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3. Counsel for the petitioner then submitted on the basis of Article 271 of the Constitution that unless there is express authorisation by the Constitution the State Legislature has no power to impose a tax by way of surcharge. Article 271 reads thus :

Notwithstanding anything in Articles 269 and 270, Parliament may at any time increase any of the duties or taxes referred to in those articles by a surcharge for purposes of the Union and the whole proceeds of any such surcharge shall form part of the Consolidated Fund of India.
(2) Such percentage, as may be prescribed, of the net proceeds in any financial year of any such tax, except in so far as those proceeds represent proceeds attributable to Union territories or to taxes payable in respect of Union emoluments, shall not form part of the Consolidated Fund of India, but shall be assigned to the States within which that tax is leviable in that year, and shall be distributed among those States in such manner and from such time as may be prescribed.

Then follows Article 271 saying that it will be open to Parliament to increase those duties and taxes by a surcharge for the purpose of the Union and the whole proceeds shall form part of the Consolidated Fund of India. It was to avoid a possible contention on the part of the States that the surcharge levied and collected by the Union should also be assigned to the States by the Union or distributed between the Union and the States, that Article 271 was enacted, providing that notwithstanding the fact that the taxes and duties levied and collected under Articles 269 and 270 must be assigned to States or distributed between the Union and the States as the case may be, the surcharge shall form part of the Consolidated Fund of the Union. In other words, the Parliament may impose a surcharge on the duties and taxes mentioned in Articles 269 and 270 and credit it to the Consolidated Fund of the Union exclusively. But for Article 271, the States could successfully contend that surcharge levied and collected by the Union must be assigned to the States or distributed between the Union and the States as the case may be. The article cannot be pressed in aid of the contention that but for that article the Parliament would have no power to levy surcharge on taxes and duties which the Parliament is competent under the Constitution to levy.