AI Drafter 
TaxTMI 
TaxTMI 
1959 (9) TMI 64
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.... Government in March, 1956. His proposal was that a single integrated tax should be imposed on gifts of all kinds (including under this term accession to property through bequest and inheritance), which should replace the present estate duty, as well as to bring into charge other gratuitous transfers of property which are not now taxable. The suggestion of Prof. Kaldor to abolish estate duty with the introduction of gift tax was evidently not accepted and today the Estate Duty Act and the Gift Tax Act exist side by side. The gift tax is a well known system of tax obtaining in several countries of the world such as the United States of America, Canada, Australia, the Netherlands and New Zealand. Generally, the purpose of the Gift Tax Act is to prevent the avoidance of estate duty and income-tax by reaching transactions which would otherwise escape taxation. In order to evade estate duty or tax on higher incomes, the tendency of the people will be to make gifts inter vivos and thereby split up large fortunes which will result in the diminution of surtaxes etc. The gift tax has been resorted to as a safeguard against these things. The charging section in the Act is section 3. That ....
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....ny limitation on the subjects included in the item. It should not be understood in a narrow or limited sense but should be interpreted as extending to all ancillary or subsidiary matters which can reasonably be said to be comprehended in it. The learned counsel has drawn our attention to United Provinces v. Atiqa Begum [1941] 1 M.L.J. 65 at 77 & 78 (F.C. ) Suppl.. The passage called in aid on behalf of the petitioners occurs at page 77: "The subjects dealt within the three Legislative Lists are not always set out with scientific definition. It would be practically impossible for example to define each item in the Provincial List in such a way as to make it exclusive of every other item in that List, and Parliament seems to have been content to take a number of comprehensive categories and to describe each of them by a word of broad and general import. In the case of some of these categories, such as 'local government', 'education', 'water', 'agriculture' and 'land', the general word is amplified and explained by a number of examples or illustrations, some of which would probably on any construction have been held to fall under the....
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....nstance, item 30 of List I is carriage of passengers and goods by railway, sea or air or by national waterways in mechanically propelled vessels, while entry 89 empowers Parliament to make laws levying terminal taxes on goods or passengers, Carried by railway, sea or air. This entry also includes taxes on railway fares and freights while entry 22 is railways. If really entries 22 and 30 imply a power to tax in regard to those topics, item 89 is redundant and serves no useful purpose. A comparison of items 41 and 83 leads to the same result. A careful analysis of the entries of that List establishes that the Constitution has treated the two powers separately for purposes of legislative competence. Similarly, in List II items 1 to 44 constitute one group containing topics on which the States could make laws, while entries 45 to 63 deal with taxes. The intent of the Constituent Assembly in this behalf could also be gathered from article 248(1) and (2) and entry 97 of List I. Thus, the distinction between the two sets of entries is a well-marked one and has been brought out lucidly, if we may say so with respect, by the Supreme Court in Sundararamier & Co. v. State of Andhra Pradesh....
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.... itself with an altogether different head of legislation, that is, tax on the ownership of property. The object of this item is the levy of a tax on the ownership of property as such, while gift tax is a tax on a particular use of the property or the exercise of a single power subsidiary to ownership. The owners of a property may put it to several uses. A gift inter vivos is one of the several rights a person may have in a property. This form of tax attaches itself to a transfer of property, while the tax envisaged in entry 49 is incidental to the ownership irrespective of any use to which it may be put. There is authority for this opinion of ours in Bromley v. McCaughn [1929] 280 U.S. 124. There, the question was whether a federal tax imposed upon transfers by gift violated constitutional provisions requiring the apportionment of direct taxes and uniformity in duties. Imposed and excises throughout the United States and prohibited the taking of property without due process. This was answered in the negative by the Supreme Court of the United States of America in the view that it was not a tax upon property but it was a tax imposed on the exercise of a single one of the powers i....
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....res to make laws imposing cesses on goods other than salt. In understanding that ruling, we have to bear in mind section 140 of the Government of Indian Act, which says: "Duties on salt, Federal duties of excise and export duties shall be levied and collected by the Federation, but, if an Act of the Federal Legislature so provides, there shall be paid out of the revenues of the Federation to the Provinces and to the Federated States, if any, to which the Act imposing the duty extends, sums equivalent to the whole or any part of the net proceeds of that duty and those sums shall be distributed among the Provinces and those States in accordance with such principles of distribution as may be formulated by the Act." It was because of the expressions mentioned in the section, namely, "duties on salt" and "federal duties of excise and export duties" that their Lordships though that duties on salt were regarded as a category by themselves not comprised under the heading "excise and export duties". They also took into account the fact that unlike other goods, which may form the subject matter of excise and export duties, salt was in sense State control. We do not think that the....
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....all include the power of making any law imposing a tax not mentioned in either of those Lists. It is plain that the constitution makers were anxious to invest Parliament with exclusive power with regard to any subject which was not within the intendment of any of the Lists. The argument of the counsel for the petitioners that at the time when the Constitution was framed, gift tax would not have been within the contemplation of the constitution makers is devoid of force. It is precisely to cover cases, which were not within the contemplation of the Constituent Assembly, that this provision was conceived to enable Parliament to meet any contingency that might arise in future. We cannot also give effect to the argument that gift tax would come within the purview of entry 47 of List II. It was contended that the words "succession to agricultural land" in that entry would take in a gift of agricultural land because succession to property may be either by inheritance or by transfer inter vivos. This argument is sought to be sustained on Santhamma v. Neelamma A.L.R. 1956 Mad. 642. In that case, the validity of certain provisions of the Madras Aliyasanthana Act, 1949, was challenged on ....
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.... 12 is helpful to the petitioners. The passage, which is relied upon, is contained at page 78: "It is equally important to remember that neither in their ordinary grammatical significance nor by a long continued use in a technical sense have the words 'devolution' and 'succession' acquired a connotation that would preclude their application to described the operation of the rule of survivorship a above explained. Then text writers and Judges have used one or the other of these terms to include the accession of right which takes place on the death of one of the members of a Mitakshara joint family. Many enactments of Parliament and of the Indian Legislature have used the words 'inheritance' and 'succession' in juxtaposition, justifying the inference that succession is either another category from or a wider category than 'inheritance'." It appears from these remarks that it is only when accession of right takes place on the death of a person, the expression "devolution" or "succession" would be appropriate. These words imply the passing of property to another on the death of a person and can have no application to transfers inter v....
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....gricultural land. The question of occupied field is absolutely irrelevant in the context of the present enquiry since we are concerned here with Lists I and II and not with the Concurrent List. Further, we have to judge the vires of the Act with reference to the applicability of the entries in the respective Lists. If it does not fall within the ambit of the State List, it would be saved by the residuary entry and its validity would be unaffected notwithstanding that a State legislative measure contains a similar provision. If, on the other hand, it comes within the purview of any of the entries in List II, it would not be protected by entry 97 irrespective of the non-existence of a State enactment for a similar purpose. Quite apart from that, section 63 does not touch upon tax on gift of property. Sub-section (2), which is relevant, merely says that a duty shall also be levied in every village on certain transfers of property in accordance with the provisions of section 67. Section 67 runs as follows: "(1). The duty on transfers of property shall be levied: (a) in the form of a surcharge on the duty imposed by the Indian Stamp Act, 1899, as force for the time ....
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.... restrospective. It is never stale to say that a court is concerned with the bounds of legal power and not with the bounds of wisdom in its exercise by the legislature. Hence, this submission is wholly untenable. On this discussion, it follows that the Gift Tax Act is not open to challenge on any ground and is intra vires even in so far as it affected transfer of agricultural land. There remains the question whether it is permissible for the Gift Tax Officer to aggregate all the gifts made by an assessee during a relevant year for the purpose of assessment. The point sought to be made was that each individual gift should form the basis of assessment and that the value of all the gifts made by an assessee could not be added so as to increase the rate of levy specified in the schedule in the absence of any provision authorising the aggregation of the gifts made on different dates during the whole year. It is submitted that whenever the Parliament intended that such an aggregation should take place, it employed language conferring specifically such a power and as supporting it our attention is drawn to section 4(1) of the Indian Income-tax Act and section 34 of the Estate Duty Act.....