DHARMASHASTRA NATIONAL

LAW UNIVERSITY

Constitutional Law
CASE ANALYSIS:
Union Of India vs H. S. Dhillon

Submitted by~
SHIVANSH PARIHAR
BAL/121/18
Submitted to~
Mr. Ashit Kumar Srivastava
Ms. Srishti Chaturvedi
Assistant Professor of Law
 TABLE OF CONTENT

ACKNOWLEDGEMENT............................................................................................................3

FACTS OF THE CASE.................................................................................................................4

DECISION OF THE SUPREME COURT..................................................................................6

1. If it is not, is it beyond the legislative competence of Parliament?....................................6

2. Whether the impugned Act is a law with respect to Entry 49 list II ?...........................7

CONCLUSION..............................................................................................................................8
 ACKNOWLEDGEMENT

I would like to thank the university and then our Hon’ble Vice Chancellor Prof. Balraj
Chauhan for giving me this great opportunity to work on a topic like this which was
enlightening and of considerable relevance.

I would also like to thank Mr. Ashit Kumar Srivastava & Ms. Srishti Chaturvedi Asst.
Professor of Law who helped me the most in completing this project through all the
consultations given by them. The consultations were of utmost help.
 FACTS OF THE CASE

This case involved the definition of “net wealth” in the Wealth Tax Act 1957 a Central Law as
amended by the Finance Act 1969. The amended definition of ‘net wealth’ included agricultural
land in assets for the purpose of calculating tax on capital value of the net wealth.

The relevant entries are:

Entry 86 List I ‘taxes on capital value of assets, exclusive of agricultural land’.

Entry 97 List I ‘any other matter not included in List II or List III’.

Entry 49 List II ‘taxes on lands and buildings’.

Article 248 of Indian Constitution: -

(1) Parliament has exclusive power to make any law with respect to any matter not enumerated
in Concurrent List or State List.

(2) Such power shall include the power of making any law imposing tax not mentioned in either
of those lists.

It was argued that the object and effect of exclusion of agricultural land from entry 86 List I was
to take agricultural land out of the ambit of Entry 97 List I and Article 248 and therefore Wealth
Tax Act as amended by Finance Act including agricultural land for calculating tax on capital
value of assets was a law under Entry 49 List II.
Argument of M.C Setalvad for Government of India

The impugned Act is not a law with respect to Entry 49 List II and if this is so, it must
necessarily fall within the legislative competence of Parliament under Entry 97 List I read with
Article 248 or under Entry 86 List I read with Entry 97 List I. The words ‘exclusive of
agricultural land’ in Entry 86 L I could not cut down the scope of Entry 97 List I or Article 248.

He argued that the proper way of testing the validity of a Central law was first to see whether the
Central law was with respect to a matter or tax mentioned in List II, if it was not, no other
question would arise and Central law will be valid.

Argument of Palkiwala for the Respondents

It was the scheme of the Constitution to give States exclusive power to legislate in respect of
agricultural land, income on agricultural land and taxes thereon. The object and effect of
excluding agricultural land from the scope of Entry 86 of List- I was take it out of the ambit of
Entry 97of List- I and Article 248 and therefore the impugned law was a law with respect to
Entry 49 List- II.
 DECISION OF THE SUPREME COURT

The best way of dealing with the question of validity of the Impugned Central Law to ask two
question: -

1. If it is not, is it beyond the legislative competence of Parliament?

It is unthinkable that the Constitution makers had withheld certain matters or taxes beyond the
legislative competence of the legislatures of this country. “If on proper examination of Entry 49
List II read in the light of Entry 86 List I, it is held that tax on the capital value of agricultural
land is not included with in Entry 49 List II or in Entry 86 I it would be arbitrary to say that it
does not fall under Entry 97 I read with Article 97 List I. We do not read ‘any other matter in
Entry 97 List I to mean that it has any reference to topics excluded in Entries 1-96.

The words ‘any other matter’ have reference to matters on which Parliament has been given
power to legislate by the enumerated entries 1-96. Accordingly, we do not interpret the words
‘any other matter’ to mean a topic mentioned by way of exclusion.”

On the terms of Entry 97 List I read with Article 248 the only question to be asked is: Is the
matter sought to be legislated or included in List II or List Iii or is the tax sought to be levied
mentioned in List II or List III. No question has to be asked about List I. If the answer is in the
negative, then it follows that Parliament has the power to make laws with respect to that matter
or tax. It must be remembered that the function of the lists is not to confer powers; they merely
demarcate the legislative fields. The Court explained that taxing power has been distributed
between the Centre and the States and there no entry in the Concurrent List dealing with taxes
2. Whether the impugned Act is a law with respect to Entry 49 list II ?

The tax under Entry 49 of List- II is not a personal tax but a tax on property whereas wealth tax
is a personal tax. Therefore, the impugned Act was not a law with respect to Entry 49 List II.
Parliament had not encroached upon a legislative field assigned exclusively to State Legislatures.

Hence the impugned legislation is valid either under entry 86 List I read with Entry 97 List or
under Entry 97 List- I standing by itself. The Supreme Court held that the Wealth Tax Act did
not fall within either Entry 86 of List I or Entry 49 List II. If the impugned Act was not a law
under entry 49 List-II the Central Act was valid.

However even assuming that that the Wealth Tax Act as originally enacted was a legislation
under Entry 86 List I nothing in the Constitution prevented Parliament from combining its
powers under Entry 86 List I with its powers under Entry 97 List I. There was no principle which
prevented Parliament from relying on the powers specified under entries 1-96 and supplementing
them with powers under Entry 97 List I and Article 248.

Parliament could include agricultural land in the capital value of assets under Entry 86 List I but
it could include it in the exercise of its power under Entry 97 List I because agricultural land was
not a matter included in any of the entries 1-96 of List I.

The Court clarified that even if there were doubts in the acceptance of this interpretation they
were removed by Article 248 which gave exclusive power to Parliament to make a law on any
matter not enumerated in List II or List III. As tax on capital value of assets was not included I
Lists II or List III, Parliament was competent to enact a law on that subject.
 CONCLUSION

“If a Central Act is challenged as being beyond the legislative competence of Parliament it is
enough to enquire if is a law with respect to matters or taxes in List II. If is not, no further
question arises”

Comment: The interpretation given by the Supreme Court in H.S. Dhillon case on scope of
residuary power of Parliament can be appreciated so as to avoid any vacuum in the area of
legislative powers as would have happened had the Court adopted a restrictive view of the
residuary power of Parliament. This interpretation gives a new dimension to power of the Centre.