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of <h1>Supreme Court Clarifies Legislative Competence on Extra-Territorial Laws</h1> <h3>GVK INDS. LTD. & ANR. Versus THE INCOME TAX OFFICER & ANR.</h3> GVK INDS. LTD. & ANR. Versus THE INCOME TAX OFFICER & ANR. - [2011] 39 VST 114 (SC), [2011] 332 ITR 130 (SC), 2011 (3) SCR 366, 2011 (4) SCC 36, 2011 (3) ... Issues Involved:1. Legislative competence of Parliament regarding extra-territorial aspects.2. Constitutional limitations on Parliament's power to legislate for territories outside India.3. Interpretation of Article 245 and its implications on legislative powers.4. Validity of Section 9(1)(vii)(b) of the Income-tax Act, 1961.Detailed Analysis:1. Legislative Competence of Parliament Regarding Extra-Territorial Aspects:The judgment addresses whether Parliament's legislative powers under Article 245 include competence over aspects or causes outside India. The court recognizes that Parliament can legislate on matters within India, but it also considers whether this extends to extra-territorial aspects that affect India. The judgment discusses various interpretations of the territorial nexus requirement, ultimately concluding that Parliament may legislate on extra-territorial matters if they have a real or expected impact on India.2. Constitutional Limitations on Parliament's Power to Legislate for Territories Outside India:The court examines whether Parliament can legislate 'for' any territory outside India. It concludes that Parliament's legislative competence is limited to the territory of India or extra-territorial aspects that have a nexus with India. The court rejects the notion that Parliament can legislate for foreign territories without any connection to India, emphasizing that such legislation must be for the benefit of India and its inhabitants.3. Interpretation of Article 245 and Its Implications on Legislative Powers:Article 245 is analyzed to determine the scope of Parliament's legislative powers. The court distinguishes between the acts of making laws and their extra-territorial operation. It concludes that while Parliament can make laws with extra-territorial operation, these laws must still have a nexus with India. The court also rejects the argument that clause (2) of Article 245 provides an independent source of legislative power, emphasizing that it only prevents invalidation of laws on the ground of extra-territorial operation.4. Validity of Section 9(1)(vii)(b) of the Income-tax Act, 1961:The appellant challenged the constitutional validity of Section 9(1)(vii)(b) of the Income-tax Act, 1961, on the grounds of legislative competence and violation of Article 14. The High Court upheld the validity of this section. The Supreme Court, while addressing the broader constitutional issues, did not specifically invalidate this provision but focused on the legislative competence of Parliament concerning extra-territorial aspects.Conclusion:The court concludes that Parliament can legislate on extra-territorial aspects if they have a real or expected impact on India. However, it cannot legislate 'for' foreign territories without any connection to India. The judgment emphasizes the necessity of a nexus with India for any extra-territorial legislation and clarifies the interpretation of Article 245 in this context. The appeal is to be listed before an appropriate bench for disposal.
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