Article 279 of the Costitution of India with Case law
🇮🇳 Article 279 of the Constitution of India
Subject: Calculation of “net proceeds” of taxes
🔹 Bare Text of Article 279:
“(1) In the foregoing provisions of this Chapter, ‘net proceeds’ means, in relation to any tax or duty, the proceeds thereof reduced by the cost of collection, as ascertained and certified by the Comptroller and Auditor-General of India (CAG), and the expression ‘net proceeds’ shall be construed accordingly.
(2) The certificate of the CAG referred to in clause (1) shall be final.”
🧩 Explanation:
Purpose: Article 279 defines how “net proceeds” of taxes and duties are to be calculated — an essential concept for revenue distribution between the Centre and the States.
Key Term – Net Proceeds:
= Total tax collected – Cost of collection
Authority to Certify:
Only the Comptroller and Auditor-General (CAG) can certify this amount.
Finality Clause:
The CAG’s certification is binding and cannot be challenged.
🧾 Importance of “Net Proceeds”:
Used for:
Distribution of taxes between Centre and States under Articles 270, 273, 275.
Calculations for Finance Commission recommendations.
Determining State entitlements in divisible tax pool.
🧑⚖️ Important Case Laws on Article 279:
🔸 **1. R.K. Garg v. Union of India, AIR 1981 SC 2138
Held: Although this case primarily deals with taxation powers and economic policy, the Court observed the importance of fiscal transparency and constitutional mechanisms, including the role of the CAG in certifying net proceeds under Article 279.
🔸 **2. Comptroller and Auditor General of India v. K.S. Jagannathan, AIR 1987 SC 537
Context: Role and power of the CAG.
Relevance: The Court reiterated that the CAG is a constitutional authority, and its certification under Article 279 is final and not justiciable, ensuring objectivity in financial governance.
🔸 **3. Union of India v. Harbhajan Singh Dhillon, (1972) 2 SCC 779
Issue: Taxation powers and constitutional interpretation.
Importance: Affirmed that tax administration, including determination of net proceeds, must align with Article 279 and be certified by CAG for any revenue sharing to take place.
🔸 **4. State of Rajasthan v. Union of India, AIR 1977 SC 1361
Relevance: Emphasised constitutional federalism and financial discipline. The Court highlighted that Article 279 ensures independent financial certification, reinforcing fiscal federalism.
📊 Practical Application Example:
Suppose the Central Government collects ₹10,000 crore from Income Tax.
Collection cost = ₹200 crore.
Net Proceeds = ₹10,000 crore – ₹200 crore = ₹9,800 crore.
This ₹9,800 crore is certified by the CAG and used for sharing with States as per Finance Commission recommendations.
🧭 Related Articles:
| Article | Subject |
|---|---|
| Article 266 | Consolidated Funds |
| Article 270 | Distribution of taxes |
| Article 280 | Finance Commission |
| Article 148 | Comptroller and Auditor-General of India |
📌 Key Takeaways:
| Point | Detail |
|---|---|
| Term Defined | “Net proceeds” of taxes/duties |
| Certified By | Comptroller and Auditor-General (CAG) |
| Binding Nature | Certification is final |
| Role | Key to revenue sharing and inter-governmental fiscal accountability |
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