Appeals Nos
664 to 669 of 1967
Appeals from the judgment and order dated March 22 1962 July 23 1962 July 24 1962 July 12 1963 and August 14 1963 in Writ Petitions Nos
1077 of 1959 19 and 739 of 1960 157 of 1961 970 of 1962 and 594 of 1963
Jagadish Swarup Solicitor General section K Aiyar and R N Sachthey for the appellants in all the appeals
section V Gupte A K Varma J B Dadachanji 0
C Mathur and Ravinder Narain for the respondent
in C A Nos 664 and 668 of 1967
O P Rana for the intervener for the State of UP M R K Pillai for the intervener for the State of Kerala
B Sen Santosh Chatterjee and G section Chatterjee for Sukumar Bose for the State of West Bengal
section Govind Swaminathan Advocate General Tamil Nadu A V Rangam and M Subramaniam for the State of Tamil Nadu
Lal Narayan Sinha Advocate General Bihar D P Singh nad V J Francis for the intervener for the State of Bihar
K A Chitaley Advocate General State of Madhya Pradesh MN Shroff and I N Shroff for the intervener for the State of Madhya Pradesh
E section Venkataramiah Advocate General Mysore and section P Nayar for the intervener for the State of Mysore
J C Medhi Advocate General Assam and Naunit Lal for the intervener for the State of Assam
The Judgment of the Court was delivered by Hidayatullah CJ
These six appeals by certificate under article 1321 of the Constitution are filed against the decision of the High Court of Mysore declaring that Parliament had no power to legislate with respect to taxes on gift of lands and buildings
The High Court passed a detailed judgment on two of the petitions by which the competence of Parliament was challenged and followed its own decision in the other four cases
It is not necessary to give the facts of the six petitions in the High Court
As illustrative of the facts involved we may mention on WP No 1077 of 1959
In that case a certain D H Nazareth owner of a coffee plantation 197 made a gift by registered deed January 22 1958 of a coffee plantation and other properties in favour of his four sons
The market value of the property was Rs 374080 and the coffee plantation accounted for Rs 324700
Gift tax of Rs 35612 was demanded
If the coffee _plantation was left out of consideration the tax was liable to be reduced by Rs 34036
The authority to charge gift tax on the gift of the coffee plantation was challenged and the right of Parliament to impose a gift tax on lands and buildings questioned
In some of the other cases agricultural or paddy lands or buildings were the subjects of gifts and they were similarly taxed and the tax questioned
The High Court held that entry 49 of the State List read with entry 18 of the same list reserved the power to tax lands and buildings to the Legislature of the States and Parliament could not therefore use the residuary power conferred by entry 97 of the Union list
This decision is challenged before us
The Gift Tax Act was passed in 1958 and subjected gifts made in the year ending March 31 1958 to tax
The Act contained the usual exempted limits and other exemptions
We need not concern ourselves with them here
We are only concerned with the validity of parliamentary legislation imposing gift tax at all
To consider the objection to the Gift Tax Act which was sus tained by the High Court a few general principles may be borne in mind
Under article 245 Parliament makes laws for the whole or any part of the territory of India and the Legislatures of the States for the whole or part of their respective States
The subject matter of laws are set out in three lists in the Seventh Schedule
List I usually referred to as the Union List enumerates topics of legislation in respect to which Parliament has exclusive power to make laws and List II usually referred to as the State List enumerates topics of legislation in respect to which the State Legislatures have exclusive power to make laws
List III usually referred to as the Concurrent List contains topics in respect to which both Parliament and Legislature of a State have power to make laws
Inconsistency between laws made by Parliament and those made by the Legislatures of the State both acting under the Concurrent List is resolved by making Parliamentary law to prevail over the law made by the State Legislature
So long as the Parliamentary law continues the State law remains inoperative but becomes operative once the Parliamentary law throwing it into shadow is removed
Then there is the declaration in article 248 of the residuary powers of legislation
Parliament has exclusive power to make any law in respect to any matter not enumerated in the Concurrent List or State List and this power includes the power of mak ing any law imposing a tax not mentioned in either of those lists
198 For this purpose and to avoid any doubts an entry has also been included in the Union List to the following effect 97
Any other matter not enumerated in List II or List III including any tax not mentioned in either of those lists
It will therefore be seen that the sovereignty of Parliament and the Legislatures is a sovereignty of enumerated entries but within the ambit of an entry the exercise of power is as plenary as any legislature can possess subject of course to the limitations arising from the Fundamental Rights
The entries themselves do not follow any logical classification or dichotomy
As was said in State of Rajasthan vs section Chawla and another1 the entries in the list must be regarded as enumeratio simplex of broad categories
Since they are likely to overlap occasionally it is usual to examine the pith and substance of legislation with a view to determining to which entry they can be substantially related a slight connection with another entry in another list notwithstanding
Therefore to find out whether a piece of legislation falls within any entry its true nature and character must be in respect to that particular entry
The entries must of course receive a large and liberal interpretation because the few words of the entry are intended to confer vast and plenary _powers
If however no entry in any of the three lists covers it then it must be regarded as a matter not enumerated in any of the three lists
Then it belongs exclusively to Parliament under entry 97 of the Union List as a topic of legislation
The Gift Tax Act was enacted by Parliament and it is admit ted that no entry in the Union List or the Concurrent List mentions such a tax
Therefore Parliament purported to use its powers derived from entry 97 of the Union List read with article 248 of the Constitution
This power admittedly could not be invoked if the subject of taxes on gifts could be said to be comprehended in any entry in the State List
The High Court has accepted the contention of the tax payers that it is so comprehended in entries 18 and 49 of the State List
Those entries read 18
Land that is to say rights in or over land land tenures including the relation of landlord and tenant and the collection of rents transfer and alienation of agricultural land land improvement and agricultural loans colonization 49
Taxes on lands and buildings
 The argument is that by entry 18 land  of all description is made subject to legislation in the States and by entry 49 taxes of 1 1959 Supp 1 SCR 904
199 whatever description on lands in that large sense and buildings generally fall also in the jurisdiction of the State
Reference is made to entries 45 46 47 and 48 of the State List in which certain taxes are to be imposed on land and agricultural land or income from agriculture exclusively by the States in contrast with entries 82 86 87 and 88 where the taxes are imposed on properties other than agricultural land or income from agriculture
It is submitted therefore that the general scheme of division of taxing and other entries by which land particularly agricultural land and income therefrom is reserved for the States shows that taxes on lands and buildings read liberally must also cover taxes in respect of gifts of land particularly agricultural land and buildings
If the entry so read can be reasonably said to include the tax then there can be no question of recourse to the residuary powers of Parliament
The matter is not res integra and however attractive the argument it cannot be accepted
Many High Courts in India have considered this matter before the Supreme Court decided it
The Mysore view was not followed in section Dhandapani vs Addl
Gift Tax Officer Cuddalore1 Madras High Court Shyam Sunder vs Gift Tax Officer2 disapproved on another point in the Supreme Court
A contrary view was earlier also expressed in Jupadi Sesharatnam vs Gift Tax Officer Palacole3 Andhra Pradesh High Court and Joseph vs Gift Tax Officer 4 Kerala High Court
In fact the judgment under appeal stands alone
The subject of entry 49 of the State List in relation to imposition of Wealth Tax came up for consideration in Sudhir Chandra Nawn vs Wealth Tax Officer Calcutta  ors5 and the view of the High Court on the construction of this entry was affirmed
Although the judgment  under appeal was not referred to expressly the result is that it must be taken to be impliedly overruled
In view of the decision of this Court it is not necessary to deal with the matter except briefly
The Constitution divides the topics of legislation into three broad categories  a entries enabling laws to be made b entries enabling taxes to be imposed and c entries enabling fees and stamp duties to be collected
It is not intended that every entry gives a right to levy a tax
The taxes are separately mentioned and in fact contain the whole of the power of taxation
Unless a tax is specifically mentioned it cannot be imposed except by Parliament in the exercise of its residuary powers already mentioned
Therefore entry 18 of the State List does not confer additional power 1 3 5 2 AIR 1967 All 19
4 200 of taxation
At the most fees can be levied in respect of the items mentioned in that entry vide entry 66 of the same list
Nor is it possible to read a clear cut division of agricultural land in favour of the States although the intention is to put land in most of its aspects in the State List But however wide that entry it cannot still authorise a tax not expressly mentioned
Therefore either the pith and substance of the Gift Tax Act falls within entry 49 of State List or it does not
If it does then Parliament will have no power to levy the tax even under the residuary powers
If it does not then Parliament must undoubtedly possess that power under article 248 and entry 97 of the Union List
The pith and substance of Gift Tax Act is to place the tax on the gift of property which may include land and buildings
It is not a tax imposed directly upon lands and buildings but is a tax upon the value of the total gifts made in a year which is above the exempted limit
There is no tax upon lands or buildings as units of taxation
Indeed the lands and buildings are valued to find out the total amount of the gift and what is taxed is the gift
The value of the lands and buildings is only the measure of the value of the gift
A gift tax is thus not a tax on lands and buildings as such which is a tax resting upon general ownership of lands and buildings but is a levy upon a particular use which is transmission of title by gift
The two are not the same thing and the incidence of the tax is not the same
Since entry 49 of the State List contemplates a tax directly levied by reason of the general ownership of lands and buildings it cannot include the gift tax as levied by Parliament
There being no other entry which covers a gift tax the residuary powers of Parliament could be exercised to enact a law
The appeals must therefore be allowed but there shall be no order about costs throughout
The appeal 66667 however abates as the sole respondent died
VPS Appeals allowed


Summary:
Gift tax was levied under the Gift Tax Act 1958 on gifts of coffee plantations paddy and other agricultural lands and buildings made by the respondents
The Gift Tax Act was enacted by Parliament but there is no entry in the Union or Concurrent Lists mentioning such a tax
The High Court held that Parliament was not competent to enact a law impos ing a gift tax on lands and buildings because entries 18 and 49 of the State List reserved the power to State Legislatures
On appeal to this Court
HELD  The Constitution divides the topics of legislation into three broad categories  a entRies enabling laws to be made b entries enabling taxes to be imposed and c entries enabling fees and stamp duties to be collected
The taxes are separately mentioned and contain the whole of the power of taxation except entry 97 of the Union List under which Parliament ha  exclusive power to make a law in respect of any matter not enumerated in the Concurrent or State Lists and the power includes the power of making a law imposing a tax not mentioned in either of the Lists
199 G H Entry 18 of the State List dealing with land  though very wide does not therefore confer any power of taxation and cannot authorise a tax not expressly mentioned199 H Entry 49 of the State List contemplates a tax directly levied bY reason of the general ownership of lands and buildings
But the pith and substance of the Gift Tax Actis to place the tax on the gift of property which may include land and buildings
It is not a tax imposed directly upon lands and buildings but is a tax upon the value of the total gifts made in a year which is above the exempted limit
The lands and buildings are valued only as a measure of the value of the gift and what is taxed is the gift
A gift tax is thus not a tax on lands and buildings as such but is a levy upon a particular use namely the transmission of title by gift
200 A E There being no other entry in the State List which might cover a gift tax the residuary powers of Parliament under article 248 and entry 97 of the Union List could be exercised by Parliament to enact the law
200 E F Sudhir Chandra Nawn vs Wealth Tax Officer Calcutta  Ors followed
section Dhandapani vs Addl
Gift Tax Officer Cuddalore  Shyam Sunder vs Gift Tax Officer AIR 1967 All 19 Jupadi Sesharatnam vs Gift Tax officer Palacole and Joseph vs Gift Tax Officer  approved