TAXATION UNDER INDIAN CONSTITUTION

INTRODUCTION:
Taxation refers to the process of levying taxes on individuals, businesses, and
other entities by a government or other authorized body. Taxes are compulsory
payments that are collected by the government to fund public goods and
services such as education, healthcare, infrastructure, defence, and social
welfare programs.
Taxation involves the identification and classification of taxable entities, the
determination of the tax base, the calculation of the tax liability, the collection
and enforcement of taxes, and the administration and governance of the tax
system. Taxes can be levied on various types of income, goods, services, and
assets, and the rates and methods of taxation can vary depending on the
jurisdiction and the type of tax.
Taxation is a critical source of revenue for governments and plays an essential
role in promoting economic growth, development, and social welfare.
However, taxation is also a complex and often controversial subject, as it can be
difficult to strike a balance between raising sufficient revenue for the
government and ensuring that taxpayers are not unduly burdened by taxes.

TAXATION UNDER INDIAN CONSTITUTION:

Taxation in India is governed by the Constitution of India, which provides for a
three-tier system of government, consisting of the Union government, the state
governments, and the local bodies. The Constitution divides the power to tax
between these three levels of government.
The power to levy and collect taxes is divided into two broad categories - direct
and indirect taxes. Direct taxes are levied on the income or wealth of
individuals and companies, while indirect taxes are levied on goods and
services.
The Union government has the power to levy and collect taxes on income
(except agricultural income), customs duties, central excise duty, and service
tax. The state governments have the power to levy and collect taxes on
agricultural income, sales tax, stamp duty, and excise duty on alcoholic
beverages and narcotics. Local bodies such as municipalities have the power to
levy and collect taxes on property and other local taxes.
The Constitution also provides for the formation of a Goods and Services Tax
(GST) Council, which is responsible for making recommendations on the rates,
exemptions, and other aspects of the GST. The GST is a comprehensive indirect
tax levied on the supply of goods and services across India, replacing multiple
indirect taxes levied by the Union and state governments.
The Constitution also provides for the establishment of a Finance Commission,
which recommends the distribution of tax revenues between the Union and
the state governments, and between the state governments themselves.
In summary, the Indian Constitution provides for a well-defined system of
taxation, which is divided between the Union government, state governments,
and local bodies. The Constitution also provides for the establishment of
institutions such as the GST Council and the Finance Commission, which ensure
that the tax system is fair and equitable for all.

ARTICLES UNDER INDIAN CONSTITUTION THAT DEALS WITH TAXATION:

The Indian Constitution contains several articles related to taxation, which
define the powers and responsibilities of the Union government, state
governments, and local bodies with respect to taxation. Some of the key
articles related to taxation in the Indian Constitution are:
1. Article 265 - This article provides that no tax shall be levied or collected
except by authority of law. This means that any tax levied by the
government must have a legal basis, and cannot be imposed arbitrarily.

2. Article 246 - This article defines the distribution of powers between the
Union government and state governments with respect to taxation. It
provides that the Union government has exclusive power to levy and
collect taxes on certain items, while the state governments have
exclusive power to levy and collect taxes on other items.
 3. Article 246A - This article provides for the Goods and Services Tax (GST)
and gives the Parliament and the state legislatures the power to make
laws on the taxation of goods and services.

4. Article 270 - This article provides for the distribution of tax revenues
between the Union government and state governments. It provides that
certain taxes collected by the Union government, such as income tax and
customs duties, shall be distributed among the states in accordance with
the recommendations of the Finance Commission.

5. Article 271 - This article provides for the grants-in-aid to be given to the
states by the Union government. These grants are given to assist the
states in meeting their financial obligations, including the payment of
salaries, pensions, and debt servicing.

6. Article 276 - This article provides for the power of state governments to
levy taxes on professions, trades, and callings. It sets out the maximum
rates of such taxes, which cannot exceed a certain percentage of the
income or turnover of the profession, trade, or calling.

Overall, these articles provide the framework for taxation in India, ensuring
that taxes are levied and collected in a fair and transparent manner, and that
the revenue generated from taxes is distributed equitably among the Union
government, state governments, and local bodies.

ARTICLE 265 OF INDIAN CONSTITUTION:

 Article 265 of the Indian Constitution lays down the fundamental
principle that no tax can be levied or collected except by authority of
law. This means that any tax that is imposed by the government must
have a legal basis, and cannot be imposed arbitrarily.
 The article provides that the power to levy and collect taxes is subject to
the provisions of the Constitution and any law made by the Parliament
or the state legislature. This means that any tax that is imposed must be
 in accordance with the provisions of the Constitution, as well as any law
that has been enacted by the appropriate legislative body.
 In other words, the government cannot impose any tax that is not
authorized by law. Any tax that is levied or collected in violation of Article
265 would be unconstitutional and invalid.
 Article 265 ensures that the taxation system in India is fair, transparent,
and consistent with the principles of justice and equity. It also provides
citizens with the right to challenge any tax that is imposed without the
authority of law, through legal remedies such as writ petitions in the
courts.
In summary, Article 265 of the Indian Constitution is a fundamental provision
that ensures that the power to levy and collect taxes is subject to the rule of
law, and provides a framework for fair and transparent taxation in the country.

ARTICLE 246 OF INDIAN CONSTITUTION:

Article 246 of the Indian Constitution deals with the distribution of legislative
powers between the Union Government and the State Governments. The
article lays down that the Parliament has the power to make laws on subjects
enumerated in the Union List, while the State Legislatures have the power to
make laws on subjects enumerated in the State List.
With respect to taxation, Article 246 provides for a three-fold distribution of
legislative powers:
1. Union List: The Parliament has the exclusive power to make laws with
respect to certain taxes mentioned in the Union List. These include taxes
on income other than agricultural income, customs and excise duties,
corporation tax, taxes on capital gains, and service tax.
2. State List: The State Legislatures have exclusive power to make laws with
respect to certain taxes mentioned in the State List. These include taxes
on agricultural income, state excise duty, land revenue, stamp duty, and
taxes on professions, trades, callings, and employments.
3. Concurrent List: Both the Union and State Governments have the power
to make laws on subjects mentioned in the Concurrent List. These
include taxes on goods and services, which have now been subsumed
under the Goods and Services Tax (GST).
It is important to note that in case of a conflict between a law made by the
Parliament and a law made by the State Legislature on the same subject, the
law made by the Parliament shall prevail. This provision is aimed at ensuring
uniformity in tax laws across the country and to avoid any contradictions or
overlapping between the tax laws made by the Union and the State
Governments.
In summary, Article 246 of the Indian Constitution provides for the distribution
of legislative powers with respect to taxation between the Union Government
and the State Governments, and lays down the exclusive and concurrent
powers of these governments to make laws on different types of taxes.

ARTICLE 246A OF INDIAN CONSTITUTION:

 Article 246A was added to the Indian Constitution in 2016 to give the
Union Government and the State Governments concurrent powers to
make laws on goods and services tax (GST). It provides that Parliament
and the State Legislatures have the power to make laws with respect to
GST imposed by the Union or by the States.
 The introduction of Article 246A led to the creation of the Goods and
Services Tax Council, which is a constitutional body comprising
representatives of the Union and State Governments. The GST Council is
responsible for making recommendations on various aspects of GST,
such as tax rates, exemptions, and thresholds, and for ensuring that
there is uniformity in the application of GST across the country.
 Under the GST regime, most of the indirect taxes that were levied by the
Union and the States have been subsumed under GST. This includes taxes
such as excise duty, service tax, central sales tax, and value-added tax
(VAT).
 The introduction of GST has been a major tax reform in India, aimed at
simplifying the indirect tax system, reducing the compliance burden on
taxpayers, and promoting ease of doing business in the country. It has
also led to the creation of a single national market, which has helped in
the free movement of goods and services across the country.
In summary, Article 246A of the Indian Constitution gives the Union and State
Governments concurrent powers to make laws on GST, which has been
introduced as a major indirect tax reform in the country.
ARTICLE 270 OF INDIAN CONSTITUTION:
 Article 270 of the Indian Constitution deals with the distribution of taxes
between the Union Government and the State Governments. It provides
for the creation of a consolidated fund for each State, into which certain
taxes and duties are to be paid. These taxes and duties include:
 Taxes on income other than agricultural income collected by the Union
but assigned to the States.
 Taxes on the sale or purchase of goods other than newspapers, collected
by the Union but assigned to the States.
 Taxes on the consignment of goods, collected by the Union but assigned
to the States.
 Duties of excise on medicinal and toilet preparations, collected by the
Union but assigned to the States.
 Service tax collected by the Union but assigned to the States.
 Any other tax or duty levied by the Union and assigned to the States.
 The article also provides that Parliament may, by law, specify any other
tax or duty that is to be assigned to the States, in addition to those
mentioned above.
 The taxes and duties assigned to the States under Article 270 are
distributed among the States on the basis of the recommendations of
the Finance Commission. The Finance Commission is a constitutional
body that is appointed by the President of India every five years to
recommend the distribution of financial resources between the Union
and the States.
In summary, Article 270 of the Indian Constitution provides for the distribution
of certain taxes and duties between the Union Government and the State
Governments, and lays down the procedure for assigning and distributing these
taxes and duties to the States.

ARTICLE 271 OF INDIAN CONSTITUTION:

 Article 271 of the Indian Constitution deals with the distribution of the
proceeds of certain taxes between the Union Government and the State
Governments. It provides that any tax levied by the Union Government,
which is collected and appropriated by the Union, may be assigned to
the States if Parliament, by law, so provides.
  The article further provides that the net proceeds of such a tax, after
deducting the cost of collection, shall be distributed among the States in
accordance with the recommendations of the Finance Commission. The
Finance Commission is a constitutional body that is appointed by the
President of India every five years to recommend the distribution of
financial resources between the Union and the States.
 The taxes that can be assigned to the States under Article 271 include
taxes such as income tax, wealth tax, and estate duty, among others. The
Union Government collects these taxes, and after deducting the cost of
collection, the net proceeds can be assigned to the States if Parliament,
by law, so provides.
 The article also provides that the law made by Parliament for the
assignment of such taxes to the States may provide for the establishment
of a separate fund for each State, into which the proceeds of the
assigned taxes will be paid. This fund is to be administered by the State
Governments, and the proceeds are to be utilized for the purposes
specified in the law made by Parliament.
In summary, Article 271 of the Indian Constitution provides for the assignment
of certain taxes levied by the Union Government to the States, and lays down
the procedure for the distribution of the net proceeds of these taxes among
the States. The article ensures that the financial resources of the States are
augmented, and they are provided with adequate funds to carry out their
functions and responsibilities.

ARTICLE 276 OF INDIAN CONSTITUTION:

 Article 276 of the Indian Constitution deals with the imposition of taxes
on professions, trades, callings, and employments. It provides that no
State Government shall levy a tax on professions, trades, callings, or
employments except by law.
 The article further provides that any law made by a State Government
for the imposition of such a tax shall provide for the following:
 The classes of persons who may be subjected to the tax.
 The maximum amount that may be levied.
 The persons who shall be exempted from the tax.
 The manner in which the tax shall be assessed and collected.
  The authority that shall be responsible for the assessment and collection
of the tax.
 The procedure for the determination of any dispute regarding the tax.
 The manner in which the proceeds of the tax shall be allocated and
utilized.
 In addition, the article provides that no such tax shall be levied on any
person who earns his livelihood by personal manual labour or who is not
engaged in any profession, trade, calling, or employment.
 The purpose of Article 276 is to ensure that any tax imposed on
professions, trades, callings, or employments by a State Government is
done in a fair and reasonable manner, and does not unduly burden the
citizens. The article provides for the necessary safeguards and
procedures to be followed while imposing such a tax, and ensures that
the tax is used for the benefit of the public.
In summary, Article 276 of the Indian Constitution lays down the provisions for
the imposition of taxes on professions, trades, callings, and employments by
the State Governments. The article provides for the necessary safeguards and
procedures to be followed while imposing such a tax, and ensures that the tax
is used for the benefit of the public.

CASE LAWS:
Here are some landmark judgments on taxation in India:
1. Union of India v. Azadi Bachao Andolan (2003) : In this case, the Supreme
Court of India held that the provisions of the Double Taxation Avoidance
Agreement (DTAA) prevail over the provisions of the Income Tax Act, if
they are in conflict with each other. This means that if a taxpayer can
claim relief under the DTAA, then the provisions of the DTAA will apply
instead of the provisions of the Income Tax Act.
2. McDowell and Co. Ltd. v. Commercial Tax Officer (1985) : In this case, the
Supreme Court of India held that tax planning is legitimate, but tax
avoidance is not. The court also held that if a transaction is entered into
solely for the purpose of avoiding tax, then it is not valid.
3. Vodafone International Holdings B.V. v. Union of India (2012) : In this
case, the Supreme Court of India held that the Indian tax authorities do
not have jurisdiction to tax the sale of shares of a foreign company,
 where the underlying assets of the company are located in India. This
decision was controversial and led to the introduction of the
retrospective amendment to the Income Tax Act in 2012.
4. State of Tamil Nadu v. Pyare Lal Malhotra (1989) : In this case, the
Supreme Court of India held that the levy of sales tax on the transfer of
property in goods involved in the execution of a works contract is valid.
The court held that a works contract is a composite contract, and the
transfer of property in goods involved in the execution of such a contract
can be taxed under the Sales Tax Act.
5. Commissioner of Income Tax v. B. C. Srinivasa Setty (1981) : In this case,
the Supreme Court of India held that an assessee is entitled to arrange
his affairs in such a way as to minimize his tax liability. The court held
that tax planning is legitimate and the tax authorities cannot interfere
with it unless it is a sham or a device to evade tax.

CONCLUSION:
In conclusion, the Indian Constitution provides a comprehensive framework for
taxation in India. The Constitution empowers both the Central and State
Governments to levy taxes, subject to certain restrictions and guidelines.
Articles 246 to 279 of the Constitution deal with the distribution of taxation
powers between the Centre and the States, while Articles 265 to 293 deal with
the principles and procedures for levying taxes.
The Constitution provides for a wide range of taxes, including income tax, sales
tax, excise duty, customs duty, and service tax, among others. The Constitution
also lays down the principles of taxation, such as the principle of equality and
non-discrimination, the principle of just and reasonable taxation, and the
principle of uniformity in taxation.
Over the years, the courts have also played a crucial role in shaping the
taxation landscape in India through landmark judgments. These judgments
have helped to clarify the constitutional provisions relating to taxation and to
ensure that the tax system is fair and just for all citizens.
Overall, the Constitution of India provides a strong framework for taxation that
is designed to ensure that taxes are levied in a fair and reasonable manner, and
that the proceeds of the taxes are used for the benefit of the public.