Article 265 of the Indian Constitution is a cornerstone provision that establishes a fundamental principle governing the power of taxation in India. It mandates that the State, whether the Union or a State government, cannot impose or collect any tax unless it is expressly authorised by a law enacted by a competent legislature. This provision is vital for upholding the rule of law and protecting citizens’ property rights against arbitrary executive action.
The article ensures that the power to tax, which directly affects the property of individuals and entities, rests squarely with the elected representatives of the people, embodied in the Parliament and State Legislatures. This principle is a safeguard against the executive levying taxes without legislative sanction, thereby preventing potential abuse of power and ensuring financial accountability and transparency in governance.
Original Text
265. No tax shall be levied or collected except by authority of law.
Detailed Explanation
Article 265 unequivocally states that the power to levy and collect taxes must originate from a specific law. The phrase “authority of law” is crucial here. It means that the tax must be imposed under the provisions of a statute passed by a competent legislature, namely, the Parliament of India or a State Legislature, acting within its respective legislative competence as defined in the Lists of the Seventh Schedule.
This article serves as a limitation on the executive power. The executive branch of the government is responsible for administering the laws, including tax laws, but it cannot itself create a new tax, abolish an existing tax, or modify the essential features of a tax (like the rate, base, or exemptions) without legislative backing. Any executive action pertaining to taxation must be traceable to a valid law.
The article implies that mere executive orders, notifications, or rules, unless specifically authorised by a parent Act of the legislature, cannot impose or collect taxes. Delegated legislation in the field of taxation is permissible, but only to the extent specifically empowered by the enabling Act and within the framework laid down by the legislature. The essential legislative functions of taxation (like determining the subject matter, rates, and basis of taxation) cannot be delegated to the executive.
This principle is deeply rooted in the history of constitutionalism, echoing the famous maxim “no taxation without representation.” While the Indian Constitution doesn’t explicitly use this phrase, Article 265 embodies its spirit by vesting the ultimate authority to tax with the legislature, which is composed of elected representatives.
Detailed Notes
- Fundamental Principle: Article 265 lays down the fundamental principle that the power to levy and collect taxes in India resides exclusively with the legislative authority, not the executive.
- Source of Authority: Any tax imposed or collected must be sanctioned by a specific law enacted by a competent legislature (Parliament or State Legislature).
- “Authority of Law”: This phrase requires a valid statute passed by the legislature.
- Executive Limitation: The article restricts the executive government’s power; it cannot impose, modify, or abolish taxes on its own authority. Executive action must be supported by legislation.
- Rule of Law: It upholds the rule of law by ensuring that governmental power, specifically the power to tax, is exercised under the authority of law and not arbitrarily.
- Protection of Property: It serves as a crucial safeguard for citizens’ property rights, preventing the State from taking private property through taxation without legal backing.
- Separation of Powers: It reinforces the separation of powers by assigning the function of law-making for taxation to the legislature and the function of executing and collecting taxes to the executive.
- Delegated Legislation: While permissible, delegated legislation in taxation must operate strictly within the scope and limits defined by the parent Act passed by the legislature. Essential legislative functions like fixing tax rates cannot be delegated completely.
- Competent Legislature: The law must be passed by a legislature that is competent to enact such a law as per the distribution of legislative powers in the Seventh Schedule (Union List, State List, Concurrent List).
- Lack of Law: Any tax levied or collected without the backing of a valid law is unconstitutional and illegal.
Additional Comments
- Article 265 is a fundamental constraint on both the Union and State governments regarding their power of taxation.
- It is related to the broader principle of Public Purse Control, which dictates that public funds cannot be spent or raised without legislative sanction.
- The principle enshrined in Article 265 is often invoked in court cases challenging the legality of tax demands or notifications issued by tax authorities.
- This article is distinct from the distribution of legislative powers for taxation (covered in Article 246 and the Seventh Schedule) and the financial relations between the Union and States (covered in other articles of Part XII). Article 265 establishes the requirement of a law, irrespective of which legislature is competent to make that law.
- While India does not explicitly have “no taxation without representation” as a constitutional phrase, Article 265 effectively implements this democratic principle.
Summary
Article 265 of the Indian Constitution mandates that no tax can be levied or collected by the state unless it is specifically authorised by a law enacted by a competent legislature. This provision restricts the executive’s power to tax and ensures that taxation is based on legislative authority, thereby protecting citizens’ property rights and upholding the rule of law. It underscores that the power to tax is vested in the elected representatives, preventing arbitrary financial burdens.