Case: T.M. Kanniyan Vs. Income Tax Officer, Pondicherry &amp; Another

1. In all these writ petitions, the petitioners challenge the vires of the Taxation Laws (Extension to Union Territories) Regulation No. 3 of 1963. The contention is that the President had no power to promulgate the Regulation under Article 240 of the Constitution. On August 16, 1982, Pondicherry became a Union Territory. On December 5, 1962, Parliament enacted the Pondicherry Administration Act 1962 (Act No. 49 of 1962). Section 4 (1) of this Act provided that all laws in force immediately before August 19, 1962 would continue to be in force in Pondicherry until amended or repealed by a competent legislature or other competent authority. Section 4 (2) empowered the Central Government to make necessary adaptations and modifications for the purpose of facilitating the application of any such law in relation to the administration of Pondicherry and bringing the provisions of any such law into accord with the provisions of the Constitution. Section 7 provided that all taxes, duties, cesses and fees which immediately before August 19 1962 were being lawfully levied would continue to be levied In Pondicherry and to be applied for the same purposes, until other provision was made by a competent legislature or other competent authority. After the passing of this Act, the petitioners continued to be subject to the existing French laws relating to income-tax. On March 30, 1963, the President in the exercise of the powers conferred on him by Article 240 of the Constitution promulgated the impugned Regulation No. 3 of 1963. The Regulation extended certain Indian Acts relating to taxation to the Union mentioned therein. Section 3 (2) of the Regulation extendedthe Income-tax Act, 1961, subject to the modify dons mentioned in Part II of the Schedule, to Pondicherry as from April 1,1963. Section 4 (1) provided that any law in force in Pondicherry corresponding tothe Income-tax Act, 1961 would stand repealed on April 1, 1963. The petitioners carry on business at Pondicherry arid are being assessed to income-tax under the Income-tax Act 1961. They have filed the present writ petitions asking for a declaration thatthe Income-tax Act, 1961, was not legally extended to Pondicherry and a direction prohibiting the respondents from implementing that Act in relation to Pondicherry.

Court's reasoning:
Article 240 of the Constitution confers on the President a general power of making regulations for the peace, progress and good government of the specified Union territories.In exercise of this power, the President may make a regulation repealing or amending any Act made by Parliament or any existing law which is for the time being applicable to the Union territory. The regulation when promulgated by the President has the same force and effect as an Act of Parliament which applies to that territory. The President can thus make regulations on all subjects on which Parliament can make laws for the territoryThere is no distribution of legislative power with respect to Union territories. That is why Parliament is given power by Article 248 (4) to legislate even with respect to matters enumerated in the State list If tee inclusive definition of "State" in Section 3 (58) at the General Clauses Act were to apply to Article 248 (4), Parliament would have no power to legislate for the Union territories with respect to matters enumerated in the State List and until a legislature empowered to legislate on those matters is created under Art. 239-A for the Union territories, there would be no legislature competent to legislate on those matters; moreover, for certain territories such as the Andaman and Nicobar Island no legislature can he created under Art. 239-A, and for such territories there can be no authority competent to legislate with respect to roasters enumerated in the State List. Such a construction is repugnant to the subject and context of Article 246. It follows that in view of Article 246 (4), Parliament has plenary powers to make laws for Union territories on all matters. Parliament can by law extend the Income-tax Act, l96l to a Union territory with such modifications as it thinks fit. The President in the exercise of his powers under Article 240 can make regulations which have the same force and effect as an Act of Parliament which applies to that territory The President can therefore by regulation made under Article 240 extend the Income-tax Act 1961 to that territory with such modifications as he thinks fitThe President can thus make regulations under Article 240 with respect to a Union territory occupying the same field on which Parliament can also make laws. We are not impressed by the argument that such overlapping of powers would lead to a clash between the President and Parliament. The Union territories are centrally administered through the President acting through an administrator. In the cabaret system of Government the President acts on the advice of the Ministers who are responsible to ParliamentWhen promulgated by the President the regulation has the game force and effect as an Act of Parliament applicable to that territory. This general power of the President to make regulations extends to all matters on which Parliament can legislate. It may be recalled that Article 239-A and the proviso to Article 240 (1) were inserted by the Constitution (Fourteenth Amendment) Act. Under Article 240 as it stood after the Constitution (Seventh Amendment) Act and before the enactment of the Constitution (Fourteenth Amendment) Act, it could not be contended that the general power of the President to make regulations under Article 240 (1) was limited to matters enumerated in the Stab List and the Concurrent List. The position was not changed by the insertion of Article 239-A and the proviso to Article 240 (1) by the Constitution (Fourteenth Amendment) Act. Moreover, Article 239-A does not authorise Parliament to create legislatures for the Union territories of the Andaman and Nicobar Islands, Laccadive, Minicoy and Amindivi Islands and Dadra and Nagar Haveli. It is clear, therefore, that the power of the President to make regulations with respect to those territories is not limited by the proviso to Article 240 (1). We are satisfied that the proviso to Article 240 (1) on its true construction does not fetter the power of the President to make regulations for any of the Union territories specified in Article 240 (1) including Pondicherry as long as no legislature is created for the territoryIt was suggested that there is no provision for the distribution of the incometax attributable to Union territories and therefore the President could not extendthe Income-tax Act, 1961 to the Union territories. If this argument were sound, even Parliament could not extend the Income-tax Act to the Union territories. Moreover, the argument overlooks Article 270 which shows that the income-tax attributable to Union territories forms part of the Consolidated Fund of India.It is not necessary to make any distribution of income-tax with respect to Union territories as those territories are centrally administered through the PresidentThere is no force in the contention that the President cannot make a law with respect to income-tax in the absence of an express grant of such a power. There is distribution of legislative power between the Centre and the States and consequently distinct grants of taxing power are made in the legislative lists. With respect to Union territories, there is no distribution of legislative power. For the Union territories, Parliament has plenary powers to make laws and the President has general powers to make regulations. In the exercise of his powers under Article 240, the President could make Regulation No. 3 of 1963 extendingthe Income-tax Act, 1961 and other laws to the Union territories.