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Table of Contents
   Index
   About the Author
   Introduction
   Preface 
   Indian Federalism
   Integration of States
   Article 370
   The Constituent Assembly
   Federal Jurisdiction
   Division of Powers
   State Apart
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Chapter 6: Division of Powers

The Indian federal organization envisages a division of powers between the Union Government and the Constituent Units: the States, in statutorily guaranteed terms. The powers vested with the Union Government as well as the powers exercised by the State Governments are plenary and derived from the Constitution of India and cannot be abrogated by the Union or the States. With exceptions, which provide for certain defined circumstances, the Union Government and the State Governments exercise powers with their respective jurisdiction, which is defined by the Constitution.

The division of powers is embodied in an elaborate scheme under which the legislative, administrative and financial powers of the Union Government and the State Governments are enumerated in detail. The Constitution provides for a concurrent area of jurisdiction in legislative sphere, subject to the condition that the authority of the Parliament to legislate on the subjects included in the concurrent area is recognized paramount.

A characteristic feature of the division of powers, the Indian federal organization incorporates, is that all residuary powers of legislation are retained by the Union Government. The Constitution of India, vests exclusive powers with the Government of India, to legislate in respect of any matter, in addition to the subject included in the Union List, which is not enumerated in the State List and the Concurrent List.

The division of powers between the Union and the State of Jammu and Kashmir is determined within the scope of Article 370 of the Constitution of India as amended by the various Constitution (Application to Jammu and Kashmir) Orders, promulgated by the President of India from time to time. In its original form Article 370, did not provide for the application of the provisions of the Constitution of India, with regard to the state-center relations, including the Seventh Schedule. Accordingly the powers of the Parliament to legislate were limited to:

1. Matters in the Union List and the Concurrent List, which were enumerated in the Instrument of Accession;
2. Matters, in the Union List and the Concurrent List, which in consultation with the State Government were declared by the President to correspond to the matter specified in the Instrument of Accession;
3. Such other matters in the Union List and the Concurrent List, which were specified by the President of India with the concurrence of the State Government.
The scheme of the division of powers embodied in Article 370 was drastically modified in 1954, when the President of India promulgated the Constitution (Application to Jammu and Kashmir) Order of 1954, and Part XI of the Constitution of India together with Seventh Schedule was made applicable to the State. The provisions of Part XI of the Constitution of India deal with the legislative and administrative relations of the State. The application of Part XI of the Constitution of India brought the division of powers between the Union and Jammu and Kashmir in line with the federal division of powers envisaged by the Constitution of India. The subsequent Presidential Orders further defined the areas of authority of the State and the Union, pruning and modifying the reservations imposed upon the application of the Part XI of the Constitution of India to the State, which included the application of division of financial powers between the Union and the State, Part XI enumerated. Most to the reservations and exceptions saved certain subjects in the Union List and the Concurrent List from the jurisdiction of the Union and reserved them for the State and secured the State Legislative, administrative and financial powers, which in case of the other Indian States were vested with the Union Government. Many of the reservations and exceptions, including those, which vest the residuary powers in the State, are still operative. Thus the powers exercised by the Union in relation to the State, pertain to subjects in the Union List and the Concurrent List, with regard to which the provisions of the Seventh Schedule are made applicable to the State. All the residuary powers are vested with the State.

Legislative Relations

The Constitution of India follows the principle in accordance with which, all matters of national importance are vested with the Union and matters of local importance are exercised by the States. The content and nature of the powers of national importance and local importance, was determined by the Constituent Assembly of India, in which the British Provinces and the acceding States were represented on the basis of the ratios of population and to which the Governments of the acceding States had delegated the power to do so.

The Constitution of India enumerates elaborately the legislative powers delimiting subjects for the competence of he Union and the States. Besides the exclusive legislative powers that the Union and the State Legislatures are given, concurrent authority of legislation is vested in the Union and the State Legislatures over a number of specified subjects. The provision of the Seventh Schedule are applicable to the State of Jammu and Kashmir in respect of the Union List and be Concurrent List with certain exceptions. The Union is competent to legislate in respect of the Jammu and Kashmir State with regard to the following subjects in the Union List:

1. Defense of India and every part thereof, including preparation for defense and all such acts as may be conducive in times of war, its prosecution and after its termination, effective demobilization; naval military and air forces and other armed forces of the Union; administration of cantonments; naval, military and air-force works; arms firearms, ammunition and explosives; atomic energy and mineral resources necessary for its production; industries declared by Parliament by law to be necessary for the purpose of defense or for the prosecution of war;

2. Foreign affairs and all matters which bring the Union into relation with foreign countries; diplomatic and consular and trade representations; United Nations Organization; Participation in international conferences, associations and other bodies and conventions with foreign countries; war and peace, foreign jurisdiction, citizenship, naturalization and aliens, extradition, immigration to and emigration from India; pilgrimages to places outside India; piracies and crimes committed on the High Seas or in the air, offences against the Law of Nations committed on land or the High Sea or in air;

3. Railways; highways, declared by or under law made by the Parliament as national Highways; shipping and navigation on inland waterways declared by law made by the Parliament as national waterways, mechanically propelled vessels on waterways; light houses including light ships, beacons and other provisions for the safety of shipping and aircraft; ports declared by or under law, made by the parliament to be major ports, authorities; port including their delimitation and the constitution of port quarantine including hospitals with seamen's and maritime hospitals; airways, aircraft and air navigation, aerodromes, aeronautical education and training provided by the States and other agencies; carriage of passengers and goods by railways, sea or air, by national waterways; posts and telegraphs, telephones, wireless, broadcasting and other forms of communication;

4. property of the Union and the revenues there from; public debt of the Union; currency, coinage, legal tender foreign exchange, foreign loans, Reserve Bank of India, Post Office Saving Bank; lotteries; trade and commerce with foreign countries; import and export across custom frontiers; custom frontiers; inter-state trade and commerce, incorporation, regulation and winding up of trading corporation, including banking insurance, financial corporation, except cooperative societies; incorporation, regulation, and winding up of corporations whether trading or not, banking; bills of exchange cheques, promissory notes and other instruments; insurance; stock exchange and future markets; patents, inventions and designs, copy right, trade marks and merchandise marks, weights and measures, quality of goods to be exported out of India or transported from one State to another;

5. Industries declated by Parliament by law to be expedient in the public interest; regulation of and development of oil fields and mineral oil resources, petroleum and petroleum products; other liquids and substances declared by Parliament by law to be inflammable; regulation of mines and mineral development to the extent declared by law made by the Parliament to be expedient in public interest; labor and safety in mines and oil fields;

6. Regulation and development of inter-State rivers and river valleys to the extent to which such regulation and development under the control of the Union is declared by Parliament in the public interests; fishing and fisheries beyond territorial waters; manufacture and distribution of salt by Union agencies, regulation and control of manufacture, supply and distribution by other agencies; cultivation, manufacture and sale for export of opium;

7. Industrial disputes concerning Union employees;

8. National Library, the Indian Museum, the Imperial War Museum, the Victoria Memorial, the Indian War Memorial and other institutions financed by the Government of India; Benares Hindu University, Aligarh Muslim University; the Delhi University and any other institution declared by parliament by law to be institutions of national importance; institutions of scientific and technical education, financed by the Government of India; wholly or in part, and declared by the Parliament by law to be institutions of national importance; Union agencies for professional, vocational or technical training, including training of police of ricers, the promotion of special studies and research, and scientific and technical assistance in the investigation and detection of crime; coordination and determination of standards in institutions for higher education or research or scientific or technical institutions; ancient and historical monuments and archaeological rights and remains declared by Parliament to be of national importance; the Survey of India, the Geological, Botanical, Zoological and Anthropological Surveys of India; Meteorological Department;

9. Census;

10. Union Public Services; All India Services; Union Public Service Commission; Union Pensions; pensions payable by Government of India or out of the Consolidated Fund of India;

11. Elections to Parliament; to the State Legislatures and to the of rices of the President and Vice President; the Election Commission;

12. Salaries, allowances of the members of the Parliament Chairman and the Deputy Chairman of the Council of States and Speaker and the Deputy Speaker of the House of the People; powers, privileges and immunities of each House of Parliament and of the members and the Committees of each House; enforcement of attendance of persons for giving evidence or producing documents before the Committee of Parliament or Commissions appointed by the Parliament;

13. Emoluments, allowances, privileges and rights in respect of leave or absence of the President and Governors, salaries and allowance of the Ministers of the Union; the salaries and allowances and rights in respect of leave and other conditions of the service of the Comptroller and Auditor General of India; Audit and Account of the Union and the States;

14. Constitution, organization, jurisdiction and powers of the Supreme Court, including contempt, and fees taken, persons entitled to practice; High Courts; servants of the High Courts; persons entitled to practice in the High Courts;

15. Extension and regulation of the powers of police force belonging to any State or to any area outside the State or to railway areas outside the State; Inter-State quarantine;

16. Taxes on income other than agricultural income; duties of custom including export duties; duties on excise on tobacco and other goods manufactured or produced in India except alcoholic liquor for human consumption and opium, Indian hemp and other narcotic drugs; corporation tax; Taxes on capital value of assets exclusive of agricultural land of individuals and companies, taxes on capital of companies; estates duty in respect of succession to property other than agricultural land; terminal taxes on goods or passengers, carried by rail, sea or air; taxes on railway fares and freights; taxes other than stamp duties on transaction in stock exchanges and future markets; rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of landing letters of credit, policies of insurance transfer of shares, debentures, proxies and receipts; taxes on sale and purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-state trade or commerce;

17. Offences, against laws with respect to any of the matters in the Union List; inquiries, surveys and statistics in the Union List jurisdiction of Courts other than Supreme Court with respect to any of the matters in the Union List; Admiralty Jurisdiction; fees in respect of any matters in the Union List but not including fees taken in any Courts;

18. Prevention of activities directed towards, disclaiming, questioning or disruption the sovereignty and territorial integrity of India or bringing about secession of a part of territory of India from the Union or causing insult to the Indian National Flag, the Indian National Anthem and the Constitution of India.

In the Concurrent List, the subjects over which the Union and the State of Jammu and Kashmir exercised concurrent jurisdiction, are specified as follows:

1. Removal of prisoners, accused persons, persons subjected to preventive detention, from one State to another State;
2. Administrators General and official trustees;
3. Lunacy and mental deficiency, hospitals for the treatment of lunatics and mentally deficient;
4. Adulteration of foodstuffs and other goods; drugs and poisons;
5. Trade unions; industrial labor disputes, social security and insurance, unemployment and employment; labor welfare, conditions of work; provident funds, employer's liability; workmen's compensation; invalidity and old age pensions and maternity benefits; vocational and technical training of labor;
6. Legal, medical and other professions; vital statistics including registration of births and deaths;
7. Trade and commerce; production, supply and distribution of the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in Public interest and imported goods, foodstuffs including edible oilseeds and oils, cattle fodders, oil cakes and other concentrates, raw cotton and cotton seeds and raw jute;
8. Mechanically propelled vehicles, including the principles on which taxes on such vehicles are to be levied; factories;
9. Newspapers, books and printing presses;
10. Inquiries and statistics;
11. Jurisdiction and powers of all Courts;
12. Fees in respect of any of the matters specified in the List and but not including the fees taken in any Court.
The powers which are reserved for the State include the subjects in the Union List and the Concurrent List, which are saved application in relation to the State along with all other residuary powers, including the subjects in the State List. The provisions of the Statc List of the Seventh schedule are not applicable to the State. Entry 97 of the Union List, which vests the residuary powers of legislation in the Parliament, is not application to the State. The powers reserved for the State, therefore, include:
1. The powers enumerated in the Union List but saved application in respect of Jammu and Kashmir;
2. Powers enumerated in the Concurrent List but saved application in respect of Jammu and Kashmir;
3. Subjects enumerated in the State List; and
4. Residuary powers.
The powers vested with the Union Government and the States are mutually exclusive, but the Constitution of India provides for certain exceptions, in which the Union is empowered to legislate on the subjects enumerated in the State List. In respect of Jammu and Kashmir State as well, the Union is empowered to legislate on the powers vested with the State. However, Article 249 of the Constitution of India is not applicable to the Jammu and Kashmir and the Parliament cannot assume powers to legislate on the residuary powers vested in the State. The Parliament is empowered to legislate on the residuary powers vested in the State to implement treaty obligations and in case a state of emergency is in operation.
 
Article 246 and Article 254 of the Constitution of India are applicable to the Jammu and Kashmir State without any reservations. With regard to the laws made by the Parliament in its exclusive powers to legislate in respect of the Union List, the precedence of Parliament is presumed. In case of a conflict between the laws made by the Parliament and the State Legislature on a subject placed within the concurrent jurisdiction of the Union and the State, the law made by the Parliament prevails. Legislation undertaken by the State Legislature whether anterior or posterior to the Union legislation becomes void to the extent of its inconsistency.
 
The Constitution (Application to Jammu and Kashmir) Orders promulgated by the President of India in 1954, and subsequently, have brought the State within the ambit of the legislative relations between the Union and the States envisaged by the Constitution of India. However, the exceptions and reservations, specifically with regard to the residuary powers, leaves a wide field of legislative authority to the Jammu and Kashmir State. 

Residuary powers are a vital part of the legislative competence, which in the Indian federal organization, are vested with the Union Government. The elaborate enumeration of the powers, the Seventh Schedule underlines, adds to the importance of the residuary powers, mainly because any such enumeration can be far from exhaustive and the State Government has the opportunity to block a national decision on important makers of government, which may arise from time to time. In such a case, the Jammu and Kashmir State retains the initiative to legislate on matters, which may conflict with national consensus and force the Parliament to amend Article 370, since the State Government would not be prepared to give concurrence to a change in the operation of Article 370, which the President of India would seek to bring about.

Administrative Relations

The State Governments are ensured exclusive and independent administrative authority over the subjects in respect of which they exercise legislative authority.

Since the administrative operations involve delegation of powers in decision making, with ramifications far wider than those involved in legislation, the Constitution of India has devised techniques which ensure the Union a measure of control aver the administrative competence of the State. "The Constitution has devised techniques of control over the states by the Union to ensure that the State Governments do not interfere with the legislative and executive policies of the Union and also to ensure that the efficiency and strength of each individual unit which is essential for the strength of the Union."

To ensure smooth and satisfactory function of the administrative process of the Union and the States and their coordination at the two levels the Constitution of India underlines the following provisions:

1. The executive powers of the State are so exercised as to ensure compliance with the laws made by the Parliament;
2. The Union is empowered to issue directions to the State Governments to ensure that their administrative operations do not impede and prejudice the executive powers of the Unions;
3. The Union is empowered to issue directions to the State Governments to remove any obstacles and difficulties for a Union agency to function in the States;
4. The Union is empowered to issue directions the States in respect of maintenance of the means of communication of national importance and the protection of railways;
5. Full faith and credit is given to public acts, records and judicial proceedings of the Union in all parts of the Union territory;
6. The Union Government is empowered to deal with the waters of inter-state rivers and river valleys;
7. The Union Government is empowered to settle inter-state disputes.
The provisions of the Constitution of India with regard to administrative relations between the Union and States are applicable to Jammu and Kashmir with certain modifications. The administrative competence of the State Government extends to all the subjects placed within the ambit of the Legislative authority of the States.
However, the administrative powers exercised by the Jammu and Kashmir State are subject to the limitations, which the Constitution of India imposes on the other States, with certain modifications. The State Government is also required to exercise its administrative authority in such a way that compliance with the laws made by the Parliament is ensured. The Union Government s empowered to give the State Government such directions as are considered necessary for this purpose. By a specific modification in respect of Jammu and Kashmir, the State Government is required to exercise its executive power in a manner, which facilitates the function of the Union Government in the State. The State Government is also required to acquire and requisition property on behalf of the Union and transfer property to the Union if it belongs to the State. Article 256 of the Constitution of India, in its application to Jammu and Kashmir, is appended with a new clause by the Constitution (Application to Jammu and Kashmir) Order 1954, which stipulates;
 
The State of Jammu and Kashmir shall so exercise its executive power as to facilitate the discharge by the Union of its duties and responsibilities under the Constitution; and in particular, the said State shall, if so required by the Union, acquire or requisition property on behalf of and at the expense of the Union, or in default of agreement, as may be determined by an arbitrator appointed by the Chief Justice of India.
Besides the powers of the Union to ensure compliance with the laws made by the Parliament, the State Government is also subject to the obligation to refrain from acts, which impede and hamper the executive power of the Union. The Union Government is empowered to give directions to the State Government to ensure that the administrative operations in the State do not impede and obstruct the function of the Union in the States. The Union can also give directions to the State Government in regard to the construction and the maintenance of national or military importance and protection of railways. The Union Government is also empowered to declare highways or waterways as national highways. The Union Government is also empowered to construct and maintain means of communication as apart of its function with respect to naval, military and air force works.
 
Provisions are incorporated in Article 365 of the Constitution of India, for drastic remedial measures, which the Union is empowered to take in case State Governments fail to comply with the directives it has given to them. In case a State fails to comply with the directions given by the Union, the President is empowered to impose a state a emergency in the State under Article 356 of the Constitution of India. Article 356 provides for the imposition of a state of emergency in a State of consequence of a constitutional breakdown. During the operation of the emergency, the President is entitled to assume all or any powers of the State Government and also order that the powers of the State Legislature be exercised by or under the authority of the Parliament.
Article 365 of the Constitution of India is not applicable to the Jammu and Kashmir State and therefore, no remedies are available to the Union if the State Government fails to comply with directions, the Union Government issues to the State. The powers of imposing a state of emergency are drastic and are meant for grave and serious situations; nevertheless, they are essential to ensure cooperation of the States with the administrative decisions of the Union Government. Without any constitutional remedies, the administrative powers vested with the Union in respect of Jammu and Kashmir, are hollow and deprived of their content.

The provisions of the Constitution of India, applicable to the Jammu and Kashmir State, empower the Union Government to entrust the State Government and its officers, executive functions of the Union, with the consent of the State Government. The Union Government is also empowered to impose duties on the Government of the State and is officers, through any of its laws applicable to the State. The Governor of the State is also entitled to entrust the State Government or its officers, functions of the Union Government with the consent of the Government of India Such an action can be taken by the Governor in respect of any matter over which the administrative authority of the State extends.

Provisions of Article 261 of She Constitution of India require the State Governments to give full faith and credit to public acts, records and judicial proceedings of the Union. The manner in which these acts and records are proved and their effect determined is laid down by law made by the Parliament. Article 261 is applicable to the Jammu and Kashmir State with certain modifications. Article 261, as it is applicable to Jammu and Kashmir stipulates;

1. Full faith and credit shall be given to throughout the territories of India to public acts, records and judicial proceedings of the Union and of every State.
2. The manner in which and the conditions under which the acts, records and proceedings referred to in clause (i) shall be proved and the effect thereof determined, shall be provided by law.
3. Final judgments or orders delivered or passed by Civil Courts in any part of the territory of India shall be capable of execution within the territory according to law.
In respect of the Jammu and Kashmir State therefore, the manner in which public acts, records and judicial proceedings are proved and their effect determined, is provided by law and not by "law made by Parliament." The power to determine the manner in which the acts, records and proceedings are proved and their effect determined is vested in the Courts and not the Union Legislature.
 
The Constitution of India provides for the appointment of Inter-State Council to coordinate policy and action between the Union Government and the States. The Inter-State Council is appointed by the President of India. The Jammu and Kashmir State is also brought within the ambit of these provisions and is subject to the powers of the President. The Inter-State Council is entrusted with the functions to enquire into and advise upon disputes between the States, investigate and deliberate upon the subjects of mutual interest between the Union and the States and recommend measures for better coordination of policy and action with respect to the subjects of common interest.

Financial Relations

The financial powers of the Union Government and the Governments of the States are separately defined by the Constitution of India. No area of concurrent jurisdiction is left between the Union and the States, though provisions are available to empower the Union to levy and collect certain taxes and share certain tax returns with the States. In the allocation of resources between the Union and the States, the-Constitution classifies the exclusive State sources, the duties levied by the Union but collected and appropriated by the States and the duties levied by the Union and distributed between the Union and the States.

The division of financial powers underlined by the Constitution of India, envisages two distinctly separate schemes; the division of powers to tax and distribution of the revenues. The Constitution of India does not only envisage a plan for the patterns of division of taxable sources, it envisages a pattern of distribution of the revenue returns between the Union and the States. The Union and the States levy taxes within the orbit of their competence to tax but the division of revenues is based on the principle of their needs and requirements. This, in fact, accounts for the unusual constitutional provisions under which certain taxes included in the Union List are wholly or in part intended for the States and in certain cases their collection is entrusted to the States. The net proceeds assigned to the States are distributed among them on the principles recommended by the Finance Commission.

The division of taxing powers and financial resources between the Jammu and Kashmir State and the Union follows the main principles of the patterns of allocations underlined by the Constitution of India. The sources enumerated for UNI or in the Union List are demarcated exclusively for the Union Government.

Provisions of the Constitution of India with regard to the taxes and duties levied by the Union and collated and appropriated by the States or taxes levied by the Union and divided between the Union and the States are applicable to Jammu and Kashmir as well. The reservation made in favor of the State is that entry ninety-seven of Union List is not applicable to the State and the residuary powers of taxation are not transferred to the Union as is the case with the other Indian States.

The division of sources and revenues between the Union and the Jammu and Kashmir State is divided by the Constitution (Application to Jammu and Kashmir) Order 1954, as follows:

Union Sources

1. Property of the Union; public debt of the Union duties of custom and export duties;

2. Currency, coinage and legal tender; Post-Office saving Bank; corporation tax; duties of excise on tobacco and goods manufactured and produced in India; fees in respect of any of the matters in the Union List, but not including any fees taken in the Courts; lotteries;
3. Posts and telegraphs, telephones, wireless, broadcasting and other communications; railway fares and freights;
4. Stamp duty in respect of bills of exchange, cheques, promissory notes etc.
5. Reserve Bank of India;
6. Taxes on income other than agricultural land; duties in respect of succession to property other than agricultural land; terminal taxes on goods, passengers carried by railway, sea and air;
7. Taxes other than stamp duties on transactions in stock exchanges and future markets; taxes on the sale or purchase of newspapers; taxes on capital value of assets exclusive of agricultural land of  individuals and companies.

State sources

1. Land revenue; taxes on agricultural income; taxes on land and buildings;

2. Taxes on mineral rights subject to the limitations imposed by the Parliament relating to mineral development;
3. Duties in respect of succession to agricultural land; estate duties in respect of agricultural land;
4. Duties of excise on goods manufactured and produced in the States, such as alcohols, opium, narcotics and narcotic drugs;
5. Taxes on sale and consumption of electricity;
6. Taxes on the entry of goods into local area for consumption, use or sale; taxes on sale, and purchase of goods other than newspapers; capital taxes; taxes on goods and passengers carried by road or on inland waterways;
7. Fees in respect of any makers in the State List except the fees taken in any court; stamp duty in respect of documents other than those specified in the Union List; taxes on advertisements except those published in the newspapers;
8. Taxes on vehicles; taxes on animals and boats; tolls;
9. Tolls, taxes on professions, trades, callings and employments, taxes on luxuries including taxes on entertainment, amusement betting and gambling;

Taxes levied and collected by The Union but Assigned to the States

1. Duties in respect of succession to property other than agricultural land; estates duty on property other than agricultural land; terminal taxes on goods or passengers carried by railway, sea or air; taxes on railway fares and freights; taxes other than stamp duties on transactions in stock exchanges and future markets;
2. Taxes on the sale and purchase of newspapers and on advertisements published therein;
3. Taxes on the sale and purchase of goods other than newspapers where such sale or purchase takes place in the course of inter-State trade and commerce.
Duties levied by the Union but collected and Appropriated by the State.
Stamps duties and duties on excise on medical and toilet preparations mentioned in the Union List are levied by the Government of India and collected and appropriated by the State.
Taxes levied and collected by the Union but Distributed between the Union and the State.
1. Taxes on income other than agricultural income;
2. Union duties of excise other than such duties of excise on medicinal and toilet preparations as are mentioned in the Union List and collected by the Government of India.
Grants-in-aid

Within the broad framework of the division of financial powers between the Union and the States, the distribution of revenue is made in favor of all States uniformly. However, due to regional disparities and economic stresses the financial needs of some of the States are more pressing than that of the other States. In order to meet exigencies arising out of the regional and economic disparities, the Constitution of India provides for a system of Grants-in-Aid to the States charged on the Consolidated Fund of India. The Grants-in-Aid are actually the final balancing instrument of the resources of the States with their manifold functions particularly services. The Parliament is empowered to make grants every year to the extent deemed necessary. The grants are fixed in accordance with the recommendations of the Finance Commission. The Jammu and Kashmir is covered by the Constitutional provisions pertaining to the Grants-in-Aid. The Second Finance Commission in its interim report covered the financial integration of the State.

Finance Commission

The provisions of the Constitution of India with regard to the appointment of the Finance Commission, are applicable to Jammu and Kashmir State and consequently the State also comes within the scope of the powers of the Commission. The Finance Commission is constituted every five years to advise the President of India with regard to the division of revenues between the Union and the States, Grants-in-Aid and other financial matters referred to the Commission by the Parliament. The Parliament is vested with the authority to determine by law the qualifications of the members of the Commission and the manner of their selection. The Commission is empowered to make recommendations on the following issues:

1. Distribution between the Union and the States of the net proceeds of taxes, which are to be, may be, divided between them and allocation between the States of the respective shares of such proceeds;
2. The principles which should govern the Grants-in-Aid of the revenues of the Consolidated Fund of India; and
3. Any other matter referred to the Commission by the President in the interests of sound finance.


Immunity of Instrumentalities

The State of Jammu and Kashmir is also subject to the paramount power of the Union in the same manner as the other States are. No reciprocal immunity of instrumentalities is secured between the Union and the State. Instead the same determinatives and instruments, which regulate the financial relations between the Union and the other Indian States, regulate the financial relations between the Union and Jammu and Kashmir State. The one aspect in which the financial relations between the Union and the State differ from financial relations between the Union and the other States is that the residuary powers of taxation are reserved for the State Government.

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