Concept of Taxing Power In Democracy, Indian Perspective | Tax law
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Concept of Taxing Power In Democracy- Indian Perspective

Power is a measure of a person's ability to control the environment around them, including the behavior of other persons. The term authority is often used for power perceived as legitimate by the social structure.
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Authored by: Lakshmi. S - VII Semester Student of National University of Advanced Legal Studies

Concept Of Power

Philosophical Concept:
Power is a measure of a person's ability to control the environment around them, including the behavior of other persons. The term authority is often used for power perceived as legitimate by the social structure. Power can be seen as evil or unjust; indeed all evil and injustice committed by man against man involve power. The exercise of power seems endemic to humans as social beings.

The use of power need not involve coercion (force or the threat of force). At one extreme, it more closely resembles what everyday English-speakers call "influence", although some authors make a distinction between power and influence - the means by which power is used (Handy, C. 1993 Understanding Organisations).

Power manifests itself in a relational manner: one cannot meaningfully say that a particular social actor "has power" without also specifying the role of other parties in the social relationship (for a discussion of this concept see Simmel's work on 'subordination' and 'superordination').

Because power operates both relationally and reciprocally, sociologists speak of the balance of power between parties to a relationship: all parties to all relationships have some power: the sociological examination of power concerns itself with discovering and describing the relative strengths: equal or unequal, stable or subject to periodic change. Sociologists usually analyse relationships in which the parties have relatively equal or nearly equal power in terms of constraint rather than of power. Thus 'power' has a connotation of unilateralism. If this were not so, then all relationships could be described in terms of 'power', and its meaning would be lost.

Even in structuralist social theory, power appears as a process, an aspect to an ongoing social structure.
One can sometimes distinguish primary power: the direct and personal use of force for coercion; and secondary power, which may involve the threat of force or social constraint, most likely involving third-party exercisers of delegated power.

Political Concept:

Political power (imperium in Latin) is a type of power held by a person or group in a society. There are many ways to hold such power. Officially, political power is held by the holders of sovereignty. Political powers are not limited to heads of states, however, and the extent to which a person (such as Joseph Kony, Subcomandante Marcos, or Russell Means) or group (such as an insurgency, terrorist group, or multinational corporation) holds such power is related to the amount of societal influence they can wield, formally or informally. In many cases this influence is not contained within a single state and it refers to international power. Political scientists have frequently defined power as "the ability to influence the behaviour of others" with or without resistance.
Within normative political analysis, there are also various levels of power as described by academics that add depth into the understanding of the notion of power and its political implications. Robert Dahl, a prominent American political scientist, first ascribed to political power the trait of decision-making as the source and main indicator of power. Later, two other political scientists, Peter Bachrach and Morton Baratz, decided that simply ascribing decision-making as the basis of power was too simplistic and they added what they termed a 2nd dimension of power, agenda-setting by elites who worked in the backrooms and away from public scrutiny in order to exert their power upon society. Lastly, British academic Steven Lukes added a 3rd dimension of power, preference-shaping, which he claimed was another important aspect of normative power in politics which entails theoretical views similar to notions of cultural hegemony. These 3 dimensions of power are today often considered defining aspects of political power by political researchers.

A radical alternative view of the source of political power follows the formula: information plus authority permits the exercise of power. Political power is intimately related to information. Sir Francis Bacon's statement: "Nam et ipsa scientia potentia est" for knowledge itself is power, assumed authority as given. Many will know that unless someone with authority heeds, there is no political power. The kingmaker is not the king.

It is said democracy is the best method of informing those entrusted with authority.They are best able to use authority without ignorance to maximize political power. Those who exercise authority in ignorance are not powerful, because they do not realize their intentions and have little control over the effects of using their authority.

Post-modernism has debated over how to define political power. Perhaps, the best known definition comes from the late Michel Foucault, whose work in Discipline and Punish (and other writings) conveys a view of power that is organic within society. This view holds that political power is more subtle and is part of a series of societal controls and 'normalizing' influences through historical institutions and definitions of normal vs. abnormal. Foucault once characterized power as "an action over actions" (une action sur des actions), arguing that power was essentially a relation between several dots, in continuous transformation as in Friedrich Nietzsche's philosophy. His view of power lent credence to the view that power in human society was part of a training process in which everyone, from a prime minister to a homeless person, played their role within the power structure of society. Jürgen Habermas opposed himself to Foucault's conception of discourse as a battlefield for power relations, arguing that it should be possible to achieve consensus on the fundamentals rules of discourse, in order to establish a transparent and democratic dialogue. Thenceforth, he argued against Foucault and Louis Althusser that power was not immanent to discourse, and that philosophy could be completely distinguished from ideology.

Sovereign Power- Source of Taxing Power

What differentiates membership of the State from that of other associations is its compulsory nature and the fact that all other organizations and activities within the frontiers of the State are, in the last resort, subordinate to it. The modern State is a territorial society, divided into Government and subjects, claiming within its allotted physical area, supremacy over all other institutions. Sovereignty is, the most important constituent element of the State and there can be no State without a Sovereign power.

The sovereignty of the State is unlimited internally as well as externally. It is original and absolute power and it cannot be divided. Division of sovereignty means destruction of sovereignty. Sovereignty represents the unity of the State, and the sovereign State is one which is externally free and internally supreme. If Sovereignty is not absolute, no State exists, if sovereignty is divided, more than one States exist. There can be no legal power at the back of the sovereignty of the State and no legal check on its scope.

Bodin defined sovereign power as “the supreme power over the citizens and subjects, unrestrained by law.” Hugo Grotius defined it as “supreme political power vested in him whose acts are not subject to any other and whose will cannot be overridden. ”Sovereign power according to Jenks, is “an authority which, in the last resort controls absolutely and beyond appeal the actions of every individual member of the community.”

Development of The Concept:

The term “sovereign” is deriver from the Latin word “superanus” which means ‘supreme’. The notion is modern and its emergence is connected with the rise of the modern nation-State. But it does not mean that the ancient and medieval ages had no idea of such a notion. For the ancients it simply meant “statement of the fact that there must be an ultimate control, someone with the last word in any case of the dispute, able to make final adjustments in the sharing of responsibility and power; and that the State, and no other social force, must exercise this final authority.

The middle ages knew nothing about the doctrine and practice of concerted final authority. The political form, then, was feudalism, based on personal dependence and allegiance within many small groups. Feudalism was the antithesis of unified authority. There was open conflict between the spiritual and temporal authorities and if anybody, under the circumstance, could claim final authority, it was the Church and not the State.

The religious wars of the sixteenth century destroyed the unity of the Church and on the ruins of this destruction, built the modern State. The triumphant monarch either gradually destroyed or absorbed all possible rival intermediaries between himself and his subjects, including the Church. Sovereignty came to be regarded as one of the essential attributes of the State, incarnate in the Kong, the head of the State. His authority was final to define and pronounce the law. The emergence of the modern State, thus gave a new meaning to the term Sovereignty.

Later, people began to realize that the King was a part of the governmental machine and, accordingly, an agent rather than a master, and, as such, he possessed subordinate and delegated authority, which could be revoked at the will of the master, the people. It was a protest against absolute monarchy. The revolutions followed this made the people sovereign and transferred to it, all the attributes of the old monarchy of divine right. The State in its corporate capacity, as thus endowed with all the attributes of sovereignty which the monarch previously possessed. The activities of the State were not only limited to protection, administration and dispensation of justice, but it became an organizer of economic life, an educator, an agent in practically every aspect of collective existence.

This meant an ever-increasing mass of legislation and a great increase in the importance of the State as supreme law-maker, thus reinforcing the dogma of the sovereignty, by giving it a much wider field of application.

In the modern constitutional law, it is frequently said that a legislature is “sovereign within its powers”. This is, of course, pure nonsense if sovereignty is supreme power for there are no “powers” of sovereign body. There is only unlimited power which sovereignty implies. But if sovereignty is merely a legal phrase, for legal authority pass any sort of laws, it is not entirely ridiculous to say that legislature is sovereign in respect of certain subjects for it may then pass any sort of laws on those subjects, but on any other subjects. Parliament, as a creature under the Constitution, not being sovereign-law-making body, is not a constituent body. The Constituents (the people) as political sovereign are a different body. Both the Parliament and the Constituent Assembly, alike, as the representative institutions, reflect the different modes of the exercise of sovereign power for different purposes, within their prescribed limits of authority, as the delegates of power from the People( the constituents) while the Situs of Sovereignty, remains undivided in the People i.e., the Constituents.

As the purposes differ, the nature and the modes of exercise of sovereign power by the Parliament, as the Peoples’ delegate, under Parts XI and XX, differ. The exercise of Power by the Parliament under Part XI is ordinary legislative Power, within the prescribed limits of authority. The exercise of Power by the Parliament under Part XX, being special in nature, is extra-ordinary, in its mode of exercising the law making Power within its prescribed limits of authority. Considering, the special nature with reference to the mode of exercising the extraordinary power, under Part XX, the unenumerated power to amend Part III under Art. 368 of Part XX, the exercise of which by any organ in the state, is expressly forbidden under Art.13(2), as an incident of the Peoples’ exercise of sovereign power of retaining Fundamental Rights under Part III, in the process of exercising the Rights of Self-Determination, the unenumerated power to amend Part III under Art.368 of Part XX cannot be construed as one identical with unenumerated ordinary legislative power, under Entry 97, List I, Schedule VII read with Art.248 of Part XI as is held in the decision of Golak Nath v. The State of Punjab

All governmental organs and institutions owe their origin to the constitution and derive their powers from its provisions. These organs and institutions enjoy only such powers as are conferred on them and function within limits demarcated by the constitution. Parliament is no exception and unlike British Parliament, cannot claim unlimited powers. It must function within its limits and its actions are subjected to judicial scrutiny. It is given the power to amend the constitution, but the power to amend must be exercised within the bounds of the constitution. Besides conforming to the procedure laid down for this purpose, the power to amend should not be exercised so as to destroy or abrogate the basic structure or framework of the constitution. Sovereignty cannot, therefore, be located in Parliament.

In a sense the constitution may appear to be sovereign as it is the supreme law of the land. However a document cannot be the sovereign. The people of India, according to the Preamble, have given to themselves this constitution. The source of the constitution is the people of India will continue to be governed under the constitution so long as it is acceptable to them and its provisions promote their aims and aspirations. It is true that the constitution was adopted by the constituent assembly which was not directly elected by the people. But that does not necessarily mean that the constituent assembly as it came to be constituted, did not project the feelings of the people. The fact that the constitution has been in operation foe more than fifty years with a number of general elections from time to time is an evidence of the people having accepted the constitution in its present form. Following the course of Indian history and the pattern of Indian politics, it may be said that, unlike the Western society, it is the elite of the Indian society rather than the people themselves who have set the tone for the reformation of the society. Besides the fact that the Preamble provided that the people of India have enacted and given to themselves the constitution and its continued acceptance by the people over the years leads to no other conclusion that the binding force of the constitution is the sovereign will of the people of India. If at any stage of history, the people find the constitution is not serving the needs of the Indian Society, the people of India may, if necessary, set in motion machinery which provides for a system suited to the aims and aspirations of the people. It may therefore, be rightly observed that the sovereignty lies with the people of India.

Taxing Power

Taxation is the legal capacity of the sovereignty or one of its governmental agents to exact or impose a charge upon persons or their property for the support of government and for the payment for any other public purposes which it may constitutionally carry out. The power of taxation differs from the power of eminent domain, for under taxation the government is required to make and enforce contribution of money or property by the citizen as his share of the burden of support of the government. Property taken under eminent domain is much beyond the owner’s share of the burden of government. Eminent domain takes nit a share of the public burden, but more than a share.

A government cannot exist without raising and spending money. Parliament controls public finance which includes granting of money to the administration for expenses on public services, imposition of taxes and authorization of loans. This is a very important function of Parliament. Through this means Parliament exercise control over the executive because whenever Parliament discusses financial matters, government’s broad policies are invariably brought into focus. The Indian Constitution devises an elaborate machinery for securing parliamentary control over finances which is based on the following four principles.

The first principle regulates the constitutional relation between the Government and Parliament in matters of finance. The executive cannot raise money by taxation, borrowing or otherwise, or spend money, without the authority of Parliament. The second principle regulates the relation between the two Houses of Parliament in financial matters. The powers of raising money by tax or loan and authorizing expenditure belongs exclusively to the popular House, viz., Lok Sabha. Rajya Sabha merely assents to it. It cannot revise, alter or initiate a grant. In financial matters, Rajya Sabha does not have co-ordinate authority with Lok-Sabha and Rajya Sabha plays only a subsidiary role in this respect. The third principle imposes a restriction on the power of Parliament to authorize expenditure. Parliament cannot vote money for any purpose whatsoever except on demand by ministers. The fourth principle imposes a similar restriction on the power of Parliament to impose taxation. Parliament cannot impose any tax except upon the recommendation of the Executive.

Constitutional Podium of Taxing Power

The entries in the legislative lists are divided into two groups- one relating to the power to tax and the other relating to the power of general legislation relating to specified subjects. Taxation is considered as a distinct matter for purposes of legislative competence. Hence, the power to tax cannot be deducted from a general legislative Entry as an ancillary power. Thus, the power to legislate on inter-state trade and commerce under Entry 42 of List I does not include a power to impose tax on sales in the course of such trade and commerce.

There is no Entry as to tax, in the Concurrent List; it only contains an Entry relating to levy fees in respect of matters specified in List III other than court-fees.
In order to determine whether a tax was within the legislative competence of the legislature which imposed it, it is necessary to determine the nature of the tax, whether it is a tax on income, property, business or the like so that the Entry under which the legislative power has been assumed could be ascertained.

The primary guide for this is what is known as the ‘charging section. The identification of the subject-matter of a tax is only to be found in the charging section, the section which creates the liability to pay the tax as distinguished from the mode of assessment or machinery by which it is assessed.

Generally speaking, all taxation is imposed on persons, but the nature and amount of liability is determined either by individual units, as in the case of a poll-tax, or in respect of the tax payers’ interest in property or in respect of transactions of activities of the tax payers.

But, the ‘incidence’ or the ultimate burden of a tax does not determine its nature or alter the legislative power relating to it. It is the substance of the levy and not the form that determines the nature of the tax. The name given by the Legislature is not conclusive for this purpose.

Once it is held that a legislature has the power to legislate over a particular subject, its competence is not to be limited by the manner in which the power is exercised. Thus, a taxing statute may be amended by incorporating a provision in an annual Finance Act. The intrinsic character of the tax is not to be determined by the mode of measurement or the standard of calculation prescribed for assessing the amount of the tax.

So far as the Entries relating to the taxing power are concerned,- “it is wrong to think that two independent imposts arising from two different acts or circumstances were not permitted” by the Constitution. Thus, the same article may be subject to a Central excise duty and a State Octori duty, or a State tax as well as an Ambit of Taxing Power.

If the power to impose a tax is established, the power to collect the same is necessarily implied. The legislature having the power to impose a tax has also the power to prescribe the means by which the tax shall be collected and to designate officers by whom it shall be enforced; the obligation and indemnity of those officers; the means to ensure proper realization of the tax. The method and manner of collection of tax is no criterion for judging the vires of the tax law.
The following powers flow from the power to tax as ancillary powers-
(1) To provide for refund of a tax illegally or improperly collected and to impose restriction upon the right to claim such refund.
(2) To provide for the prevention of evasion of the tax imposed.
(3) To levy a penalty for the proper enforcement of the taxing statute, or collecting any amount wrongly under colour of that statute, whether by way of fine or forfeiture.

On the other hand, in exercise of taxing power conferred by exercise of a legislative Entry, the Legislature cannot provide for the following, which cannot be said to be ‘ancillary’ to the legislative power in question:
(1) that any money collected by a person by a wrong application of taxing law would still be recoverable by the State as if it were a tax imposed under its legitimate powers, even though the Legislature may penalize such illegal collection.
(2) The result would be the same if the law required the dealer who has recovered an illegal sum which was not recoverable under the taxing law to deposit it with the State so that the State might refund to the person from whom the money had been illegally recovered, because the requirement of deposit with the State is an exercise of the taxing power over a subject which was outside that power.

Constitutional Limitations Upon The Taxing Power

Apart from the limitation by the division of the taxing power between the Union and State Legislature by the relevant Entries in the legislative Lists, the taxing power of either Legislature is particularly subject to the following limitations imposed by particular provisions of our Constitution:
(1) It must not contravene Art.13.
(2) It must not deny equal protection of the laws, must not be discriminatory or arbitrary .(Art.14)
(3) It must not constitute an unreasonable restriction upon the right to business.(19(1)(g))
(4) No tax shall be levied the proceeds of which are specially appropriated in payment of expenses for the promotion or maintenance of any particular religion or religious denomination (Art.27).
(5) A State Legislature or any authority within the State cannot tax the property of the Union.(Art.285)
(6) The Union cannot tax the property and income of a State (Art.289).
(7) The power of a State to levy tax on sale or purchase of goods is subject to Art.286.
(8) Save in so far as Parliament may, by law, otherwise provide, a State shall not tax the consumption or sale of electricity in the cases specified in Art.287
1. Hoechst Pharmaceuticals Ltd. v. State of Bihar, AIR 1983 SC 1019.
2. Kunnathat Thathunni Moopil Nair v. State of Kerala, AIR 1961 SC 552.
3. Kunnathat Thathunni Moopil Nair v. State of Kerala, AIR 1961 SC 552.
4. Ayurveda Pharmacy v. State of T.N, AIR 1989 SC 1230.
5. Chandrakant Krishnarao Pradhan v. Jasjit Singh, AIR 1962 SC 204

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