Sharma, C.J.I- - (1.) The respondents in these appeals have successfully contended before the High Court that the Wealth-tax Act, 1957 is not applicable to the State of Jammu and Kashmir inasmuch as Section 1(2) of the Act in sofar as it extends the Act to Jammu and Kashmir, is ultra vires the power of Parliament. The High Court has upheld their argument that in view of the special provisions contained in Article 370, the Parliament had no legislative competence to extend the Act to the State of Jammu and Kashmir.
(2.) The provisions in Article 370 (omitting the parts which are not relevant here) are in the following terms :- "Temporary provisions with respect to the State of Jammu and Kashmir.- (1) Notwithstanding anything in this Constitution,- (b) the power of Parliament to make laws for the said State shall be limited to - (i) those matters in the Union List and the Concurrent List which, in consultation with the Government of the State, are declared by the President to correspond to matters specified in the Instrument of Accession governing the accession of the State to the Dominion of India as the matters with respect to which the Dominion Legislature may make laws for that State; and (ii) such other matters in the said Lists as, with the concurrence of the Government of the State, the President may by order specify, (d) such of the other provisions of this Constitution shall apply in relation to that State subject to such exceptions and modifications as the President may by order specify." By the Presidential Order made under Article 370(1) called the Constitution (Application to Jammu and Kashmir) Order, 1954, the provisions of the Constitution of India were applied to the State of Jammu and Kashmir with several exceptions and modifications. The words "Notwithstanding anything in Clauses (2) and (3)" occurring in Clause (1, and Clauses (2, (3) and (4) of Article 246 were omitted. Article 248 and Entry 97 of List I, List II and List III (Concurrent List) of the Seventh Schedule too were omitted. Thus the Parliament was vested with the power to make laws only with respect to the matters enumerated in Entries 1 to 96 of List I. The residuary power was retained by the State. Some modifications have been made from time to time in the 1954 Order, but they are not relevant for the present purpose and need not be noticed. According to the respondents, the Act is relatable only and exclusively to Entry 97 of List I and since the said Entry has no application to the State of Jammu and Kashmir, application of the Act to their State is incompetent. The High Court has upheld this contention. If the above premise is correct, there is no doubt that these appeals should fail. The appellant, however, submits that the Act, insofar as it applies to non-agricultural assets, is relatable to Entry 86 of List I and not to Entry 97. It is common ground that the Act as applied to Jammu and Kashmir does not take in Agricultural lands/assets.
(3.) The Parliament has been vested, by Article 246(1) of the Constitution, with the exclusive power to make laws with respect to any of the matters enumerated in List I of the Seventh Schedule. Entry 86 of the Union List is in the following terms :- "86. Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies; taxes on the capital of companies." The Act as it was initially passed in 1957 did not apply to agricultural land. It was only by an amendment in 1969 that the agricultural land was also brought within the purview of the Act.;