G.V.K. INDUSTRIES V. INCOME TAX OFFICER (2011) 4 SCC 36
FACTS
The appellant, through a writ petition filed in the Andhra Pradesh High Court, contested an order by the respondents regarding the appellant's obligation to withhold a portion of payments made to a foreign company. This obligation was purportedly under either Section 9(1)(i) or 9(1)(vii)(b) of the Income Tax Act (1961).
Additionally, the appellant challenged the constitutional validity of Section 9(1)(vii)(b) of the Income Tax Act (1961), asserting a lack of legislative authority and a violation of Article 14 of the Constitution. Although the High Court determined that Section 9(1)(i) did not apply to the case's specific circumstances, it upheld the applicability of Section 9(1)(vii)(b) and affirmed its constitutional validity.
The case was subsequently referred to a constitutional bench by a two-judge bench of the Supreme Court. The central constitutional questions before the Supreme Court revolved around whether Parliament's legislative authority, as per Article 245, encompasses the competence to legislate concerning aspects or causes that occur, arise, or exist, or may be anticipated to do so, outside the territory of India.
ISSUES:
The constitutional question at hand is-
(a) the territory of India, or any part thereof; or
(b) the interests, welfare, well-being, or security of the inhabitants of India, and Indian citizens.
JUDGMENT-
The Supreme Court affirmed in 1st issue that the Parliament holds the authority to exercise its legislative powers in relation to extra-territorial aspects or causes. This encompasses events, phenomena, resources, actions, or transactions occurring outside the territory of India, whether due to natural occurrences or human agency, within various spheres including social, political, economic, cultural, biological, environmental, or physical domains.
The Parliament may aim to regulate, modify, alleviate, or alter the effects of such extra-territorial aspects or causes. However, this is only permissible when such aspects or causes have, or are anticipated to have, an impact on the territory of India, or any part thereof, or on the interests, welfare, well-being, or security of India's inhabitants, including Indians.
It was further emphasized that the Parliament's legislative powers, encompassing extra-territorial aspects or causes, should not be subject to predetermined quantitative criteria like "sufficiency" or "significance". Rather, the essential criterion is that the connection to India must be genuine or anticipated to be genuine, and not illusory or fanciful.
The determination of whether a particular law enacted by Parliament establishes such a genuine connection between the extra-territorial aspect or cause and something related to India and Indians, in terms of impact, effect, or consequence, is a matter involving both factual and legal considerations.
If the Parliament sets a specific standard for such a relationship beyond the constitutional requirement of genuineness, the courts are obligated to enforce it as a matter of the law itself, and not solely of the Constitution.
The Supreme Court responded negatively to the second issue. It affirmed that Parliament had the authority to create laws concerning matters occurring within India's territory, as well as those with an impact on or connection to India even if they were extraterritorial. Such laws would align with Parliament's power to legislate for India, either wholly or in part. However, laws enacted by Parliament relating to extraterritorial matters without any connection to India would be beyond its jurisdiction and considered laws intended for a foreign territory.