Parliament's competence over gift-tax on agricultural land was upheld, as the levy was treated as a tax on the gift transaction.

Parliament had legislative competence to enact the Gift-tax Act as applied to gifts of agricultural land because the levy was treated as a tax on the transaction of gift, not a tax on land itself. The power to legislate on agricultural land or on taxes on lands and buildings did not extend to imposing gift-tax on transfers of such land, and taxation was treated as a distinct field from the substantive subject. The measure therefore did not fall within Entry 49 of List II, and Parliament's authority was upheld under the residuary power in Article 248 and Entry 97 of List I. The challenge to validity failed.

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Issues: Whether Parliament had legislative competence to enact the Gift-tax Act insofar as it applied to gifts of agricultural land and whether such levy was covered by the State List.

Analysis: The levy was held to be a tax on the transaction of gift and not a tax on land as such. The power to legislate on transfer and alienation of agricultural land or on taxes on lands and buildings did not, by itself, include the power to impose a gift-tax on such transactions. Taxation was treated as a distinct field from the main subject of legislation, and the power to tax gifts of land could not be read as ancillary to the power to tax land and buildings. On that basis, the Act was found not to fall within Entry 49 of List II. The Court held that Parliament's competence could be traced to the residuary legislative power under Article 248 and Entry 97 of List I.

Conclusion: The Gift-tax Act was within Parliament's legislative competence and the challenge to its validity failed.

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