# SECOND GIFT TAX OFFICER, MANGALORE, ETC v. D. H. NAZARETH ETC

- **Citation:** [1971] 1 S.C.R. 195
- **Court:** Supreme Court of India
- **Decided:** 1970-04-02
- **Case number:** Civil Appeals Nos. 664 to 669 of 1967
- **Bench:** M. H!Dayatullah, J. C. Shah, A. N. Grover, A. N. Ray, I. D. Dua
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/second-gift-tax-officer-mangalore-etc-v-d-h-nazareth-etc-4983
- **Pages:** 6

## Headnote

Constitution of India, 1950, Art. 248, Schedule VII, Union List, Entry
97 and State List, Entries 18 and 49-Gift Tax Act (18 of 1958)-Enacted
by Parlian1ent under residuGr,v power--Competence of Parliament.
Gift tax was levied under the Gift Tax Act, 1958, on gifts, of coffee
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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 impasing a gift tax on lands and buildings, because, entries 18 and 49 of the
State List reserved the power to State Legislatures.
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On appeal to this Court.
HELD : The Constitution divides the topics of legislation into three
broad categories : (a) en fries 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 menuoned and contain the
whole of the power of taxation, except entry 97 of the Union List, under
which, Parliament has 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 dealin~ with 'land', though very wide, does
not therefore confer any power of taxatiou and cannot authorise a tax
not expressly mentioned. [ 199 HJ
Entry 49 of the State List contemplates a t.ax directly levied by reason
of the general ownership of lands and buildings.
But the pith and substance of the 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 buildi~gs 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-El
There being no· other entry in the State List which might cover a
gift tax, the residuary powers of Parliament under Art. 248, and entry 97
of the Union List. could be exe,cised by Parliament. to enact the law.
[200 E-F]
Sudhir Chandra Nawn v. Wealth Tax Officer, CGlcutta & Ors. (1968)
69 l.T.R. 897 (S.C.) followed.
S. Dhandapani v. Addi. Gift Tax Officer, Cuddalore, (1963) 49 J.T.R.
712, ShyGm Sunder v. Gift Tax Officer, A.LR. 1967 All. 19, Jupadi Sesharatnam v. Gift Tax Officer, Palacole, ( 1960) 38 J.T.R. 93 and Joseph v.
Gift Tax Officer, (1964) 45 J.T.R. 66, approYed.
196
SUPREME COURT REPORTS
[1971] l S.C.R.

## Text

195
A
SECOND GIFT TAX OFFICER, MANGALORE, ETC.
V.
D. H. NAZARETH ETC.
April 2, 1970
8
[M. H!DAYATULLAH, C.J., J. C. SHAH,
A. N. GROVER,
A. N. RAY AND I. D. DUA, JJ.)
Constitution of India, 1950, Art. 248, Schedule VII, Union List, Entry
97 and State List, Entries 18 and 49-Gift Tax Act (18 of 1958)-Enacted
by Parlian1ent under residuGr,v power--Competence of Parliament.
Gift tax was levied under the Gift Tax Act, 1958, on gifts, of coffee
C
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 impasing a gift tax on lands and buildings, because, entries 18 and 49 of the
State List reserved the power to State Legislatures.
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On appeal to this Court.
HELD : The Constitution divides the topics of legislation into three
broad categories : (a) en fries 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 menuoned and contain the
whole of the power of taxation, except entry 97 of the Union List, under
which, Parliament has 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 dealin~ with 'land', though very wide, does
not therefore confer any power of taxatiou and cannot authorise a tax
not expressly mentioned. [ 199 HJ
Entry 49 of the State List contemplates a t.ax directly levied by reason
of the general ownership of lands and buildings.
But the pith and substance of the 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 buildi~gs 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-El
There being no· other entry in the State List which might cover a
gift tax, the residuary powers of Parliament under Art. 248, and entry 97
of the Union List. could be exe,cised by Parliament. to enact the law.
[200 E-F]
Sudhir Chandra Nawn v. Wealth Tax Officer, CGlcutta & Ors. (1968)
69 l.T.R. 897 (S.C.) followed.
S. Dhandapani v. Addi. Gift Tax Officer, Cuddalore, (1963) 49 J.T.R.
712, ShyGm Sunder v. Gift Tax Officer, A.LR. 1967 All. 19, Jupadi Sesharatnam v. Gift Tax Officer, Palacole, ( 1960) 38 J.T.R. 93 and Joseph v.
Gift Tax Officer, (1964) 45 J.T.R. 66, approYed.
196
SUPREME COURT REPORTS
[1971] l S.C.R.
CIVIL APPELLATE JURISDICTION: Civil 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, S. K. Aiyar and R. N. Sachthey, for the appellants (in all the appeals).
S. V. Gupte, A. K. Varma, J.B. Dadachanji, 0. C. Mathur and
Ravinde:· Narain, for the respondent (in C. A. No!f. 664 and 668
Of 1967).
0. P. Rana, for the intervener for the State of U.P.
M. R. K. Pillai, for the intervener for the State of Kerala.
B. Sen, Santosh Chatterjee and G. S. Chatterjee for Sukumar
Bose, for the State of West Bengal.
S. 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
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V. J. Francis, for the intervener for the State of Bihar.
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K. A. Chitaley, Advocate-General, State of Madhya Pradesh,
M.N. Shroff and /. N. Shr<off, for the intervener for the State of
Madhya Pradesh.
E. S. Venkataramiah, Adl'ocate-General, Mysore and· S. P.
Nayar, for the intervener for the State of Mysore.
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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, C.J.
These six appeals by certificate under Art.
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.. 132(1) 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 _g)lSes. It is not necessary to give
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the facts of the six petitionsjn die High Court. As illustrative of
the facts involved we may mention on W.P. No. 1077 of 1959. In
that case a certain D. H. Nazareth, owner of a coffee. plantation,
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GIFT TAX OFFICER v. NAZARETH (Hidaya:ut/ah, C.J.)
197
made a gift by registered deed, January 22, 1958, of a coffee plantation and other 12.roperties in favour of his four sons. The market
value of the prope<ty was Rs. 3,74,080 and' the coffee plantation
accounted for Rs. 3,24,700.
Gift tax of Rs. 35,612/· was demanded. If the coffee jlantation was left out of consideration the
tax was liable to be reduced by Rs. 34,036.
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 th~ other cases agricultural or paddy
lands or buildings wer~ 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 build·
ings to the Legislature of the States und Parliament could not,
therefore, use the residuary power conferred by entry 97 oi the
Union List. This decision is challenged before us.
The Gift Tax A~t was passed in 1958 and subjected gifts made
in the year ending March 31, 1958 to tax.
The Act contained
the nual 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 obj_ection to the. Gift Tax Act which was sustained by the High Court a few general principles may be borne
in mind.
Under Art. 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 tc
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 Art. 248 of the residuary
powers of legislation.
Parliame_nt has exclusive power to make
any law in respect to any 111atter not enumerated in the Concurrent List or State List and this power includes the power of making any law imposill& a tax •ot 111entioned in either of those lists.
198
SUPREME COURT REPORTS
[1971] l S.C.R.
For this purpose, and to avoid any doubts, an entry has also been
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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 soyereignty 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 Funda~ental .Rights. The entries themselves do
not follow any logical classification or dichotomy. As was said in
State of Rajasthan v. S. Chawla and another(') the entries in the
list must be regarded as enumeratio simplex of broad categorie~.
Since they are likely to overlap occasionally, it is usual to exam~e 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
Li.st as a topic of
legislation.
The Gift Tax Act was enacted by Parliament and it is admitted that no entry in the Union List or the Concurrent List men·
tions such a tax.
Therefore, Parliament purported to use its
); powers derived from entry 97 of the Union List read with Art. 248
• of the Constitution. This power admittedly could not be i:lvokee1
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 arul 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."
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"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. I S.C.R. 904.
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GIFT TAX OFFICER v. NAZARETH ({iidayatullah, C.J.)
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, 4 7 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 particμlarly 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 particul;irly 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.
Th.e
Mysore view was not followed in S. Dhandapan,i v.
Addi. Gift
Tax Officer, Cudda/ore(') (Madras High Court); Shyam Sunder
v. Gift Tax Officer(') (disapproved on another point in the Supreme Court). A contrary view was earlier also expressed m Jupadi
Sesharatnam v. Gift Tax Officer, Pa/acole( 3 ) (Andhra Pradesh
High Court) and Joseph v.
Gift Tax Officer(') (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 v. Wealth Tax Officer, Calcutta & ors.(') 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 ~ourt 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
en1bling 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 andin fact contain the whole 'of the power of taxation. Unless a !llX 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
(I) (1963) 49 l.T.R. 712.
(3) (1960) 38 tL.R. 93.
(5) (1968) 69 T.T.R. 897 (S.Cl.
'(:il A.LR. 1967 All. 19.
(4) (1964) 45 l.L.R. 66.
200
SUPREME COURT REPORTS
[1971 j l S.C.R,
of taxation. At the most fees can be levied in respect of the items
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mentioned in that entry, vide entry 66 of the same list. Nor is it ·
possible to read a clear cut division of agricultu[al 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 th'j\
pith and substance of the Gift Tax Act falls within entry 49 ofll B
State List or it does not. If it does, then Parliament will have no
power to levy the tax even under the residuary powers.
J[f it does
not, then Parli~ent must undoubtedly possess that power under
Art. 248 and entry 97 9~ 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 lnnds and buildings but. is a tax
upon the value of the total gifts made in n yenr which is above
,tl:ie 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 nnd 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 r~siduary powers of Parliament could be
exercised to enact a law. The appeals must, therefore, b1~ allowed
but there shall be no order about costs throughout.
The appeal
666/67 however abates as the sole respondent died.
V.P.S.
Appeals allowed.
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