Article 285 of Indian Constitution: Exemption of Property of Union from State taxation

Article 285 of Indian Constitution prohibits tax liabilities on the property of the Union which is located within the territories of a state, unless otherwise provided by an Act of Parliament. Clause (1) establishes a general exemption which bars states as well as local authorities from imposing taxes on property of the Union. Clause (2) gives an allowance for certain taxes on Property of the Union and these are allowed to be taxed if the taxation occurred before the commencement of the Constitution and is not changed afterwards. This enables a distinction to be made between Union and State powers with respect to imposition of tax, and assets of the union from suffering undue financial burden.

Article 285 of Indian Constitution

Exemption of property of the Union from State taxation

1. The property of the Union shall, save in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State.
2. Nothing in clause (I) shall, until Parliament by law otherwise provides, prevent any authority within a State from levying any tax on any property of the Union to which such property was immediately before the commencement of this Constitution liable or treated as liable, so long as that tax continues to be levied in that State.

Note: "The information on Article 285 of Indian Constitution is referred from the official website of the Indian Code and is for reference only. Original laws and orders remain untouched.

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According to Article 285 of the Indian Constitution, State governments and local authorities, with respect to the finances of the Union Government, cannot levy taxes on Union property unless Parliament expressly provides otherwise, and such tax-aided exemptions will therefore continue.

• Exemption from State Taxation: Union property is not subject to state or local taxes which in turn means full financial independence for the Central Government.
• Parliamentary Authority: Parliament has the authority to pass specific laws which tax Union property.
• Continuation of Pre-Existing Taxes: Taxes which were put in place before the Constitution came into force may stand unless Parliament amends them.
• Clear Separation of Taxation Powers: An elaborate framework has been put in place to avoid overlaps of taxation provisions and responsibilities between the Union and State governments with respect to taxation.
• Preserving Fiscal Stability: Safeguards Union assets from arbitrary state taxes, promoting a consistent financial structure.

Article 285 of Indian Constitution Significance

Article 285 of Indian Constitution safeguards Union property from taxation by the States, thereby ensuring the financial independence of the Central Government. Thus, it prohibits the imposition of any taxes on Union property by any State or local authority, guaranteeing smooth functioning and fiscal stability in India.

However, such property may continue to be taxable by a prior tax put on it by the States at the time when the Constitution came into force unless such tax is changed by Parliament. Thus, while it clearly demarcates taxation powers. Article 285 lifts the burdens that may be unreasonably placed on Union assets but allows Parliament to define, where necessary, exceptions to the rule. This turns into a fortification for the federal constitution, which ensures that Union resources are exempt from arbitrary state taxation.

Article 285 of Indian Constitution Landmark Cases

Article 285 of India Constitution safeguards Union property from State taxation, shaping legal interpretations through landmark cases that clarify exemptions and exceptions. The following are some of the landmark cases:

Union of India & Others v. State of Uttar Pradesh & Others (2007),

In Union of India & Others v. State of Uttar Pradesh & Others (2007), the Supreme Court ruled that water and sewerage charges imposed on Railway properties were fees for services rendered, not taxes under Article 285 of Indian Constitution. Since Article 285 exempts Union property from State taxation but does not exempt payment for services used, the Railways were required to pay these charges to the state authorities.

Union of India v. Purna Municipal Council & Others (1991)

In Union of India v. Purna Municipal Council & Others (1991), the Supreme Court ruled that municipal service charges imposed on Railway properties were not taxes under Article 285 of Indian Constitution but rather fees for services rendered. The Court held that Article 285(1) exempts Union property from State taxation but does not prevent payment for essential services provided by local authorities, making the Railways liable for such charges.

State of Punjab v. Union of India (1990)

In State of Punjab v. Union of India (1990) the Supreme Court ruled that sales tax imposed on goods sold by the Railways was unconstitutional under Article 285(1) which exempts Union property from State taxation. It was held by the Court that since the goods which were to be sold belonged to the Railways at the time of sale, such goods were free from state-imposed taxes as reinforcing the constitutional protection of Union assets from State taxation.

Conclusion

Article 285 of Indian Constitution grants financial autonomy to the Union Government by exempting its properties from taxation imposed by states so as not to export any financial burden on the Union by states or local authorities. To regain that flexibility, Parliament has the power to regulate those exemptions. This article thus, clearly provides the razor-sharp distinction between broad-ranging powers of taxation that serve to strengthen the endemism of the federal system in India by reinforcing the singular financial liabilities the Union and State governments assume.