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the constitutionality of the Act. The main issues before the court were :
(/) whether the instant legislation fell under entry 49 of the state list or entry
86 of the union list5, namely, the identification of the subject matter of the
Act in order to specify the legislative entries of the lists under which it would
fall. If it did not fall under any of these entries, then clearly Parliament
had the residuary power to impose the tax in question; (//) assuming that
the Act fell under entry 86, whether the words "exclusive of agricultural
land" in the entry constituted a positive prohibition on Parliament's legisla-
tive competence to levy wealth tax on agricultural land so as to take it
beyond the residuary jurisdiction of Parliament.
49 of list II. In analyzing the nature of a tax under entry 86 the court
stated that :
[IJtis not imposed on the components of the assets of the assessee:
it is imposed on the total assets which the assessee owns, and
in determining the net wealth not only the encumbrances
specifically charged against any item of asset, but the general
liability of the assessee to pay his debts and to discharge his
lawful obligations have to be taken into account.9
The court added that the tax under entry 49 of list II
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.10
Thus the concept of a tax under entry 86 and one under entry 49 was defined
and it was held that both cover different fields and there was no conflict
between them. In the subsequent decisions of Assistant Commissioner
v Buckingham and Carnatic Co. Ltd.,11 and Sri Prithvi Cotton Mills Ltd.
v. Broach Municipality12 which involved the validity of state statutes, the
above view was reiterated by the court. Therefore, in none of the previous
cases the issue squarely arose whether a tax on net wealth of individuals
(as distinguished from capital value of assets) could be levied under entry
86 and whether it could include agricultural assets.
Mr. Chief Justice Sikri in the instant case examined the question
whether the Wealth Tax Act fell within entry 86, list I and concluded that
there was a difference between net wealth tax and a tax that could be levied
under entry 86. The difference in his view was that in ascertaining the capital
value of assets under entry 86, it was not obligatory for Parliament to provide
for deduction of debits, though he agreed that aggregation of assets was
necessary. Referring to authorities on the concept of taxation on net
wealth, he observed that the essential element in a true wealth tax was to
provide for reduction of general liabilities from the total assets of
an individual. Consequently, in pith and substance, the impugned law did
not fall under entry 86 but under entry 97 of list I (residuary entry). Further,
the Chief Justice pertinently observed that assuming that the Wealth Tax
Act, as originally enacted, came within the purview of entry 86, the residuary
clause could still be invoked to justify the wealth tax on agricultural land :
Mr. Justice Mitter decided the appeal on the point that the subject
matter of Wealth Tax Act including or excluding agricultural land was not
covered by entry 86 of list I but by entry 97. He was of the view that capital
value of assets did not mean the same thing as net wealth as defined in the
Wealth Tax Act. While examining the concept of 'capital value of assets',
he pointed out that this expression was used in the English Law of Rating
and found its way in the Government of India Act, 1935, (entry 55, list I)
and in the Constitution (entry 86, list I). Agreeing with the meaning of
the expression under the Law of Rating, he concluded that it meant
The second issue considered by the court was the extent of union's
residuary powers. The division of legislative powers between the union
and state legislatures is enshrined in article 246 of the Constitution. It
distributes the subject matter of legislation in three lists enumerated in the
seventh schedule to the Constitution and specifies the legislative body
competent to deal with any such subject matter. The three lists are elabora-
tely worded and the framers of the Constitution have attempted to make
the entries in one list exclusive of those in the other lists. However, due
to "the imperfections of human expression and the fallibility of legal
draftsmanship" 16 some conflict or overlapping between entries in the different
lists is inevitable. To deal with such contingencies, the Constitution in
article 246 has provided a scheme of priority of the union list (list I) over
the state and concurrent lists (lists II and III). 17 Further, the Constitution
makers in article 248 provided for residuary powers of legislation to Parlia-
ment. This article reads :
(1) Parliament has exclusive power to make any law with respect
to any matter not enumerated in the Concurrent List or State
List.
(2) Such power shall include the power of making any law imposing
a tax not mentioned in either of those Lists.
The union list also contains a residuary entry, entry 97 on the following
lines :
Any other matter not enumerated in List II or List III including any
tax not mentioned in either of those Lists.
had unequivocally held that where the subject matter of legislation did not
fall within the state list, concurrent list and the enumerated entries in the
union list, it was covered by the residuary jurisdiction of Parliament.
Thus in all these decisions residuary power was availed of when the
subject matters of legislation were not enumerated in the three lists. How-
ever, in the Dhillon case the question was whether a topic of legislation
mentioned by way of exclusion in an entry in the union list would fall within
the compass of residuary powers of Parliament. The Wealth Tax Act,
1957, as amended in 1969, was seemingly enacted under entry 86 of list I.
The respondents had argued that the words 'exclusive of agricultural land'
were words of prohibition and prohibited Parliament from including capital
value of agricultural land in any law levying tax on capital value of assets.
A matter specifically excluded in the union list could not fall within the
words 'any other matter' in entry 97 of the same list.
Mr. Chief Justice Sikri and Mr. Justice Mitter refused to give such
a resticted interpretation to the scope of the residuary power. Mr. Chief
Justice Sikri opined that the Constitution makers had not withheld certain
legislative powers from the legislative competence of the legislatures in
India either legislating singly or concurrently. He held that the words
'any other matter' in entry 97 of list I referred to matters contained in each
of entries I to 96 and thus gave additional powers. The test to determine
the scope of residuary powers was to examine whether the matter sought
to be legislated on was included in list II or in list III. No question had
to be asked in respect of list I. If it did not fall within list II or list III,
then it followed that Parliament had requisite legislative competence.
In the words of the Chief Justice :
If the argument of the respondent is accepted, Article 248 would have
to be redrafted as follows : 'Parliament has exclusive power to make
any law with respect to any matter not mentioned in the Concurrent
List or State List, provided it has not been mentioned by way of
exclusion in any entry in List I.21
Similar were the observations of Mr. Justice Mitter :
Under the express words of clause (1) of Article 248, one has only
to consider whether the subject matter of legislation is comprised in
List II or List III; it if is not, Parliament is competent to legislate on it
irrespective of the inclusion of akindred subject in ListI orthe specified
limits of such subject in this Li St.... Although read by itself Entry 97 may
seem to suggest that the expression 'any other matter' has reference
to the other entries in List I, Article 248(1) makes it clear beyond doubt
that such matters are those which are not covered by entries in List II
or List III.22
21. Supra nole 1 at 792.
22. Id. at 844 and 859.
86 JOURNAL OF THE INDIAN LAW INSTITUTE [Vol. 14 : 1
Since this was a case involving the determination of limits of the union
and state legislative powers under the Constitution of India, Mr. Chief
Justice Sikri as well as Mr. Justice Shelat expressed views on the applicability
of the rules of interpretation of the Canadian Constitution (the British
North America Act, 1867) to the distribution of legislative powers under the
Indian Constitution. The Chief Justice pointed out that the scheme of
distribution of legislative power between the dominion and the provinces
in Canada was essentially the same as under Indian Constitution and the
tests evolved in Canada could appropriately be applied in India also. The
test was that if the central law was challenged as being beyond the jurisdiction
of Parliament, it was sufficient to inquire if it was a law with respect to matters
or taxes enumerated in list II or list III. If it was not, no further question
arose, which meant that in that case Parliament would have full power to
legislate on such subjects. By this method of enquiry, he was not depriving
the states of their legitimate sphere of jurisdiction. The states had full
competence in respect of entries in list II, and subject to legislation by Parlia-
ment on matters in list III. On the other hand Mr. Justice Shelat felt that
there was no similarity either in the content or the scheme of distribution of
the Canadian Constitution and the Constitution of India. Mr. Justice Mitter,
though was of the view that the scheme of distribution of legislative powers
in the Constitution of India had a 'close parallel' to that in the Canadian
Constitution, did not discuss the points of similarity to arrive at the decision
in the instant case.
Both the Chief Justice as well as Mr. Justice Shelat relied on the
Constituent Assembly Debates to prove their point as regards the scope
of Parliament's residuary powers. Reference was also made to the reports
of the Union Powers Committee and the Expert Committee on Financial
Provisions.
General observations
The majority view on the scope of residuary powers of Parliament,
it may be submitted, is in consonance with the plain language of the provi-
sions of the Constitution and the intent of the framers of the Constitution,
and typifies the broad and liberal interpretation of provisions concerning
distribution of legislative powers in favour of the centre. The Constitution
of India has established a highly specialized kind of federalism that both
in its executive and legislative terms, it is deliberately weighted in favour of
Parliament and central government and in particular it reveals a scheme of
legislative jurisdiction in which Parliament is to play the dominant part.
Apart from this fact, there is a greater logical consistency in the opinions of
the Chief Justice and Mr. Justice Mitter than in the opinion of Mr. Justice
Shelat. The text of article 248 is explicit in language in that 'any matter
not enumerated in the Concurrent List or State List' will come under the
residuary jurisdiction of Parliament indicating thereby that even if a matter
is excluded by enumeration in list I, it will come under the residuary power.
On the other hand, the minority emphaiszed the word 'other' in the words
'any other matter' to mean that the residuary power could be invoked
only in any matter other than those specified (whether by exclusion or inclu-
sion) in list I, and matters not enumerated in the concurrent list or state
list. Moreover, the words 'any other matter' in entry 97 of list I
cannot but have the same meaning as attributed to similar words in article
248. It has been repeatedly held that legislative entries do not confer
powers, they merely demarcate the fields of competence.24 The substantive
powers of legislation are to be found in the article itself. The plain meaning
of article 248 gets added support in the intent of the framers of the Constitu-
24. See Mr. Justice Ramaswamy's observations in Harakchand v. Union of India,
A.I.R. 1970 S.C. 1453 at 1458 :
Before constring these entries it is useful to notice some of the well settled
rules of interpretation laid down by the Federal Court and by this Court
in the matter of construing the entries. The power to legislate is given to the
appropriate legislatures by Article 246 of the Constitution. The entries
in the three Lists are only legislative heads or fields of legislation; they demar-
cate the area over which the appropriate legislatures can operate.
See also Baldeo Singh v. Commr. of Income Tax, A.I.R. 1961. S.C. 736 ; Balaji
v. I.T.O., A.I.R. 1962 S.C. 123.
to JO URNAL OF THE INDIAN LA W INSTITUTE [Vol. 14 : 1
economic and social issues of the day. The solution of such problems
requires an attitude on the part of judges not just to rely on the text of the
constitution but also on other extra-legal materials to give meaning to the
text. This should be the approach in matters of constitutional litigation
because constitution should be kept fluid through constitutional interpreta-
tion. After all, constitutions which are the yardstick or grundnorm for
other legislation should not be interpreted "in vacuo but as living instru-
ments of government".26
Alice Jacob*
26. Vincent C. MacDonald, The Privy Council and the Canadian Constitution,
29 Can. Bar. Rev. 1021 at 1030 (1951); See generally McWhinney, Edward, Judicial
Review (4th ed. 1969).
* LL.M., J.S.D. (Yale) Research Professor, Indian Law Institute.