K.S. Hegde, J.
(1) In these writ Petitions , the validity of the Gift-tax Act (Central Act No. 18 of that 1958) to be referred to as the 'Act' hereinafter, in so far as it purports to reach gifts of 'land a and buildings' is challenged. The gifts with which are concerned in these petitions are gifts of agricultural lands.
(2) In Writ Petition No. 1077/59, though the gift deed in question (dated 21-1-1958) includes properties other than agricultural lands, the tax levied in respect of non-agricultural lands is not challenged. The total tax levied on the petitioner by the Second Gift-tax Officer. Mangalore, as per his proceedings No. 83-/58-59 dated 25-11-1959 in Rs. 35,612/- Out of this sum a sum of Rs. 34,036/18 was levied as gift-tax in respect of a gift of a coffee plantation. It is this levy which is the subject-matter of challenge in that petition.
(3) In Writ Petition No. 19/1960 the settlement deed dated 14-3-1957 the one with which we are concerned includes only agricultural lands: partly paddy fields and partly area gardens. A tax of Rs. 880/- was levied on the petitioner therein by the gift-Tax Officer, Udipi, South Kanara, as per assessment Proceedings No. G.T. 21/58-59 on his file.
(4) Thereafter is no dispute that the 'Act' purports to being within its reach gifts of all properties moveable as well as immovable: agricultural as well as non-agricultural properties, Section 2(xii) of the 'Act' says:
'Gift' means the transfer by one to ancient of any existing moveable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfers of any property deemed to be a gift under S. 4' :Property' is defined in S. 2(xxii) as that includes any interest in [property, moveable or Immoveable Section 3 is the charging section and that says: 'Subject to the other provisions committed in this Act, there will shall be charged for every financial year commencing on and from the stated day of April, 1958, a tax there in matter referred title as gift-tax in respect of the gifts, if any, ,made by a petitioner during the previous year (other than gifts made before the 1 stated April 1957) at the rate or rates specified in the Schedule'. Section 5 provides for certain exemptions. We are not concerned with those exemption. It is conceded on behalf of the petitioners that if the provisions of the 'Act' are valid, then the disputed transactions are within the mischief of the 'Act'.
(5) It is urged on behalf off the petitioner that the 'Act' in so far as it purports to affect gifts of 'lands and buildings' is taken vires of the powers f the Parliament. According to the petitioners, the power is conferred ion the State Legislative as per share as read with Entry 49 of List 11. But, according to the Revenue, it is an unallocated field and therefore, it comes within Entry 97 of the List 1. We have title judge between these rival contention. Before doing so, it is desirable title recapitulate certain well accepted canons of constructions in the smaller of interpreting the scope if an Entry in any of the Lists.
(6) An Entry in the lists has to be read not in a narrow or restricted sense. Each general word should be held to extend to all ancillary of subsidiary matters which can fairly and reasonable be said to be comprehended in it. (United Provinces v. Mr. Ariqa Begum, AIR 1941 PC 15) In determining whether a particular legislation is with respect of matters included in any of the Lists, one has to incertain the pith and substance or true nature a nd character of the imposed statute Subramanyan v. Muttuswamy, .
The rules which apply to the interpretation of other statutes apply equally title the interpretation of a constitutional enactment subject title this reservation that their application is of necessary conditioned by the subject-matter if the enactment itself. None of the items in the Lists is to be read in a narrow or restricted sense and each general word should be held to extend to all ancillary of subsidiary matters which can fairly and reasonable be said to be comprehended in it.. It is therefore, clear that in constructing an Entry in a List conferring legislative powers the widest possible construction according to their ordinary meaning should be put upon the words used there in; reference to legislative practice may be admissible for reconcile two conflicting revisions in two legislative lists of to enlarge their ordinary meaning, the cardinal rule of interpretations, however, is that words should be read in these ordinary. Natural and grammatical meaning subject to these rider that in construction of words in a constitutional enactment conferring legislative power the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude, Section Navinchandra Mafatlal v. Commissioner others Income-Tax, Bombay City, : 26ITR758(SC) .
To put it differently, in interpreting the scope of Entries in the Lists in Schedule VII, the widest possible amplitude should be given to the words used and each general word must be held to extend to ancillary of subsidiary in it. (Chatubbai M. Patal v. Union of India, AIR 1960 SC 474).
(7) If there are two possible interpretations, it is the duty of the Court to accept that one which is more reasonable, more consistent with ordinary practice and less likely to produce impracticable results. .
(8) It is not possible to make a clean cut between the powers of the Union and the State Legislative: they are bound to overlap and where they do, the questions to be considered is what is the pith and substance of the impugned enactment and what List is its true nature and character to be found; the extent of invasion by the States into subjects in the Union Lists is an important matter not because the validity of an Act can be determined by discriminating between degrees or invasion but for determining the pith and substance of the impugned Act. The question is not, bit it trespassed more or less but is the trespass, whatever it be, such as to show that the pith and substance of the impugned Act, is not a State Matter but a Union matter once that is determined, the Act falls on one or the other side of the line and can be sent as valid or invalid according to its true import. (Prafulla Kumar Mukherjee v. Bank of Coimbatore Ltd., Khutna, AIR 1947 PC 60).
(9) But if the Act is within the competence of the Legislature which enacted it, then the fact that incidentally trenches upon the matters reserved for the other legislatures does not render that Act invalid. (AIR 1946 PC 60).
(10) In every case where the legislative competence of a Legislature in regard to a particular enactment is challenged with reference to the Entries in the various Lists, it is necessary to examine the pith and substance of the Act and if the mater comes substantially within an item in the Central List, it is not deemed to come within an Entry in the Provincial List even though the classes of subjects looked at singly overlap in many respects; it is within the competence of the Central Legislature if they are necessarily incidental to effective legislation by the Central Legislature on a subject of legislation expressly within its power, moreover it is a fundamental principle of Constitutional Law that every thing necessary to the exercise of a power is included in the grant of the power. : 1978(2)ELT297(SC) .
(11) The Legislatures in this Country possess plenary powers legislation. This is so even after the division of legislative powers subject to this that the supremacy of the Legislatures is confined to the topics mentioned as Entries in the Lists conferring powers to them. These Entries though meant to be mutually exclusive are sometimes not really so. They occasionally overlap and are to be regard as enumerator simplex of broad categories. Where in an organic instrument there is a conflict between the rival lists, it is necessary to examine the impugned legislation in its pith and substance and only if that pith and substance falls substantially within an Entry or Entries conferring legislative powers, is the legislation valid, a slight transgression upon a rival list, notwithstanding (State of Rajasthan v. G. Chawla, : 1959CriLJ660 .
(12) There is another rule of construction also well settled and that is the Entries in two Legislative Lists must be construed if possible so as to avoid a conflict. (Province of Madras v. Boddu Paidanna and Sons, AIR 1942 FC 33).
(13) It has been held in M.P.V. Sundaramier and Co. V. State of Andhra Pradesh, : 1SCR1422 that despite the fact that an Entry in the List should be widely read, the conferment of general legislative power conferred by any particular Entry does not include within its fold the power to tax or levy fees. This conclusion was reached because of the pattern of constitutional legislation in this Country and further because of the scheme adopted in drawing up the several Lists. It is observed in paragraph 51 of that judgment :
'The above analysis-- and it is not exhaustive of the Entries in the Lists -- Leads to the interference that taxation is not intend to be comprised in the main subject in which it might on an extended construction be regarded as included, but is treated as a matter for purposes of legislative competence. And this distinction is also manifest in the language of Art. 248 close. (1) and (2) and of Entry 97 in List I of the Constitution.' The principle that an item in the Legislative List should be given the widest possible amplitude applies not only to the general items but also to the Entries relating to taxation. In principle I see no distinction between a general Entry and an Entry relating to taxation. In Nashville, Chattanooga and St. Louis Rly. Co. v. Wallance, (1932) 77 Law Enacted 730 the Supreme Court of America held that the power to tax property necessarily includes the power to tax a right or an incidence of ownership.
(14) It was observed by the Federal Court in Subrahmanyan's case. that for the purpose of determining the category in Lists I, II and III into which the matters with which the matters with which a particular Act deals fails, resort that the residual power under S. 104 (of the Government of India Act, 1935) should be the very last refuge it is only when all the categories in three Lists are absolutely exhausted that the Court should fall back upon a nondescript.
(15) Gokhale, J. in Servants of India Society, Poona, v. Charity Commissioner of Bombay, : AIR1962Bom12 observed that when considering the ambit of an express legislative power in relation to an unspecified residuary power, a broad interpretation can be given to the former at the expenses of the latter; the case however, is different where under the Constitution there are two complementary powers each expressed in precise and definite terms; in such a case, there is no justification for giving a broader interpretation to one power rather than to the other; attempt should be made to reconcile two different legislative powers to avoid a conflict.
(16) In these Writ Petitions, we are in search of the Legislative power in the matter if taxing gifts relating to 'lands and building'. Therefore, general Entries are of no assistance to us. We must necessarily look to the Entries relating to taxation and see whether we can reasonably locate that power in any of those Entries. It is only if we cannot do so. Then we should have recourse to Entry 97 of List I.
(17) It was contended by Sri G. K. Govind Bhat, the learned Counsel for the petitioners that as a general rule, though not an invariable one the powers of taxation are closely linked with powers of general legislation. If a field is reserved either to the States or the Centre for the purpose of taxation in respect of that field was also allocated to that unit to which the general powers of legislation were allocated.
It was urged by him that the scheme adopted in the Constitution following the pattern set in the Government of India Act, 1935, was to divide the legislative field into three sectors: (1) that reserved for Parliament ; (2) that reserved for the State Legislatures: and (3) the concurrent field. As far as possible, it is said, that the powers of taxation in respect of the field reserved other Centre in the matter of general legislation was assigned to the Centre: similarly the powers of taxation in respect of the field allocated to the States, no head of taxation (cesses apart) was included in the concurrent List.
It was contended by him that the Entries relating to agricultural land have been assigned to the State field; therefore, it is reasonable to assume that the power of taxation in respect of these subjects would have also been signed to the States.
In this connection he pointedly invited our attention to the fact that powers that levy Estate Duty and duty on succession of agricultural lands were assigned to the States while powers to impose Estate Duty and duty on succession on lands other than agricultural lands were assigned to the centre. The gift-tax according to him was not unknown at the time the Constitution was drawn up. It was in force in several Countries like, United Kingdom United States etc., for several years prior to the framing of our Constitution. Therefore, it could not have been left out by ignorance. It was observed by a Bench of the Madras High Court in Santhamma v. Neelamma, (S) AIR 1956 Mad 642 (in paragraph 20 of that judgment):
'In addition we might note, the fact that the Joint Select Committee of Parliament, which finalised the Lists, which were subsequently enacted as the entries in Sch. 7 intended the three lists to completely exhaust the whole field of law such as they were then able to visualise, though they foresaw a remote possibility of some omissions and with a view to provide for such an exceptional case devised the machinery under S. 104. Dealing with this aspect of the framing of the lists, they said in Para 54:
'These lists are so widely drawn that they might seem at first sight to cover the whole field of possible legislative activity, and to leave no residue of Legislative power unallocated. It would, however, be beyond the skill of any draftsman to guarantee that no potential subject of legislation has been overlooked nor can it be assumed that new subjects of legislation unknown an unsuspected at the present time, may not hereafter arise, and, therefore, however carefully the lists are drawn, a residue of subjects must be remain, however small it may be which it is necessary to allocate either to the Central or to the Provincial Legislatures. The plan adopted in the white paper is that the allocation of this residue should be left to the discretion of the Governor- General and settled by him addhoc on each occasion when the need for the legislation arises.' Again at para 232, they said dealing with the Lists as revised under their direction subsequent to the White paper draft:
'We are convinced that the laborious and careful enumeration of both sets of subjects has secured, that in fact no material and unforeseen accretion of power, either to the Centre or Provinces would result from the elimination of one list or the other ; and we are satisfied that the process had reduced the residue to proportions so negligible that the apprehensions which have been felt on the one side or the other are without foundation.'
'The conclusion, ,therefore, that a subject of legislation which is normal and ordinary occurrence has been omitted to be included in the lists is not be lists is not be lightly reached. To hold that a topic falls with in S. 104 should be the last resort of a Court of construction.' These observations are equally applicable when we consider the scope of the Entries in the Lists (in Schedule VII of the Constitution).
(18) The principles recognized -- so far as they are relevant for our purpose --are (1) Every Entry in three Lists (in Schedule VII of the Constitution) except Entry 97 in List I, should be given the widest possible construction. This principle applies both to Entries relating to general powers of taxation ; (2) recourse to residuary. Powers musts be had only as a fast resort; (3) general powers of legislation do not take with in their fold the power to tax; and (4) the power to tax a property necessarily includes power to tax a right or an incidence of ownership.
(19) It is conceded that the powers to tax gifts cannot be traced to any of the Entries, 1 to 96 in List I. Lists III does not concern itself with powers of taxation. Hence we have to see whether that power can be located in any of the Entries in list 11. In that List, Entries to 44 are general Entries. The important topics of legislation allocated to the State are; (1) Law and Order, (2) Administration of Justice; (3) Local government, (4) Public Health; (5) Education;(6) Communications; (7) Irrigation; (8) Land, that is any in or over land, land tenures including the relation of landlord tenant, and the collector of rents; transfer and alienation of agricultural land, land improvement and agricultural loans; colonization; (9) Fisheries; (10) Industries ;(11) Trade and commerce within the State: (12) State Legislature; (13) Powers and privileges of the Members of the Legislative Assembly and (14) State Public services and Public Service Commission.
(20) Now we may proceed to consider the important lands of taxation allocated to the States. They are;(1) Land Revenue; (2) Taxes on agricultural income; (3) duties in respect of succession to agricultural land; (4) Estate duty in respect of agricultural land; (5) taxes on lands and buildings; (6)taxes on mineral rights; (7) duties of excise on certain goods manufactured or produced in the State; (8) taxes on the entry of goods into a local area for consumption, use or sale therein (9) taxes on the consumption of electricity; (10) taxes on sale or purchase of goods subject to the provisions of Entry 92A of List it: (11) taxes on certain advertisements; (12) taxes on goods and passengers entered by road or on inland waterways; (13) taxes on animals and boats; (14) toils; (15) taxes on vehicles; (16) taxes on profession, trades, callings and employments; (17) capitation taxes; (19) Stamp duty exception to the extent it comes under List 11 but not including fees takes in any Court.
(21) From the foregoing, it is seen that, the scheme adopted by the regarding general powers of legislation, then allocate powers of taxation in respect of that field. There appears to be a close connection between these two sets of powers. As far as possible a particular field or legislation was more or less completely allocated either title the Center to the states. This principle in the very mature of things cannot apply to the field covered by List 111. Entry 18 in List 11, which is a gerbil Entry, shows that the legislative jurisdiction of a state covers land including 'transfer and allegation of agricultural land'. Transfer of non-agricultural 'land'. The State has been given power not merely to levy land revenue and tax on agricultural income, it has also been given power to levy, duty on succession as well as estate duty in respect of agricultural land. Then comes Entry 49 which says; 'Taxes on lands and buildings'.
No principles of public finance was brought to my notice justifying an interpretation that taxes on lands and buildings' means merely the power to tax the lands and buildings as such and not any incidence of ownership, such as alteration, transfer, gift, etc. No reason is shown why the State Legislature which is authorised to impose, duties on succession to agricultural land should have been denied the power to tax gifts. A gift is but one form of transfer. It is one mode of enjoying the ownership of land. As laid down in Nashville, Chattancoga's case, (1932) 77 law Ed 730, a power to tax property necessarily includes 'the power to tax a right or an incidence of ownership'.
Set D.M. Chandrasekhar, the learned Counsel for the Revenue, contended that this conclusion would have been unassailable if our Constitution had been written on a tabula- rasa. According to him, by the powers of constitutional legislation adopted in this Country not only the powers of taxation were separated from the general powers of legislation, but also the power to tax a 'dealing' with a property was distinguished and separately deals with from the power to tax that property as such. Thus the ratio of the decision in Sundarmier's Case, : 1SCR1422 , was tried to be further extended. In support of the above constitution my attention was levied to Entries 87 and 88 of List 1, Entries 48 and 49 of List 11 and the corresponding Entries in the Government of India Act of 1935.
I think there is no firm for the above theory, Entries 48 and 49 of List 11 became necessary in view of Entries 87 and 88 List 1. As the constitution makes wanted to split up Estate duties and duties on succession and allocate a portion of each of those beads to the Centre and to the States those Entries became necessary. Some is the case with the corresponding Entries is the Government of India Act, 1935. These Entries in my opinion do not disclose to cut down the import of these Entries on the supposed basis of the pattern of ;legislation unless that powers is clear and unmistakable.
The entries in several Lists have not been scientifically drawn up. There is a great deal of overlapping. The fact that in some cases ' alienation and transfers' of properties were separately dealt with is not sufficient to conclude that as a rate, power to legislate on 'transfers and alienations' of properties is not included in the power to legislate on the property itself.
(22) It is well known that the sources of taxation allocated to the States are inelastic and the needs of the States are ever growing. Naturally we should be reluctant to place any further limits rises on the taxation powers of the states by means of any strained construction, if the states are financially starved, the provincial autonomy, slender as it is, would be further impaired resulting to the collapse of the basic structure of our Federation. That could not have been the intention of the constitution makers. The saying that he who pays the paper has a right to call for the tune is also true in the matter of relationship between the Centre and the States.
(23) Next Sri D.M. Chandrasekhar, relied on the presumption of constitutional of a statue. The presumption recognised by Courts arises only when it is otherwise not possible to come to a satisfactory conclusion as to the constitutionality of a statute. If we consider that presumption as a 'china Wall', then the sanctify of the Constitutional provisions would vanish. Such a view is bound to incite the Centre and the States trespass on each other's fields. Presumptions are relevant only when more than one reasonable conclusion is possible. That I think, is not the case here.
(24) Strong reliance was placed by the learned Counsel for the Revenue on the division in Sesharatnam v. Gift-Tax Officer, Palacole, AIR 1960 APPEAL 15. That decision fully supports the case for the Revenue. Their lordships came to the conclusion that the act, is not open to challenge on any ground and is intra vires, even in so far as it affected agricultural lands. They opened that the requisite power of legislation does not fall within any of the Entries in Lists 11 and 111. Nor is it included in any of the Entries 1 to 96 as List 1; hence recourse must be had to Entry of the List 1. The learned chief justice who delivered the judgment of the Bench observed:
'Alternatively it was argued that Entry 18 read with entry 49 discloses the amendment of the Constitution to authorise the state Legislative to legislate on all subjects in regard to lands including the imposition of taxes form 18 mentions also transfer of agricultural lands and entry 49 speaks of taxes on lands and buildings . A combined operation of the would entries brings taxes on transfer for of agricultural lands within the jurisdiction of State Legislatures. Each of the entries in the two lists should receive the widest possible construction and should be interpreted as extending to every form of legislation on that subject and report to the residual power contained in entry 97 of they Union list should be had only as a last refuge continued the learned Counsel.
We are unable to accede to this view in this context we cannot ignore the facts that while the first part of the entry refers, to land in general terms, the text two clauses specifically refer to only agricultural lands and have to be read with item 6 of list 111. They both deal with the method of transfer or alienation of agricultural land but do not concern land itself. The alienation or transfer or agricultural land is subject to State Legislation while lands other than agricultural lands lies within the sphere in which the provincial and the federal powers are concurrent.
This, therefore, and alienation of lands are distributed in Lists 11 and 111 assigning agricultural lands to List 11 and non-agricultural lands to the 111. It is true 'Land' is a generic form and the words that follow i.e. up to 'collection of rent' are explanatory and illustrative, though it is an allied subject, it is not composed in 'Land'. If the word 'land' was intended to include transfer or alienation of agricultural land et, the latter becomes redundant as that expression would have served the purpose.
Further transfer of alienation would not have been confined to agricultural lands. Again item 6 of list 111 would conflict with item 18 if that interpretation State to be accepted. That being so, we find it difficult to import transfer and alienation of agricultural lands into 'lands' in entry 49. The luster item concerns itself with an altogether different head of legislation, that is, tax on the ownership of property.
The object of this item is the levy of a tax on the ownership of property as such, while gift-tax is a tax on a particular use of the property or the exercise of a single power subsidiary to ownership. The owner of a property may put it to several uses. A gift inter vivos is one of the several rights a person may have in a property. This form of tax attaches itself to a transfer on property, while the tax envisaged in entry 49 is incidential to the ownership irrespective of any we which it may be put'. With great respect to the learned judges who decided that case, I am unable to agree to the conclusion reached therein. I have earlier mentioned the reason for separately mentioning 'transfers and alienations of agricultural lands'. For good reason the latter was placed in the concurrent list. But, taxation power in that regard is not separately dealt with and hence thereafter is no jurisdiction to cut down the scope of Entry 49 in List 11. No question of a particular excluding the general arises in the present case.
(25) For the reason already mentioned, 1 an also unable to subscribe to the view that a power to levy tax on ownership of property does not include power to levy tax on a particular use of the property or the exercise of a single power subsidiary to ownership.
(26) Support was sought for the view taken in Jupudi Sesharatnam's Case, : 38ITR93(AP) from some of the decision of the American Courts. In America the allocation of financial powers was made on a different basis. There distinction is made between direct taxes and indeed taxes. It is true that the American Courts have taken the view that a gift tax is not a tax on property as such; its imposition does not rest on general ownership but it is an excise upon the use made of property, upon the exercise of the privilege of transmit interpreting title by gift (see: Para 315, 28 American Juris prudence?) The correctness of this conclusion is not open to question . But t/he question before us is whether the a power to tax on use made of that ownership of a property includes power to tax on use made of that ownership. Hence I do not [s1]think that the decision in Bremley v. Mc Caughan, (1929) 74 law Enacted 226, or the decision in Graniteville Manufacturing Co, v. Query, (1930) 75 Law Enacted 1126 is of any assistance for our present purposes.
(27) For the reasons mentioned above I am of the opinion that power conferred on the States under Entry 49 of List 11 power to tax gifts of 'lands and buildings'. Consequently, thereafter is no need to resort to Entry 97 List 1. As a result of this conclusion, it follows that the 'Act' is so far as it purports to impose tax on gifts of 'lands and buildings' is ultra vires of the powers of the Parliament and to that extent unconstitutional.
(28) For the reason mentioned above, the order of the Second gift-Tax Officer, Mangalore, in Proceedings No. 83-N/58-59 dated 25-11-1959 to the extent. It is challenged in Writ Petition No. 1077-79 has to be quashed. It is ordered accordingly. Similarly, the Order dated 28-10-1959 passed by the Gift-tax Officer, Udipi, South Kanara, in Assessment Proceedings No. G.T. 21/58-59 on his file has to be quashed. It is so ordered.
(29) The respondent shall pay the costs of the petitioners in these petitions. Advocate fee Rs. 250/- (one set).
Mir Iqbal Husain, J.
(30) I agree.
(31) Petition allowed.