Taxation law in India governs the collection and regulation of taxes by the government. The subject includes direct and indirect taxes, constitutional provisions, and major judicial interpretations. This guide explains key concepts, landmark cases, and multiple-choice questions (MCQs) to help law students prepare for the All India Bar Examination (AIBE).
📜 1. Introduction to Taxation Law
Meaning & Scope of Taxation
- Taxation is the process by which a government collects revenue from individuals and businesses to fund public services.
- Types of Taxes in India:
- Direct Taxes: Levied directly on income, such as Income Tax and Wealth Tax.
- Indirect Taxes: Levied on goods and services, such as GST and Customs Duty.
Constitutional Provisions on Taxation
- Article 265: “No tax shall be levied or collected except by authority of law.”
- Seventh Schedule:
- Union List: Includes income tax, customs duties, and corporate tax.
- State List: Includes land revenue, agricultural income tax, and state excise duty.
- Concurrent List: Includes GST, stamp duty, and taxes on professions.
⚖️ 2. Landmark Cases on Taxation Law
(a) A.K. Gopalan v. State of Madras (1950)
- Facts:
- Challenged the validity of preventive detention and taxation powers.
- Judgment:
- The Supreme Court upheld taxation laws but emphasized reasonable restrictions under the Constitution.
- Conclusion:
- Reinforced government authority in taxation, subject to constitutional limits.
(b) McDowell & Co. Ltd. v. Commercial Tax Officer (1985)
- Facts:
- The company attempted to avoid paying excise duty using tax planning techniques.
- Judgment:
- The Supreme Court ruled that tax evasion is illegal, but tax planning is allowed if done legally.
- Conclusion:
- Differentiated between tax avoidance (legal) and tax evasion (illegal).
(c) Vodafone International Holdings B.V. v. Union of India (2012)
- Facts:
- Vodafone acquired Hutchison’s Indian operations through an offshore transaction, avoiding capital gains tax in India.
- Judgment:
- The Supreme Court ruled in favor of Vodafone, stating that indirect share transfers outside India are not taxable.
- Conclusion:
- Led to retrospective taxation under amendments in the Income Tax Act.
(d) Keshav Mills Ltd. v. Commissioner of Income Tax (1953)
- Facts:
- The company challenged income tax provisions regarding assessment procedures.
- Judgment:
- The Supreme Court ruled that tax laws must be interpreted strictly but fairly.
- Conclusion:
- Reinforced literal interpretation of tax statutes.
📌 3. Major Tax Laws in India
- Income Tax Act, 1961 – Governs taxation on income.
- Goods and Services Tax (GST) Act, 2017 – Replaced multiple indirect taxes.
- Customs Act, 1962 – Regulates import and export duties.
- Wealth Tax Act, 1957 – (Now abolished) dealt with taxation on personal wealth.
🏛 4. Taxpayer Rights & Liabilities
- Rights:
- Right to be informed about taxes.
- Right to appeal against unfair tax assessments.
- Liabilities:
- Mandatory tax payment under the law.
- Duty to disclose correct income and assets.
📝 5. Multiple-Choice Questions (MCQs)
-
Which Article of the Constitution states that no tax shall be levied or collected except by authority of law?
a) Article 14
b) Article 265
c) Article 19
d) Article 368- ✅ Answer: b) Article 265
-
Which landmark case distinguished between tax avoidance and tax evasion?
a) A.K. Gopalan v. State of Madras
b) McDowell & Co. Ltd. v. CTO
c) Vodafone v. Union of India
d) Keshav Mills Ltd. v. CIT- ✅ Answer: b) McDowell & Co. Ltd. v. CTO
-
Which of the following is an indirect tax?
a) Income Tax
b) Goods and Services Tax (GST)
c) Corporate Tax
d) Wealth Tax- ✅ Answer: b) Goods and Services Tax (GST)
-
In Vodafone’s case, what was the key issue?
a) Applicability of retrospective taxation
b) Capital punishment for tax evasion
c) Taxation on direct share transfers
d) The constitutionality of GST- ✅ Answer: a) Applicability of retrospective taxation
-
Which of the following taxes has been abolished in India?
a) Income Tax
b) Wealth Tax
c) GST
d) Custom Duty- ✅ Answer: b) Wealth Tax
🎯 Conclusion
Understanding taxation laws is essential for law students preparing for AIBE. This guide covers constitutional provisions, key tax laws, landmark cases, and MCQs