized that Parliament holds residuary powers to legislate on matters not enumerated in any of the three lists. Since a tax on the capital value of agricultural land is not explicitly mentioned in any entry, it falls within Parliament’s residuary powers. Observations: The Court noted that the Constitution’s framers intended to vest residuary legislative powers in Parliament to ensure comprehensive authority over unforeseen matters. The exclusion of agricultural land from Entry 86 of List I does not imply a prohibition but rather indicates that such taxation is not covered under that specific entry. Parliament can still legislate on this matter under its residuary powers. The decision underscores the importance of a harmonious interpretation of the legislative lists to maintain the federal balance while ensuring legislative efficacy. Decision: The Supreme Court upheld the constitutionality of the amended Wealth Tax Act, affirming Parliament’s authority to include agricultural land in the computation of net wealth under its residuary legislative powers. The appeal by the Union of India was allowed, and the judgment of the Punjab and Haryana High Court was set aside. Important Terms: Residuary Powers: Legislative powers granted to Parliament to legislate on matters not enumerated in any of the three lists of the Seventh Schedule. Entry 86, List I: Pertains to taxes on the capital value of assets, excluding agricultural land, of individuals and companies. Entry 49, List II: Relates to taxes on lands and buildings, typically understood as property taxes imposed by State Legislatures. Article 248: Grants Parliament exclusive power to make laws on any matter not enumerated in the Concurrent or State List, encompassing residuary subjects. Wealth Tax: A tax levied on the net wealth of individuals or entities, considering the total value of assets minus liabilities. This landmark judgment clarified the extent of Parliament’s residuary legislative powers, particularly concerning taxation not explicitly mentioned in the legislative lists. It established that Parliament could impose taxes on subjects not enumerated in any list, provided they do not encroach upon the exclusive domain of State Legislatures. The decision reinforced the principle that the Constitution’s distribution of powers must be interpreted to allow both Union and State Legislatures to function effectively within their respective domains.

Bench: Chief Justice M. Patanjali Sastri Justice B.K. Mukherjea Justice S.R. Das Justice N.H. Bhagwati Justice Ghulam Hasan Facts: The Orissa State Legislature passed the Orissa Estates Abolition Act, 1952, aiming to acquire estates owned by zamindars (landowners) and redistribute the land. K.C. Gajapati Narayan Deo, a zamindar, challenged the constitutionality of the Act, arguing that it was a colorable exercise of legislative power and violated fundamental rights. He contended that the Act was enacted under the guise of land reforms but was, in reality, an attempt to deprive zamindars of their property without proper compensation. The petitioner approached the Supreme Court, questioning the legislative competence of the Orissa Legislature and alleging malafide intent. Issues: Whether the Orissa Estates Abolition Act, 1952, was a valid exercise of legislative power or a case of colorable legislation. Whether the Act violated Article 14 (right to equality) and Article 31 (right to property) of the Constitution. Whether the Orissa State Legislature had the authority to enact the law under the Seventh Schedule of the Constitution. Arguments: Petitioners (K.C. Gajapati Narayan Deo & Zamindars): The Act was not a genuine land reform measure but a politically motivated attempt to take over zamindari estates. The State Legislature had exceeded its constitutional power, making the Act a case of colorable legislation. The Act violated Article 14 (equality before law) and Article 31 (right to property), as it arbitrarily targeted zamindars. Respondents (State of Orissa): The Act was within the legislative competence of the State Legislature under Entry 18 of the State List, which deals with land and land tenure. The law aimed at equitable land distribution and was protected under Article 31A, which allowed the acquisition of zamindari estates for public purposes. The State denied any malafide intent and justified the law as a step toward land reforms and reducing inequality. Ratio Decidendi: Doctrine of Colorable Legislation: The Supreme Court held that the doctrine applies when a Legislature enacts a law that appears to be within its power but, in reality, transgresses constitutional limits. However, in this case, the Act was within the legislative competence of the State. Validity of Land Reforms: The Court ruled that land reforms and abolition of zamindari estates were valid state subjects under Entry 18, List II of the Constitution. No Malafide Intent: The Court found no evidence that the law was enacted with malafide intent. Instead, it was a legitimate step toward land redistribution. Protection Under Article 31A: The Court held that the Act was protected under Article 31A, which allows the government to acquire zamindari estates without violating property rights. Observations: The Doctrine of Colorable Legislation does not apply if a law is within the Legislature’s competence. The test for determining malafide intent is whether the law has an apparent public purpose and a reasonable basis for classification. The Supreme Court upheld the importance of land reforms as a constitutional objective under Directive Principles of State Policy. Decision: The Supreme Court upheld the constitutionality of the Orissa Estates Abolition Act, 1952 and dismissed the zamindars’ challenge. The Court ruled that the Act was a valid piece of legislation enacted for public welfare and not a case of colorable legislation. Important Terms: Doctrine of Colorable Legislation: A legal principle that invalidates laws when a Legislature enacts a law under the guise of a legitimate power but actually exceeds its jurisdiction. Article 31A of the Constitution: Protects land reform laws from being challenged under fundamental rights. Entry 18, List II (State List): Grants State Legislatures the power to make laws on land, land tenure, and land revenue. Zamindari Abolition: A policy aimed at redistributing land from large landowners (zamindars) to peasants. Malafide Intent: A law enacted with an improper motive rather than for a genuine public purpose.

Bench: Justice V.N. Khare Justice Ruma Pal Facts: The respondent, Drive-in Enterprises, owned a drive-in-theatre on the outskirts of Bangalore, where films were screened. In this type of cinema, viewers could watch movies while sitting in their cars. The Karnataka Cinemas (Regulation) Rules, 1971, defined drive-in-cinema as an open-air theatre where admissions were granted to people who wished to watch films from inside their vehicles. The Karnataka Entertainments Tax Act, 1958, imposed entertainment tax on admissions to cinemas. The state government later amended the Act, introducing sub-clause (v) in clause (i) of Section 2, which levied tax on vehicles entering a drive-in-theatre, in addition to the entertainment tax on the viewers. The proprietors of drive-in-theatres challenged this additional tax, arguing that it was beyond the legislative competence of the State Legislature. The Karnataka High Court struck down the tax, ruling that the levy was not on a person entertained but on an inanimate object (a car), making it ultra vires. The State of Karnataka appealed the decision to the Supreme Court. Issues: Whether the Karnataka Entertainments Tax Act, 1958, as amended, was within the legislative competence of the State Legislature. Whether levying tax on vehicles entering the drive-in-theatre amounted to an entertainment tax under Entry 62 of List II of the Seventh Schedule of the Constitution. Whether the additional tax on vehicles constituted an arbitrary and unreasonable imposition. Arguments: Petitioners (State of Karnataka): The tax was not on the vehicle itself but on the person entertained, as the car was only a means to enjoy the entertainment in comfort. The State Legislature was competent to impose such a levy under Entry 62 of List II, which allows states to tax luxuries, entertainments, amusements, betting, and gambling. The amended Act was a valid piece of legislation, and the tax was justified as it was related to the quality of entertainment received. Respondents (Drive-in Enterprises): The tax was levied on the vehicle and not the person, making it unconstitutional under Entry 62, which permits tax only on persons entertained. Cars were inanimate objects and could not be taxed under the category of entertainment. The amendment was an arbitrary exercise of legislative power, creating an unreasonable classification between drive-in-theatres and conventional cinema halls. Ratio Decidendi: Pith and Substance of the Levy: The Supreme Court held that the real nature and character of the levy must be examined. The tax was imposed not on the car but on the person using the car for entertainment. The levy was, therefore, on the person entertained, making it valid under Entry 62. Comfort and Quality of Entertainment: The Court observed that entertainment tax could vary based on the comfort and experience provided to the viewer. A person choosing to watch a movie while seated in a car was availing an additional luxury, justifying the additional tax. Legislative Competence: The Court ruled that the State Legislature was within its rights to impose an entertainment tax on those opting for a higher level of comfort while enjoying a film at a drive-in-theatre. The tax had a direct nexus with entertainment and was not merely a tax on vehicles. Observations: The term “entertainment” under Entry 62 is broad and includes not just the act of watching a film but also the means and manner in which the entertainment is consumed. The principle of legislative competence requires that the essence of the tax be examined rather than its mere nomenclature. The doctrine of pith and substance was applied to confirm that the levy was a tax on entertainment and not an indirect attempt to tax vehicles. Decision: The Supreme Court set aside the High Court’s ruling and upheld the validity of the entertainment tax on vehicles entering the drive-in-theatre. The appeal was allowed, and the levy was deemed constitutional. Important Terms: Entry 62, List II (Seventh Schedule): Grants the State Legislature power to levy taxes on luxuries, entertainment, amusements, betting, and gambling. Doctrine of Pith and Substance: A legal principle used to determine the true nature of a law by analyzing its substance rather than its form. Entertainment Tax: A tax levied on persons entertained in cinemas, amusement parks, and other recreational activities. Legislative Competence: The authority of a legislative body to make laws within its jurisdiction. Arbitrary Taxation: The imposition of a tax without reasonable justification or classification.

Bench: Chief Justice S.R. Das Justice S.K. Das Justice P.B. Gajendragadkar Justice K.N. Wanchoo Justice M. Hidayatullah Facts: The Ajmer Legislative Assembly enacted the Ajmer (Sound Amplifiers Control) Act, 1952, which received the President’s assent in 1953. The Act sought to regulate the use of sound amplifiers by imposing restrictions to control noise pollution and maintain public order. The respondents were prosecuted under Section 3 of the Act for violating conditions attached to their permit to use sound amplifiers on May 15 and 16, 1954. The prosecution alleged that the amplifiers were tuned to be audible beyond 30 yards (Condition 1) and placed at a height exceeding six feet from the ground (Condition 2). The second respondent operated the sound amplifiers for a Sammelan (public gathering) with prior permission. The Judicial Commissioner of Ajmer, upon reference under Section 432 of the Code of Criminal Procedure, held that the pith and substance of the Act fell within Entry 31 of the Union List (which includes “Posts and Telegraphs; Telephones, wireless, broadcasting and other like forms of communication”) and not Entry 6 of the State List (which includes “Public health and sanitation, hospitals and dispensaries”). Consequently, the Act was declared ultra vires the State Legislature. The State of Rajasthan, which substituted the State of Ajmer after the reorganization of states, appealed the decision before the Supreme Court. Issues: Whether the Ajmer (Sound Amplifiers Control) Act, 1952, was within the legislative competence of the State Legislature. Whether the Act fell under Entry 31 of the Union List, making it ultra vires the State Legislature. Whether the Act could be justified under Entry 6 (Public Health) or Entry 1 (Public Order) of the State List. Arguments: Petitioner’s (State of Rajasthan) Arguments: The control of sound amplifiers was necessary to maintain public order and protect public health, which fell within the State List. The Act did not seek to regulate broadcasting or wireless communication, which was the subject of Entry 31 of the Union List. Instead, it merely controlled the use of amplifiers to prevent disturbances. The power to regulate excessive noise was an essential part of public health and order, justifying the State’s legislative competence. Respondent’s (Chawla’s) Arguments: The Act essentially regulated sound amplifiers, which are instruments of broadcasting and communication, thus falling under Entry 31 of the Union List. The State Legislature lacked the authority to legislate on matters covered by the Union List. The Judicial Commissioner correctly held that the Act was unconstitutional. Ratio Decidendi: Doctrine of Pith and Substance: The Court emphasized that when determining the validity of a law, its pith and substance must be examined. If a law primarily falls within the legislative competence of a particular government, incidental encroachment on another field does not make it invalid. Regulation of Sound Amplifiers as a Matter of Public Health and Order: The Court held that although sound amplifiers could be considered a means of broadcasting, their regulation was necessary to maintain public health and order. The use of amplifiers, when unregulated, could create public disturbances and affect tranquility. Legislative Competence of the State: The Court ruled that the Act, in substance, regulated noise pollution rather than broadcasting. The legislation was aimed at maintaining public order and ensuring public health, which were matters within the State List. Observations: The Court noted that legislative powers in a federal system are not always mutually exclusive and may overlap. While broadcasting as a whole was under Union jurisdiction, controlling excessive noise from amplifiers in public places was a matter of public order and health, making it a subject within the State’s legislative competence. The regulation of sound amplifiers was a necessary measure to protect citizens from disturbances caused by their unregulated use. Decision: The Supreme Court reversed the decision of the Judicial Commissioner and upheld the validity of the Ajmer (Sound Amplifiers Control) Act, 1952. The Court ruled that the Act was within the competence of the State Legislature as it primarily dealt with public health and public order rather than broadcasting. The appeal was allowed. Important Terms: Doctrine of Pith and Substance: Used to determine the true nature of a law by analyzing its primary objective rather than incidental effects. Entry 31 of the Union List: Covers subjects related to “Posts and Telegraphs; Telephones, wireless, broadcasting, and other like forms of communication.” Entry 6 of the State List: Pertains to “Public health and sanitation, hospitals, and dispensaries,” under which states can regulate issues affecting public health. Entry 1 of the State List: Covers “Public order,” granting states the authority to enact laws to maintain peace and order. Legislative Competence: Refers to the authority of a legislative body to make laws on a particular subject, as outlined in the constitutional division of powers.

Bench: Lord Wright Lord Porter Lord Uthwatt Sir Madhavan Nair Sir John Beaumont Facts: The case involved the challenge to the validity of the Bengal Money-Lenders Act, 1940, which was enacted to regulate money lending and provide relief to borrowers. The Act limited the total recoverable amount in respect of principal and interest and was retrospective in nature, allowing borrowers to rely on its provisions in ongoing cases. The Bank of Commerce, Khulna, challenged the Act, arguing that it was ultra vires because it interfered with subjects reserved for the Federal Legislature under the Government of India Act, 1935, particularly “Banking” and “Promissory Notes,” which were under List I (Federal List). The Bank contended that since moneylenders often used promissory notes as security for loans, the Act affected negotiability and banking practices, making it a matter within the exclusive domain of the Federal Legislature. The High Court ruled in favor of the bank, declaring the Act ultra vires in so far as it dealt with promissory notes and banking. The case was then appealed to the Privy Council. Issues: Whether the Bengal Money-Lenders Act, 1940, was within the legislative competence of the Provincial Legislature, given that it affected promissory notes and banking, which were subjects in the Federal List. Whether the Act, in pith and substance, related to money lending, a subject under the Provincial List, or whether it encroached upon the Federal List in a manner that rendered it unconstitutional. Whether incidental encroachments on a subject in the Federal List would invalidate a Provincial law. Arguments: Petitioners (Bank of Commerce, Khulna): The Act regulated promissory notes, which was a subject under the Federal List. It also impacted banking transactions, an exclusive Federal subject. Since the Act encroached upon the Federal domain, it was ultra vires the Provincial Legislature. Respondents (State of Bengal): The Act was primarily concerned with money lending, which fell under the Provincial List. Any impact on promissory notes and banking was incidental and did not invalidate the legislation. The doctrine of pith and substance should be applied to determine the true nature of the law. Ratio Decidendi: Doctrine of Pith and Substance: The Privy Council ruled that in cases of legislative conflict, courts must determine the true nature and character of the impugned law. If the core subject matter of the legislation falls within a Legislature’s competence, incidental effects on another field do not render it invalid. Since the Bengal Money-Lenders Act primarily dealt with money lending, a Provincial subject, it was within the Provincial Legislature’s competence. Incidental Encroachment on Federal Subjects: The Court held that a law is not invalid merely because it incidentally touches upon a subject in another legislative list. Since the Act’s primary purpose was to regulate money lending, incidental effects on promissory notes and banking did not make it ultra vires. Overlapping Powers in a Federal Structure: The decision acknowledged that legislative powers in a federal system inevitably overlap, and absolute separation of subjects is impractical. The hierarchy of lists must be respected, but minor overlaps do not necessarily invalidate a law. Observations: The Court emphasized that the interpretation of legislative lists should not be rigid and that absolute separation of powers is not always feasible. The precedent set in this case influenced subsequent Indian constitutional law, particularly in cases interpreting Article 246 and the Seventh Schedule of the Constitution of India. The ruling reaffirmed the doctrine of pith and substance as a guiding principle in resolving legislative conflicts. Decision: The Privy Council ruled in favor of the State of Bengal, holding that the Bengal Money-Lenders Act, 1940, was valid as it was in pith and substance a law regulating money lending, a Provincial subject. The incidental impact on promissory notes and banking did not render it unconstitutional. Important Terms: Doctrine of Pith and Substance: A principle used to determine the true nature of legislation by examining its primary purpose rather than incidental effects. Legislative Lists in Government of India Act, 1935: Divided subjects between the Federal and Provincial Legislatures, similar to the Seventh Schedule in the Indian Constitution. Money Lending vs. Banking: Money lending was a Provincial subject, while banking was a Federal subject. The case clarified the distinction between the two. Incidental Encroachment: A law that primarily belongs to one legislative field may incidentally touch upon another without being unconstitutional. Ultra Vires: A legal principle meaning “beyond the powers,” used to determine whether a legislative body exceeded its constitutional authority.

Bench: Chief Justice Bhuvaneshwar Prasad Sinha Justice S.J. Imam Justice K. Subba Rao Justice K.N. Wanchoo Justice J.C. Shah Justice N. Rajagopala Ayyangar Facts: Shrikant Mudholkar, son of Krishna Ranganath Mudholkar, passed the Secondary School Certificate (SSC) Examination in Bombay in March 1960. His mother tongue was Marathi, and he completed his education in Marathi. He enrolled at St. Xavier’s College, affiliated with Gujarat University, for the First Year Arts course, where the medium of instruction was English. After successfully completing this course, he applied for the Intermediate Arts course, intending to continue his education in English. However, the Gujarat University Act, 1949, and subsequent amendments in 1961, particularly Statutes 207, 208, and 209, restricted English as a medium of instruction. The University refused to allow him to pursue studies in English, citing its policy to promote Gujarati and Hindi as the exclusive media of instruction. The Mudholkars challenged this decision in the Gujarat High Court, arguing that it violated their rights and the University’s legal authority. The High Court ruled in favor of Mudholkar, leading the University to appeal to the Supreme Court. Issues: Whether Gujarat University had the authority under the Gujarat University Act, 1949, to prescribe Gujarati or Hindi as the exclusive medium of instruction. Whether the State Legislature had the legislative competence to impose such restrictions, considering Entry 66 of List I (Union List) of the Constitution, which pertains to the coordination and determination of standards in higher education. Arguments: Petitioners (Mudholkars): The Gujarat University Act, 1949, did not authorize the University to impose an exclusive medium of instruction. The State Legislature could not legislate on matters affecting the coordination and determination of educational standards, which fall under Entry 66 of the Union List. Respondents (Gujarat University and the State of Gujarat): The University had the authority to determine the medium of instruction under its powers conferred by the Gujarat University Act. Education, including universities, was a subject under the State List (Entry 11 of List II at the time, now Entry 25 of List III). Ratio Decidendi: University’s Lack of Authority: The Supreme Court held that neither the Gujarat University Act, 1949, nor its amendments conferred power on the University to impose Gujarati or Hindi as the exclusive medium of instruction. Legislative Competence and Entry 66: The Court ruled that the power to coordinate and determine standards in higher education was vested in the Union under Entry 66 of List I. The State Legislature could not enact laws that affected these standards. Overlap Between Lists: Although “education” was under the State List, the Union’s power to legislate on “coordination and determination of standards” under Entry 66 prevailed. Any State law that impacted this coordination would be invalid. Observations: The power to prescribe a medium of instruction falls under the broader subject of education. However, if the imposition of a regional language affects national educational standards, it encroaches upon the Union’s domain under Entry 66. The State has the power to regulate education but cannot make laws that disrupt uniformity and coordination in higher education across India. The Statement of Objects and Reasons of a statute may help in understanding the legislative intent, but they cannot override the actual provisions of the law. Decision: The Supreme Court upheld the Gujarat High Court’s ruling and struck down the University’s policy. It declared that Gujarat University had no authority to impose Gujarati or Hindi as the sole medium of instruction. The decision reinforced that matters related to the coordination and determination of standards in higher education fall under the exclusive domain of the Union. Important Terms: Entry 66 of List I (Union List): Grants the Union Parliament power over coordination and determination of standards in institutions for higher education and research. Entry 25 of List III (Concurrent List): Covers education, including technical and medical education, and universities. Medium of Instruction: The language used to teach students; in this case, the Court ruled that universities could not unilaterally impose a specific medium. Doctrine of Repugnancy: If a State law conflicts with a Union law in a subject where both have jurisdiction, the Union law prevails. Legislative Competence: The authority of a legislative body to make laws on specific subjects as per the Constitution.

Bench: Chief Justice Maurice Gwyer Justice Sir Shah Muhammad Sulaiman Justice M.R. Jayakar Facts: The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, imposed a tax of 5% on the retail sale of motor spirit and lubricants. The Act required every retail dealer to register and maintain records of sales. The Governor-General referred the Act to the Federal Court under Section 213 of the Government of India Act, 1935, for an advisory opinion on whether the Act, in whole or in part, was ultra vires the Legislature of the Central Provinces and Berar. The core issue revolved around the constitutional distribution of taxing powers between the federal and provincial governments. Issues: Whether the tax imposed under the Act was an excise duty, falling under the exclusive legislative domain of the Central Legislature. Whether the Provincial Legislature had the competence to levy a tax on the retail sale of motor spirit and lubricants under the Government of India Act, 1935. Whether the doctrine of pith and substance applied to determine the true nature of the tax. Arguments: Petitioner’s Arguments (Government of India): The tax, though levied at the point of retail sale, was in essence an excise duty since it targeted goods that were manufactured or produced. Excise duties fall under the exclusive jurisdiction of the Central Legislature under Entry 45 of the Federal Legislative List. Respondent’s Arguments (Provincial Government): The tax was levied at the point of sale and was thus distinct from an excise duty, falling within the legislative competence of the province under Entry 48 of the Provincial Legislative List (taxes on the sale of goods). The Act was not an attempt to encroach upon the federal power but a legitimate exercise of provincial legislative authority. Ratio Decidendi: Distinction Between Excise Duty and Sales Tax: The Federal Court held that excise duties are imposed on the manufacture or production of goods, whereas sales taxes are levied on transactions of sale. Since the impugned tax was applied at the retail sale stage, it was a sales tax and not an excise duty. Legislative Competence: The Court ruled that the provincial legislature had the competence to enact the Act under Entry 48 of the Provincial Legislative List. The tax’s nature as a sales tax, rather than an excise duty, placed it within provincial jurisdiction. Doctrine of Pith and Substance: The Court emphasized that the true character of legislation must be determined by its primary purpose rather than incidental effects. Since the Act primarily taxed retail sales and not production, it fell within the provincial domain. Observations: The Court stressed that the legislative powers of the Centre and Provinces should be interpreted harmoniously to avoid conflicts. The judgment clarified the demarcation between excise duties and sales taxes, establishing that a tax on retail sales could not be construed as an excise duty. The Court noted that while excise duties could be collected at various stages, they fundamentally targeted production, whereas sales tax focused on the point of sale. Decision: The Federal Court held that the Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, was within the legislative competence of the provincial legislature and was not ultra vires. It ruled that the tax imposed was a valid sales tax and did not infringe upon the central power to levy excise duties. Important Terms: Excise Duty: A tax levied on the manufacture or production of goods within a country, typically imposed at the production stage. Sales Tax: A tax imposed on the sale of goods, usually collected at the retail level. Pith and Substance Doctrine: A constitutional principle used to determine the true nature of legislation by examining its primary purpose rather than incidental effects. Government of India Act, 1935: The statute that laid the foundation for the division of legislative powers between the Centre and the Provinces in British India. Entry 45 (Federal List) vs. Entry 48 (Provincial List): While Entry 45 granted the Centre exclusive authority over excise duties, Entry 48 empowered provinces to impose taxes on the sale of goods.

Bench: Chief Justice S.H. Kapadia Justice B. Sudershan Reddy Justice K.S. Panicker Radhakrishnan Justice Surinder Singh Nijjar Justice Swatanter Kumar Facts: G.V.K. Industries Ltd. (GVK), an Indian company, sought to establish a gas-based power project in Andhra Pradesh. To facilitate financing, GVK entered into an agreement with M/s. NRDC, a non-resident company based in the USA, for consultancy services to secure loans from international financial institutions. Upon completion of the services, NRDC invoiced GVK for a “success fee.” GVK applied to the Income Tax Officer (ITO) for a ‘No Objection Certificate’ (NOC) to remit the payment without tax deduction at source, asserting that NRDC had no business connection in India under Section 9(1)(i) of the Income Tax Act, 1961, and that the services did not qualify as technical services under Section 9(1)(vii). The ITO rejected this application, leading GVK to appeal to the Commissioner of Income Tax, who initially granted the NOC but later revoked it, directing GVK to deduct tax at source. GVK challenged this order in the Andhra Pradesh High Court, which held that while Section 9(1)(i) was inapplicable, the payments fell under Section 9(1)(vii)(b) as fees for technical services, thereby requiring tax deduction at source. GVK subsequently appealed to the Supreme Court. Issues: Whether the Parliament has the authority under Article 245 of the Constitution to enact laws with extra-territorial application. Whether the consultancy fees paid to NRDC by GVK are deemed to accrue or arise in India under Section 9(1)(vii) of the Income Tax Act, thereby necessitating tax deduction at source. Arguments: Petitioner’s (GVK) Arguments: The consultancy services provided by NRDC were rendered entirely outside India, and NRDC had no business connection within India. Therefore, the income did not accrue or arise in India under Section 9(1)(i) of the Income Tax Act. The services rendered were not in the nature of technical services as defined under Section 9(1)(vii) and its Explanation 2; thus, the payments should not be subject to tax deduction at source. Respondent’s (Income Tax Department) Arguments: The consultancy services provided by NRDC fall within the definition of “fees for technical services” under Section 9(1)(vii) of the Income Tax Act. Parliament possesses the authority to legislate on extra-territorial aspects or causes that have a nexus with India, as per Article 245 of the Constitution. Ratio Decidendi: Parliament’s Legislative Competence: The Supreme Court held that Parliament has the authority to enact laws with extra-territorial application, provided there is a real and substantial nexus between the subject matter of the law and India. The Court clarified that laws lacking such nexus would be ultra vires. Fees for Technical Services: The Court interpreted “fees for technical services” under Section 9(1)(vii) of the Income Tax Act to include consultancy services. Since NRDC provided consultancy services to GVK, the fees paid were deemed to accrue or arise in India, necessitating tax deduction at source. Observations: The Court emphasized that while Parliament can legislate on extra-territorial matters, such legislation must serve the interest, welfare, or security of India. The term “fees for technical services” encompasses various services, including managerial, technical, or consultancy services, as defined in Explanation 2 to Section 9(1)(vii) of the Income Tax Act. Decision: The Supreme Court dismissed GVK’s appeal, upholding the Andhra Pradesh High Court’s decision that the consultancy fees paid to NRDC were subject to tax deduction at source under Section 9(1)(vii) of the Income Tax Act. Important Terms: Article 245 of the Constitution: Empowers Parliament to make laws for the whole or any part of India and allows for laws with extra-territorial operation, provided there is a nexus with India. Section 9(1)(i) of the Income Tax Act: Specifies that income accruing or arising, directly or indirectly, through or from any business connection in India is deemed to accrue or arise in India. Section 9(1)(vii) of the Income Tax Act: Pertains to income by way of fees for technical services payable by a resident, except where the fees are payable in respect of services utilized in a business or profession carried on outside India or for earning income from any source outside India. Explanation 2 to Section 9(1)(vii): Defines “fees for technical services” to mean any consideration for the rendering of managerial, technical, or consultancy services, including the provision of services of technical or other personnel. No Objection Certificate (NOC): A certificate issued by the Income Tax Department allowing remittance of funds abroad without deduction of tax at source.

Bench: Chief Justice S.R. Das Justice S.K. Das Justice P.B. Gajendragadkar Justice K.N. Wanchoo Justice M. Hidayatullah Facts: Charusila Dasi, the widow of Akshaya Kumar Ghose, created the “Srimati Charusila Trust” in 1938 through a trust deed. She owned several properties, including land and buildings in Deoghar, Bihar (Schedules B and C), and properties in Calcutta (Schedule D), amounting to an estimated value of ₹8,50,000, generating an annual income of about ₹87,839. The trust was primarily aimed at constructing and maintaining two temples—one for Lord Shiva and another for Goddess Lakshmi Narayan—as well as a charitable hospital for Hindu women in Deoghar. The trust deed provided specific instructions: Completion of temple construction and installation of the deity “Iswar Srigopal” and a marble image of Sri Balanand Brahmachari. Conduct of religious rituals and festivals for the deities with an annual expenditure of ₹13,600. Establishment of the “Akshaya Kumar Female Hospital” and an outdoor dispensary in Deoghar, with an annual expenditure of ₹12,000 for healthcare services. The Bihar State Board of Religious Trusts, under the Bihar Hindu Religious Trusts Act, 1950, issued a notice under Section 59 of the Act, requiring Charusila Dasi to submit details regarding the trust. She refused, claiming that the trust was private and outside the jurisdiction of the Act. The Board insisted that the trust was public and subject to the Act. Subsequently, a demand was made under Section 70 to levy a fee on the trust. Charusila Dasi filed a writ petition in the Patna High Court under Article 226, seeking to quash the proceedings, arguing that: The trust was private and beyond the scope of the Act. The Act itself was unconstitutional as it interfered with her fundamental rights under Article 19. The Patna High Court ruled in her favor, quashing the Board’s proceedings and holding that the trust was private and not subject to the Act. The State of Bihar appealed to the Supreme Court. Issues: Whether the Srimati Charusila Trust was a private or a public religious trust. Whether the Bihar Hindu Religious Trusts Act, 1950, could regulate trusts with properties located outside Bihar. Arguments: Petitioner’s (State of Bihar) Arguments: The trust was created for religious and charitable purposes and had a public element, making it a public religious trust under the Act. Since the temples were located in Bihar and served the local Hindu community, the trust was subject to state regulation. The Act could be applied based on the doctrine of territorial nexus since a significant portion of the trust’s assets were in Bihar. Respondent’s (Charusila Dasi) Arguments: The trust was established solely for the worship of a family deity and was, therefore, a private trust. The Act could not apply to the trust since its properties extended beyond Bihar, making it extra-territorial and beyond the Bihar Legislature’s power. The Act violated her fundamental rights by interfering with private religious endowments. Ratio Decidendi: Public vs. Private Religious Trusts: The Supreme Court held that a trust intended for the benefit of the public, particularly for religious and charitable purposes, is a public trust. Since the temples and hospital were intended for public use, the Srimati Charusila Trust was classified as a public religious trust. Application of the Bihar Hindu Religious Trusts Act, 1950: The Court ruled that the Act applied to all religious trusts with properties in Bihar, even if they owned assets outside the state. The doctrine of territorial nexus justified Bihar’s authority to regulate the trust. Legislative Competence: The Bihar Legislature had the power under Article 245 of the Constitution to legislate for matters within its territory. Since the trust’s main religious endowments were in Bihar, the Act validly applied to it. Observations: The Court emphasized that Hindu religious trusts are often intended for public purposes, even if they originate as family endowments. The doctrine of territorial nexus applies when a trust has substantial assets or activities within a state’s jurisdiction. The Court distinguished between private trusts for family worship and public trusts that involve community participation in religious or charitable activities. Decision: The Supreme Court reversed the Patna High Court’s ruling, holding that the Srimati Charusila Trust was a public religious trust and was subject to the Bihar Hindu Religious Trusts Act, 1950. The appeal was allowed, and the Board’s actions were upheld. Important Terms: Private vs. Public Religious Trusts: A private religious trust serves a specific family, while a public religious trust benefits a wider religious community. Bihar Hindu Religious Trusts Act, 1950: Legislation to regulate Hindu religious trusts in Bihar, ensuring transparency and accountability. Doctrine of Territorial Nexus: A legal principle allowing a state to regulate entities with a substantial connection (nexus) to its territory, even if parts of their assets lie outside the state. Article 245 of the Constitution: Grants legislative power to Parliament and State Legislatures within their respective territories. Certiorari and Prohibition: Writs used to quash illegal administrative actions and prevent overreach by authorities.

Bench: Chief Justice Sudhi Ranjan Das Justice T.L. Venkatarama Aiyar Justice Bhuvneshwar P. Sinha Justice S.K. Das Justice P.B. Gajendragadkar Facts: R.M.D. Chamarbaugwala was the managing director of R.M.D.C. (Mysore) Ltd., a company incorporated in Mysore (now Karnataka), with its head office in Bangalore. The company organized prize competitions, including crossword puzzles, which were published in newspapers and magazines circulated in various states, including Bombay (now Mumbai, Maharashtra). Participants from Bombay would send their entries along with entry fees to the company’s Bangalore office. The State of Bombay enacted the Bombay Lotteries and Prize Competitions Control and Tax Act, 1948, which sought to regulate and tax prize competitions, including those conducted by entities outside the state but having participants within Bombay. The Act imposed taxes on gross receipts from entry fees paid by people in Bombay. Challenging the applicability of this Act to their competitions, Chamarbaugwala filed a writ petition before the Bombay High Court, contending that the Act was ultra vires (beyond the powers) of the State Legislature, especially concerning competitions conducted outside Bombay but participated in by its residents. The High Court ruled in favor of Chamarbaugwala, leading the State of Bombay to appeal to the Supreme Court. Issues: Whether the State of Bombay had the legislative competence to enact a law regulating and taxing prize competitions organized outside its territorial limits but having participants within the state. Whether the Act violated Article 19(1)(g) of the Constitution, which guarantees the right to practice any profession or to carry on any occupation, trade, or business. Whether the Act infringed upon the freedom of trade, commerce, and intercourse guaranteed under Article 301 of the Constitution. Arguments: Appellant (State of Bombay): The State argued that the Act was within its legislative competence as there was a sufficient territorial nexus between the state and the prize competitions, given that participants from Bombay paid entry fees to partake in these competitions. The State contended that prize competitions involving substantial chance were in the nature of gambling and, therefore, could be regulated and taxed under the state’s powers. Respondent (R.M.D. Chamarbaugwala): Chamarbaugwala argued that the Act was extra-territorial and could not apply to competitions organized and conducted outside Bombay. He contended that the Act violated the fundamental right to carry on business under Article 19(1)(g) and imposed unreasonable restrictions not protected by Article 19(6). He also argued that the Act infringed upon the freedom of trade, commerce, and intercourse under Article 301. Ratio Decidendi: Legislative Competence and Territorial Nexus: The Supreme Court held that the State of Bombay had the legislative competence to enact the law due to a sufficient territorial nexus between the state and the prize competitions. The Court observed that the entry fees were paid by participants residing in Bombay, establishing a clear connection justifying the state’s regulatory and taxing authority. Nature of Prize Competitions: The Court distinguished between games of skill and games of chance. It held that competitions substantially involving chance, even if they required some skill, fell under the category of gambling. Such activities were considered res extra commercium (outside the scope of commerce) and, therefore, not protected by Article 19(1)(g). Freedom of Trade and Commerce: The Court held that activities in the nature of gambling do not constitute trade, commerce, or intercourse within the meaning of Article 301. Therefore, the restrictions imposed by the Act did not violate the freedom guaranteed under this provision. Decision: The Supreme Court allowed the appeal, setting aside the Bombay High Court’s decision. The Court upheld the validity of the Bombay Lotteries and Prize Competitions Control and Tax Act, 1948, as applied to prize competitions involving substantial chance, even if organized outside the state but having participants within Bombay. The Court ruled that the State of Bombay had the legislative competence to regulate and tax such competitions and that the Act did not violate Articles 19(1)(g) or 301 of the Constitution. Important Terms: Territorial Nexus: A legal doctrine allowing a state to legislate on matters outside its territorial limits if a sufficient connection exists between the state and the subject matter. Res Extra Commercium: Activities considered outside the scope of commerce and trade, often due to their immoral or harmful nature, such as gambling. Article 19(1)(g): A provision in the Indian Constitution guaranteeing citizens the right to practice any profession or to carry on any occupation, trade, or business. Article 301: A provision in the Indian Constitution ensuring the freedom of trade, commerce, and intercourse throughout the territory of India.