Legality of Non-taxation proposals in Finance Bill

lawzmag.comThe Finance Bill, 2017-18 recently passed by Parliament has raised eyebrows mainly on the ground that it did not strictly relate to ‘Money’ thus, undermining the institutional checks and balances. In a bicameral legislature, generally powers are equitably distributed between the two houses of Parliament and a system of check and balance is institutionalized. However, in India which is established as a Union of states under Article 1 of the Constitution, the tilt is towards Lok Sabha, the directly elected House representing the Union.  On the basics of the process of formation India is a decentralized federation whereas on distribution of powers it is a functional federation. The former signifies that states in India are organized by the Union for administrative convenience while the later makes it evident that financial and residuary powers are vested not in states, but in the Union. This could be exemplified by the provisions under Articles 109(1) and 248(1) of the constitution respectively. While Article 109(1) states that money bill shall not be introduced in Rajya Sabha, Art. 248(1) empowers the Union legislature (Parliament) to make laws on subjects not enumerated in the state or Concurrent List in the VII Schedule. Further, Article 109 also provides that Rajya Sabha has the power to the extent of making recommendations only on Money Bill within a maximum period of 14 days and if it does not respond within the stipulated period the Bill is deemed to be passed. Similarly under Article 117(1), a finance bill of the first category shall be introduced only on recommendation of the President in the Lok Sabha. However, to make the procedure objective and transparent, Money Bill has been defined under Article 110(1) (a)-(g).

Rajya Sabha had recommended five amendments to the Finance Bill 2017-18, however, the Lok Sabha did not accept them and the Bill was passed in its original form. The opposition parties had called it a back-door legislation eroding the power of Parliament to frame laws democratically.

The Finance Bill, 2017-18 proposes a number of structural changes that are non-taxation related issues making it controversial. It allows the Government of India to make rules to provide for (i) qualifications, (ii) appointments, (iii) term of office, (iv) salaries and allowances, (v) resignation, (vi) removal and (vii) other conditions of service for the members of tribunals.

The Bill has made Aadhaar mandatory for PAN and income tax. Every person holding a PAN on 1 July, 2017 and who is eligible to hold an Aadhaar will be required to provide the authorities his Aadhaar number, by a date and in a manner notified by the entral government

Rule-making power of the govt. is an example of delegation of legislative powers. Through it is required for expediency and flexibility in implementation of laws it does not require Parliamentary approval. A number of tribunals or, quasi-judicial bodies are proposed to be merged. Tribunals proposed to be merged by amendments to the Finance Bill, 2017 Act Tribunal being replaced Tribunal to take over functions

Competition Act, 2002 Competition Appellate TribunalNational Company Law Appellate Tribunal (under Companies Act, 2013) Airports Economic Regulatory Authority of India Act, 2008 Airports Economic Regulatory Authority Appellate Tribunal Telecom Disputes Settlement and Appellate Tribunal (under the TRAI Act, 1997) Information Technology Act, 2000 Cyber Appellate Tribunal Control of National Highways (Land and Traffic) Act, 2002 National Highways TribunalAirport Appellate Tribunal (under the Airport Authority of India Act, 1994)

Employees Provident Funds and Miscellaneous Provisions Act, 1952 Employees Provident Fund Appellate Tribunal Industrial Tribunal (under the Industrial Disputes Act, 1947) Copyright Act, 1957 C o p y r i g h t B o a r d Intellectual Property Appellate Board (under the Trade Marks Act, 1999) Railways Act, 1989 Railways Rates Tribunal Railway Claims Tribunal (under the Railways Claims Tribunal Act,1987) Foreign Exchange Management Act, 1999 Appellate Tribunal for Foreign Exchange A p p e l l a t e Tribunal (under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976)

The involvement of the Government in the appointments or, conditions of service regarding tribunals has been questioned referring the Supreme Court’s decision in Madras Bar Association V. Union of India, Transfer case No. 150 of 2006, SC, 2014 where the Court held that Appellate Tribunals have similar powers and functions as that of High Courts and hence matters related to appointment and reappointment and tenure must be free from executive involvement.

The Finance Bill, 2017-18 proposes a number of structural changes that are non-taxation related issues making it controversial. It allows the Government of India to make rules to provide for (i) qualifications, (ii) appointments, (iii) term of office, ( iv) salaries and allowances, (v) resignation, (vi) removal and (vii) other conditions of service for the members of tribunals

The Bill has made Aadhaar mandatory for PAN and income tax. Every person holding a PAN on 1 July, 2017 and who is eligible to hold an Aadhaar will be required to provide the authorities his Aadhaar number, by a date and in a manner notified by the Central government. One of the most striking provisions of the Finance Bill is that it provides for donations to political parties through electoral bonds. Such bonds ill be issued by notified banks for an amount paid through cheque or electronic means. The critics are concerned that how will a balance between transparency and anonymity in political funding be ensured. However it is also a fact that anonymity in funding may be desirable to protect donors from harassment from rival political parties.

One of the most striking provisions of the Finance Bill is that it provides for donations to political parties through electoral bonds.

The Bill also gives the income tax officers the right to raid a property where a charity event is taking place. Earlier, section 132 of the Income Tax Act, 1961 made it mandatory for the tax authorities to have ‘reasons to believe’ that person in question had undisclosed assets, and/or was un willing to disclose information required by the department, which gave them the reason to hold a raid. Under the Bill, any property of the person in question can be provisionally seized during a raid.

The Bill also gives the income tax officers the right to raid a property where a charity event is taking place.

Law making in a successful democracy like India needs to protect the democratic attitude and must follow the constitutional provisions. It is evident that the provisions in the Finance Bill are all ‘incidental provisions’ as provided under Article 110(1) (g) which states, ‘any matter incidental to any of the matters specified in sub-clauses (a) to (f). It is also worth mentioning that the decision of the speaker of the Lok Sabha shall be final in case, according to Article 110(3), a que stion arises whether a Bill is a Money Bill or not. This is a discretionary power of the speaker which is highly significant in India’s  epresentative democracy in which the Speaker represents the essence of the popular sovereignty. This is because the Speaker himself is an elected member of the popular (directly  elected) House and is selected by the Majority of the in embers of the House. Hence, his decisions are reflective of the decisions taken by the sovereign people.

Both the taxation and non-taxation measures in the Finance Bill especially after demonetization aim at streamlining the financial system and increasing the rate of investment in India.

Moreover, in this case, the speaker of the Lok Sabha had overruled the Opposition’s objections saying that Rule 219 of the Rules of Procedure & Conduct of Business in Lok Sabha, 1952 does not specifically bar inclusion of non-taxation proposals in a Finance Bill. On this ground the speaker had also ruled out the point of order. A point of order under Rule 376 of the Rules of Procedure shall relate to the interpretation or enforcement of these rules or such Articles of the Constitution as regulate the business of the House and shall raise a question which is within the cognizance of the speaker.

Both the taxation and non- taxation measures in the Finance Bill especially after demonetization aim at  streamlining the financial system and increasing the rate of investment in India. In this backdrop, while from political view point it may appear to be a step to bypass the opposition to some extent, Constitutionally it is valid and may be in the national interests.

CBP Srivastava

President, Centre for Applied

Research in Governance (CARG),


5 thoughts on “Legality of Non-taxation proposals in Finance Bill”

  1. kanta says:

    nice article

  2. ekta says:

    Thanks for sharing

  3. wassim says:

    Good article

  4. sangeta says:

    Well written

  5. kanta says:

    Very informative

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