THE ICFAI LAW SCHOOL, THE ICFAI LAW COLLEGE, DEHRADUN

A project submitted for the partial fulfillment for internal assessment in the subject

TAXATION LAW

Project on

Analysis of MCX Stock Exchange Ltd. vs. National Stock Exchange of India Ltd

Submitted By: Under Supervision of:

Ayush Kumar Singh Priyanka Shokeen

B.AA. LL. B (H) Assistant Professor

VII Semester
Introduction: -
The system of Taxation in any country is considered to be the backbone of its’s economy,
hence we cannot say that this system is very simple, it is layered like an onion, complex as a
jigsaw puzzle, that’s why this project will provide an overview of the Tax System specific to
India.
Let us start with the meaning of the word ‘Tax’ it is a compulsory financial charge levied on
the citizens of the states. One should pay tax, as the government use this money to provide
public services. Exemption is also given in certain cases, if the citizen falls under the purview
of exceptions.
Such complex system needs to have a spot in the law of the land, i.e. Indian Constitution,
hence we are going to discuss various provisions regarding the Taxation system in India as
per Indian Constitution.

Definition/Structure of Tax in India: -

Tax structure in India is a three-tier federal structure. The central government, state
governments, and local municipal bodies make up this structure. Article 256 of the
constitution states that “No tax shall be levied or collected except by the authority of law1”.
The Tax structure in India consists of 3 federal parts:
1. Central Government (Union List (List 1 of the 7th schedule to the Constitution of
India) [Article 246(1)].)
2. State Governments (The State List has only those matters on which the State
Government has the power to make laws [Article 246(3)].)
3. Local Municipal bodies (The Concurrent List has those matters on which both the
Central and State Governments have the power to make laws [Article 246(2)].)2
Taxes are determined by the Central and State Governments along with local authorities like
municipal corporations. The government cannot impose any tax unless it is passed as a law.

Types of Taxes in India: -

Broadly we can classify the taxes in India into Two categories: -
1) Direct Taxes
2) Indirect Taxes
Direct Tax - As per the Indian tax system, direct taxes in India are the ones that are directly
levied on an individual or taxpayer’s income. The Central Board of Direct Taxes (CBDT)

1
(Indian Government, 2020)
2
(Indian Government, 2020)
overlook the direct taxes in India, and they cannot get transferred to any other individual or
legal entity.3

Different Types of Direct Taxes in India: -

1) Income Tax - Income tax is a type of tax that governments impose on income
generated by businesses and individuals within their jurisdiction. Income tax is used
to fund public services, pay government obligations, and provide goods for citizens.
2) Securities Transaction Tax - as defined under the Indian tax system, gets levied on
the stock market and securities trading. This tax is imposed on the price of the share
and the traded securities traded on the ISE (Indian Stock Exchange).
3) Wealth Tax - Wealth tax was a charge levied on the total or market value of personal
assets. Also known as capital tax or equity tax, wealth tax was imposed on the richer
sections.
4) Gift Tax - The Government introduced gift tax in April 1958 regulated by Gift Tax
Act, 1958 (The GTA) with an objective to impose taxes on giving and receiving gifts
under certain specific circumstances. Gifts in the form of cash, demand draft, bank
cheques or anything having a value were covered.
5) Estate Duty - a former death duty levied on property from 1889. It was replaced in
1975 by capital transfer tax and in 1986 by inheritance tax.
6) Expenditure Tax - Expenditure tax, tax levied on the total consumption expenditure
of an individual. It may be a proportional or a progressive tax; its advantage is that it
eliminates the supposed adverse effect of the personal income tax on investment and
saving incentives.
7) Fringe Benefit Tax - Fringe benefit tax (FBT) was a form of tax that companies paid
in lieu of benefits they offered their employees in addition to the compensation paid to
them. It was included by the Finance Act 2005 with effect from April 1, 2006.4
Indirect Tax - Taxes that get imposed on products and services when they are bought and
sold are called indirect taxes in India. The sellers of the service or products collect these
taxes under the Indian tax system. The tax gets levied as an addition to the original price of
the product or service, which increases their cost. Following are the different types of
indirect taxes in India5.
Different types of Indirect Taxes in India: -
1) Goods & Services Tax - Goods or Services Tax (GST) is a consumption tax imposed on
services and goods supply and has completely replaced the indirect taxes in India. The Indian
tax system stipulates that every stage of the goods production process and value-added
services is under the obligation to pay GST.
2) Securities Transaction Tax - Securities Transaction Tax (STT) is a tax payable in
India on the value of securities (excluding commodities and currency) transacted

3
(HDFC, 2020)
4
(Indian Government, 2020)
5
(HDFC, 2020)
 through a recognized stock exchange. As of 2016, it is 0.1% for delivery-based equity
trading.
3) Dividend Distribution Tax - The Dividend Distribution Tax is a tax levied on
dividends that a company pays to its shareholders out of its profits.
4) Property Tax - A tax levied directly on property.
5) Professional Tax - It is a tax on all kinds of professions, trades, and employment and
levied based on the income of such profession, trade and employment.
6) Entertainment Tax - Entertainment tax also sometimes referred to as "amusement
tax" is any tax levied on any form of commercial entertainment, such as movie
tickets, exhibitions, sport events and more.
7) Registration Fees, Stamp Duty, Transfer Tax - 1% of the total market or agreement
value of the property or Rs. 30,000 whichever is lesser. 5% of the total market value
of the property if it falls in Panchayet area. 6% of the total market value of the
property if it falls under municipal areas.
8) Education cess - Education cess is an additional levy on the basic tax liability.
Description: Governments resort to imposition of cess for meeting specific
expenditure.
9) Entry Tax - Entry Tax is a tax on the movement of goods from one state to another
imposed by the state governments in India. It is levied by the recipient state to protect
its tax base.
10) Road Tax and Toll Tax - Road tax is to be paid on a vehicle before it can be driven
on a public road6.

Constitutional Provisions Regarding Taxation in India: -

1) Article 256 - Only by the authority of law can taxes be levied, it states that – “Obligation
of States and the Union The executive power of every State shall be so exercised as to ensure
compliance with the laws made by Parliament and any existing laws which apply in that
State, and the executive power of the Union shall extend to the giving of such directions to a
State as may appear to the Government of India to be necessary for that purpose”
Case Laws - Tangkhul v. Simirei Shailei & Lord Krishna Sugar Mills v. UOI7

6
(Indian Government, 2020)
7
(Tangkhul v. Simirei Shailei & Lord Krishna Sugar Mills v. UOI, 1960)
2) Article 266 - Consolidated Funds and public accounts of India and of the States, money
can only be taken as per directions.

3) Article 268 – It states that – “Duties levied by the Union but collected and appropriated by
the States

(1) Such stamp duties and such duties of excise on medicinal and toilet preparations as are
mentioned in the Union List shall be levied by the Government of India but shall be collected

(a) in the case where such duties are leviable within any Union territory, by the Government
of India, and

(b) in other cases, by the States within which such duties are respectively leviable

(2) The proceeds in any financial year of any such duty leviable within any State shall not
form part of the Consolidated Fund of India, but shall be assigned to that State”
Case Laws - M/S. Kalpana Glass Fibre Pvt. Ltd. Maharashtra v. State of Orissa and Others8
& Gannon Dunkerley & Co. and others v. State of Rajasthan and others9

3) Article 269(A) – This article gives the power of the collection of the GST

4) Article 270 – This article gives the provision regarding distribution of tax levied among
Union and states. Case laws - T.M. Kanniyan v. I.T.O10

5) Article 271 – This article provides the power to the parliament to increase an decrease the
tax levied.

6) Article 273 – This grant is charged from the jute producing states such as assam and
orissa, it is upon the government for how long the charge will be collected.

7) Article 275 – This grant is sanctioned by the parliament to thise states which are inn dire
need. For example, a state suffering any natural calamity.

8) Article 276 – This article talks about the taxes levied by the state government.

9) Article 277 – Cess, fees, duty charge can continue to be levied. Case law - Hyderabad
Chemical and Pharmaceutical Works Ltd. v. State of Andhra Pradesh11

8
(M/S. Kalpana Glass Fibre Pvt. Ltd. Maharashtra v. State of Orissa and Others, 2012)
9
( Gannon Dunkerley & Co. and others v. State of Rajasthan and others, 994)
10
(T.M. Kanniyan v. I.T.O, 1968)
11
(Hyderabad Chemical and Pharmaceutical Works Ltd. v. State of Andhra Pradesh, 1964)
10) Article 279 - This article deals with the calculation of “net proceeds”11) Article 282 - It
is normally meant for special, temporary or ad hoc schemes and the power to grant sanctions
under it is not restricted. Case laws - Bhim Singh v. Union of India & Ors, MPLAD12
(Member of Parliament Local Area Development Scheme)

12) Article 286 – This article restricts the power of the state regarding Taxes.

13) Article 289 - State Governments are exempted from Union taxation as regards their
property and income but if there is any law made by the parliament in this regard then the
Union can impose the tax to such extent.

Tax related provisions: -

1. Article 301
2. Article 302
3. Article 303
4. Article 304

Article 366 – This article gives the definition of: -

 Goods
 Services
 Taxation
 State
 Taxes that are levied on the sale/purchase of goods
 Goods and service tax etc

Conclusion: -
India being the world biggest democracy and on top of that being a welfare state does affect
the taxation system. This is also a reason why the tax systemin India is so complicated. The
numbers cannot lie, Majority of the citizen of India does not give tax, as they think it is not
important. Filing a simple ITR (Income Tax Return) is also so complicated and after so long
time the BPL and illiterate public have now started using Banks. So, expecting from them to
pay the tax is simply not practical.
But let’s not dwell into the political scenario of tax collection and focusing on the provisions
present in our constitution we can say that the taxation system in India is the most complex
but also it is rightly drafted cater to the needs of citizens, and keeping in mind the idea of a
welfare state.
NOTE: -

12
(Bhim Singh vs U.O.I & Ors on 6 May, 2010, 2010)
It is a humble request to the faculty, to consider the definitions as a part of the research done, not
plagiarism. References have been given to any opinion or research mentioned in this report. It is also
a request from the faculty to consider the Articles language, as the author have tried to be
straightforward and not to provide any interpretation, so the same must not be considered as
plagiarism.
Bibliography
Gannon Dunkerley & Co. and others v. State of Rajasthan and others, 1994 (1) WLC 554, 1994 (1)
WLN 652 (Rajasthan High Court 994).

Bhim Singh vs U.O.I & Ors on 6 May, 2010, WRIT PETITION (CIVIL) NO.404 OF 1999 (Supreme Court
of India May 2010).

HDFC. (2020). HDFC Tax . Retrieved from HDFC tax : www.hdfc.com

Hyderabad Chemical and Pharmaceutical Works Ltd. v. State of Andhra Pradesh, AIR 1964 SC 1870,
1964 7 SCR 376 (Supreme court of India March 1964).

Indian Government. (2020). Income tax India. Retrieved from IncometaxIndia:

www.incometaxindia.gov.in

M/S. Kalpana Glass Fibre Pvt. Ltd. Maharashtra v. State of Orissa and Others, Writ Petition (Civil) No.
4934 of 2008 | 22-08-2012 (High Court of Orissa 2012).

T.M. Kanniyan v. I.T.O, 1968 AIR 637, 1968 SCR (2) 103 (Supreme court of India October 1968).

Tangkhul v. Simirei Shailei & Lord Krishna Sugar Mills v. UOI, 1959 AIR 1124, 1960 SCR (1) 226
(Supreme Court 1960).