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Part-75-One Pager Snapshot to the Cases on Article 265 of Constitution of India- No tax shall be levied or collected except by authority of law

-Four basic components for a valid levy of tax
-Phrase “subject of tax”, “measure of tax” and nexus between the two explained
-Charging Provision and Computation Provision
-Definition of “sale” widened to include forward contract declared ultra vires
-Computational Provision cannot go beyond the main provision
-Double Taxation is not illegal as per Article 265
-Arbitrary Best Judgement is violative of Article 265 of Constitution


Case Subject




Four basic
components for
a valid levy of

Govind Saran Ganga
Saran v. Commissioner of
Sales Tax-AIR 1985SC

Apex Court in the famous judgement held that components which entered into tax are well known. The first is the character of the imposition known
by its nature which transpires attracting the levy. The second is a clear communication of the person on whom the levy is imposed and which
is obliged to pay the tax. The third is rate at which the tax is imposed and the fourth is the measure or value to which the rate is applied for
computing the tax liability.


Phrase “subject
of tax”,
“measure of tax”
and nexus
between the two

Union of India v. Bombay
Tyre International Ltd.
(AIR 1984 SC 420)
referring to

Hon’ble Apex Court referred to Seervai’s Constitutional Law wherein it has been stated that “Another principle for reconciling apparently conflicting tax
entries follows from the fact that a tax has two elements, the person, things, or activity on which the tax is imposed, and the amount of the tax.
The amount may be measured in many ways, but decided cases establish a clear distinction between the subject matter of a tax and the standard by
which the amount of tax is measured. These two elements are described as the subject of a tax and the measure of a tax. It also referred to another
decision in the matter of R.R. Engineering Company v. Zila Parishad Bareilly (AIR 1980 SC 1088) wherein it was held that it may be and is often
so, that the tax on circumstances and property is levied based on income which the assessee receives from his profession, trade, calling or
Thereafter it held that therefore it is clear that levy of a tax is defined by its nature, while the measure of the tax may be assessed by its own
standard. It is true that standard adopted as measure of levy may indicate the nature of tax but it does not necessarily determine it.


Provision and

Commissioner Of Income
Tax, ... vs B. C. Srinivasa
Setty 1981 AIR 972

It was held by Apex Cour that character of computation provisions in each case bears a relationship to the nature of the charge. Thus, charging section
and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at
all, it is evident that such a case was not intended to fall within the charging section. Otherwise, one would be driven to conclude that while
a certain income seems to fall within the charging section there is no scheme of computation for quantifying it.


Definition of
"sale" widened
to include
forward contract
declared ultra

Sales Tax Office, Pilibhit
v. M/s Budh Prakash Jai
Prakash (AIR 1954 SC

It was held that that there is a well-defined and well-established distinction between a sale and an agreement to sell. The words "Taxes on the sale
of goods" in entry No. 48, List II, Schedule VII of the Government of India Act, 1935, conferred power on the Provincial Legislature to impose
a tax only when there has been a completed sale and not when there is only an agreement to sell. Accordingly, section 2(b) of the Uttar
Pradesh Sales Tax Act, XV of 1948, enlarging the definition of "sale" to include forward contracts must, to that extent, be declared ultra vires.
For the same reason Explanation III to section 2(h) which provides that forward contracts "shall be deemed to have been completed on the date originally
agreed upon for delivery" and section 3B of the Act must also be held to be ultra vires


cannot go
beyond the
scope of

CHD Developers Limited
vs State Of Haryana And
Others on 22 April, 2015

Petitioner challenged validity of Rule 25(2) wherein in case of computation of VAT in case of Builder and Developer, it only provided for deductive
method for labour and services but did not reduce value of immovable property. High Court observed that 'deductive method' thereunder does not
provide for any deduction which relate to the value of the immovable property. The State Government thereafter filed an affidavit dated 24.4.2014,
wherein it was affirmed that developers/work contractors assessed as normal VAT dealers were entitled to all deductions admissible as per Law/Rules.
High Court held that essentially, value of immovable property and any other thing done prior to the date of entering of the agreement of sale is to be
excluded from agreement value. Rule 25(2) was held to be valid by reading it down to the extent indicated and subject to State Government
remaining bound by affidavit dated 24.4.2014. State Government to bring necessary changes in Rules in consonance with above observation.


Double Taxation
is not illegal as
per Article 265

Avinder Singh Etc vs
State Of Punjab & Anr.
Etc (SC) 1979 AIR 321

Apex Court held that there is nothing in Article 265 from which one can spin out the constitutional vice called double taxation. Observation of Bombay
High Court was referred which gave short shrift in Western India Theatres. Some undeserving contentions die hard, rather survive after death. The only
epitaph we may inscribe is: Rest in peace and don’t be re- born! If on the same subject-matter the legislature chooses to levy tax twice over
there is no inherent invalidity in the fiscal adventure save where other prohibitions exist.


Arbitrary Best
Judgement is
violative of
Article 265 of

M. Appukutty vs Sales
Tax Officer, Spl. Circle I,
(Ker) AIR 1966 Ker 55

The High Court observed that there was no material before the authority which would in any manner justify the addition of 27,60,000 and odd Rupees
to the turnover. The addition made is arbitrary and capricious and is even mala fide in the sense that there was no application of mind to question
involved. It was also stated that the Court is not helpless to safeguard interests of victim of such decision by interfering under Article 226 of
the Constitution. Further in such cases Article 265 of the Constitution “No tax shall be levied or collected except by authority of law,” is also
violated. There is no collection of tax by the authority of law when assessments are made in this arbitrary fashion.