Indian Kanoon - Search engine for Indian Law

(a) The 'Union Taxation' argument:

4. Let us examine the contention in respect of the "Union Taxation" argument. We note that Article 289(1) of the Constitution of India declares that the "property and income of a State shall be exempt from Union taxation". In NDMC v. State of Punjab (supra), the question which arose for consideration was whether the properties of the States situated in the Union Territory of Delhi were exempt from property taxes levied under the municipal enactments in force in the Union Territory of Delhi. It is in this backdrop that the question of whether the property taxes under the two Municipal Acts extant in Delhi constituted Union taxation or not - arose for consideration. While doing so, the Supreme Court observed that the States put together do not exhaust the territory of India and that there are certain territories which do not form part of any State and yet are territories of the Union. The Supreme Court noted that the States and Union Territories are different entities as was evident from clause (2) of article 1 and, indeed, from the entire scheme of the Constitution. It was further observed by the Supreme Court that article 245 (1) prescribed that while Parliament may make laws for the whole or any part of the territory of India, the legislature of a State may make laws for the whole or any part of the State. Article 1 (2) read with Article 245 (1) would show that so far as the union territories are concerned, the only lawmaking body is Parliament. It was also observed that the legislature of a State cannot make any law for a Union Territory inasmuch as a State legislature can make laws only for that State. The division of legislative powers between Parliament and the State legislatures is clearly indicated in Article 246 of the Constitution. The Supreme Court, importantly, noted that the division is only between Parliament and the State legislatures, that is, between the Union and the States and that there is no division of legislative powers between the Union and the Union Territories as much as there is no division of powers between States and the Union Territory. The Supreme Court held that insofar as the Union Territories are concerned, it is clause (4) of Article 246 that is relevant and that says that Parliament has the power to make laws with respect to any matter or for any part of the territory of India not included in a State notwithstanding that such matter is enumerated in the State list. The Supreme Court categorically held that as the Union Territory is not included in the territory of any State, it was Parliament alone that was the lawmaking body available for such Union Territories.