INTRODUCTION

• The power to tax is an inherent sovereign

power of a State to collect a contribution of
money or other property from its citizens and
the inhabitants of its territory for defraying its
general expenditure.
• Its strategic position in the modern welfare
State is such that without it no government
can adequately discharge its manifold duties.
• Its constitutional significance requires
legitimate popular sanction for its collection.
These are some of the reasons why the term '
tax‘ has always required a rigid definition at
various levels.
• The essential nature of tax lies in its being a
burden or charge imposed by the legislative
power on persons or property for public
purposes.
• Taxation proceeds on the theory that the very
existence of the government is a necessity and
the tax payer is supposed to receive his just
compensation in the protection which the
government affords to life, liberty and property.
• Everything which is subject to the sovereign
power is a proper object of taxation. From this
statement it follows that tax laws generally
can have no extra territorial operation and
that the person or property should be within
the jurisdiction to attract the liability to tax.
• Art. 265 of the Constitution provides that no tax
shall be levied or collected except by authority of
law. But the word ‘law’ in this statement
comprehend the power of the President of India
and Governors of the states, to make law by issuing
Ordinances.
• The executive as well as the judiciary are powerless
to impose any tax. The tax may be in money or in
kind.
• A system of levy of paddy from agriculturists
during the harvest season may be viewed as a
form of tax on agriculturists if proper
conditions already stated are fulfilled. If
however the state pays the price of the paddy
it collects from the concerned people, then
certainly it will lose the character of tax and
will partake the character of acquisition
• The conscription of men for service in armed
forces and a system providing for compulsory
public labor by citizens may be viewed as instances
of taxes in kind.
• But all compulsory payments made in favour of
the state are not taxes and the test in such cases
to be applied is whether such payment was made
in return for some consideration flowing from the
state and if so, such payments cannot be viewed
as taxes.
• In India since the Constitution provides
elaborately for most of the conceivable
situations that may arise in the administration
of the country, it has been argued that this
doctrine of police power need not be
imported into the Indian Constitution.
• This statement only means that in India apart from
the grounds mentioned in Art.19 sub-clauses(2) to
(6) no other restriction can be imposed on those
fundamental rights. Even though police power need
not be specifically conferred, there is one such
example in Art.31(5) (b)(ii). which expressly provides
that Art.31 (2).providing for the prerequisites of a
valid acquisition of property, would not apply to a
law made for the promotion of public health or the
prevention of danger to life or property.
• Generally speaking, the objects of these two
powers, namely, taxing power and police
power, being different, one being to collect
revenue to defray the expenses of the
government, and the other being to promote
the general welfare of the people, it would not
be ordinarily difficult to designate the exercise
of a power either as the power of taxation or
police power.
• In a federal constitution, as is the case in India. since there
is a distribution of powers between the federal and state
governments, the question has sometimes been profile
whether the federal or state legislature by exercise of its
taxation power ‘invade any region of legislation, although
it is impliedly forbidden to enter it, and this by the simple
process of making the liability to the tax depend upon
matters within these regions”. There are decisions from
other in which taxes have been struck down on the
ground that such taxes invaded a legislative field
demarcated exclusively for the other by the constitution
• But the correct approach seems to be to treat
such laws only as legitimate exercises of
taxation power. To treat a taxation law as
invalid, because it gives some advantage or tax
exemption if certain pertain to an area in
which another government is powerful to an
area in which another government is powerful
to regulate, is a needless restriction on the
power of taxation
• Art.31(2) of the Constitution of India imposes two conditions
on the exercise of the power of eminent domain, namely,
that it should be for a public purpose and that an amount
should be given to the owner of the property
• Art.31(5) (b) (ii) excluded taxation laws from the operation of
Art.31(2) , In the case of taxation, the compensation is not
direct, but only theoretical as the person taxed can
participate in the public benefit accruing from the
expenditure of the money. Both taxation and power of
eminent domain are legislative powers exercisable for public
Purposes.