INDIA (ESTATE DUTY) BILL [Lords] (Hansard, 16 February 1945)

§ The Secretary of State for India (Mr. Amery)
I beg to move, "That the Bill be now read a Second time."
553 May I turn the attention of the House from the broad and fascinating vision of Colonial development to a small Measure whose only purpose is to remedy an oversight in the drafting of the India Act, 1935, more particularly in reference to the repartition of taxation as between the central Government and the Provinces. Last year, in introducing his Budget, Sir Jeremy Raisman, the Financial Member of the Government of India, in dealing with the various measures which he was taking, and taking with no little success, in order to cope with the grave danger of inflation, announced his intention of introducing this year an Estate Duty. That would have a further effect besides the negative effect of dealing with inflation, because it would provide the Provinces with funds for reconstruction.
I ought to explain that duties of this character, even though levied at the centre, are, under the financial schemes of the Indian federal structure, actually allocated to the Provinces, and of course the work of reconstruction in India will mainly fall upon the Provincial Governments. It was subsequently suggested that such an Estate Duty might not be within the competence of the Government of India or of Provincial Governments, because the list of taxes as between the centre and the Provinces in the Act of 1935 referred only to Succession Duties. It was suggested that a Succession Duty levied on that part of an estate which passed to a particular beneficiary would not cover a duty on the estate as a whole. The Government of India submitted the matter to the Supreme Federal Court for an opinion and that Court, by a majority of its judges, decided that the doubt cast upon the power of the Government of India and of the Provincial Governments was well founded, and that Estate Duty could not be introduced or passed on agricultural estates in the Provinces or at the centre upon estates other than agricultural.
In these circumstances, the only recourse is to Parliament, to remedy what was, obviously, an unintentional oversight. If hon. Members will look at the Bill, they will see that, in Clause 1 (1), it proposes to insert a reference to Estate Duty in the Federal Legislative List. Similarly, it proposes to insert a corresponding reference in the Provincial Legislative List, and, in Subsection (2) it proposes to introduce a reference to 554 Estate Duty in Section 137 of the Act, which provides for the distribution to the Provinces of certain taxes. Finally, Subsection (3) seeks to include a definition of what is meant by Estate Duty. Clause 2, of course, simply deals with the Title, and with instructions to printers.
The only other thing I need say, is that this Measure is purely permissive. It gets rid of a bar to the freedom of the Central and Provincial Governments in dealing with their financial problems. It does not prescribe, still less prescribe in detail, whether such duties should be imposed, or what shape they should take. It is intended simply to get rid of an unsuspected and unforeseen obstacle to necessary legislation in India. I may add that the Bill is of some urgency, because the Finance Member will be introducing his Budget next month, and will naturally want to know whether he is free to introduce the Measure which is in contemplation. If there are any other points which hon. Members wish to raise, perhaps, with your permission, Mr. Speaker, and the leave of the House, I could reply to them.

§ Mr. Pethick-Lawrence (Edinburgh, East)
I think the right hon. Gentleman has explained the Bill. It is merely to tidy up what was left a little uncertain in the main Bill, and, so far as I am concerned, I hope it will be given a Second Reading and speedily become law.

§ Mr. Silverman (Nelson and Colne)
May I ask a question about this Bill? It would be interesting to know whether there have already been enacted or levied, either centrally or in any of the Provinces, Estate Duties the legal validity of which is doubted or rejected by the Federal Supreme Court of India. If that is so, I would ask whether the effect of this Bill, if we pass it, will be in any way retrospective, so as to legalise any duties already imposed which were illegal when they were imposed.

§ Mr. Amery
No such measures have been introduced. This was the first time that any such measure was contemplated, and, in view of the doubts expressed, advantage was taken of the facility to appeal to the Supreme Federal Court, for an authoritative opinion on the subject.