Part XII: Finance, Property, Contracts and Suits

Article 279: Calculation of "Net Proceeds"

Original Article:

(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, and for the purposes of those provisions the net proceeds of any tax or duty, or of any part of any tax or duty, in or attributable to any area shall be ascertained and certified by the Comptroller and Auditor-General of India, whose certificate shall be final.

(2) Subject as aforesaid, and to any other express provision of this Chapter, a law made by Parliament or an order of the President may, in any case where under this Part the proceeds of any duty or tax are, or may be, assigned to any State, provide for the manner in which the proceeds are to be calculated, for the time from or at which and the manner in which any payments are to be made, for the making of adjustments between one financial year and another, and for any other incidental or ancillary matters.

Explanations:

Article 279 defines "net proceeds" as the revenue collected from a tax or duty after deducting collection costs. It assigns the Comptroller and Auditor-General (CAG) of India as the final authority to certify these proceeds, ensuring transparency and accountability in revenue sharing between the Union and States.

Clause-by-Clause Explanation:

Clause (1): Definition and Certification

This clause defines "net proceeds" and designates the CAG to ascertain and certify these amounts, making the certification final and binding. This ensures impartiality in revenue distribution.

Clause (2): Calculation and Distribution

Empowers Parliament or the President to legislate or order how tax proceeds are calculated, distributed, and adjusted, ensuring flexibility in revenue allocation between financial years.

Amendments:

While Article 279 has not undergone direct amendments, its application has evolved, particularly with the introduction of the Goods and Services Tax (GST), which relies on similar principles of revenue sharing certified by the CAG.

Legislative History:

Drafted as Article 259 in the Draft Constitution, it was finalized as Article 279 after debates in the Constituent Assembly. The article reflects the framers' intent to maintain transparency and fairness in fiscal federalism.

Debates and Deliberations:

• Dr. B.R. Ambedkar emphasized the role of the CAG in ensuring impartial revenue sharing.
• Shri Alladi Krishnaswami Ayyar supported the finality of CAG certifications to avoid disputes between the Union and States.

References:

• Constituent Assembly Debates, 1949
• Reports on Fiscal Federalism in India
• The Role of CAG in Revenue Sharing