Keshavananda Bharati Case (1973): How It Protects Indians from Arbitrary Taxation | Explained

Keshavananda Bharati Case (1973): A Deep Dive into Its Impact on Indian Taxation & Constitution

 

The Keshavananda Bharati case (1973) is a landmark judgment in Indian constitutional history that established the "Basic Structure Doctrine", fundamentally altering the relationship between Parliament's amendment powers and judicial review. While the case primarily dealt with constitutional amendments, its far-reaching implications on taxation laws make it essential reading for taxpayers, policymakers, and legal enthusiasts.

 

In this comprehensive guide, we’ll explore:
✔ Background of the case
✔ Key legal principles established
✔ Direct and indirect impacts on Indian taxation
✔ Relevance in modern tax disputes (GST, retrospective taxes, etc.)
✔ Why this judgment remains a shield against arbitrary taxation

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1. Background: What Led to the Keshavananda Bharati Case?

Who was Keshavananda Bharati?

• Swami Keshavananda Bharati was the head of the Edneer Mutt, a Hindu religious institution in Kerala.
• The Kerala Land Reforms Act (1963) allowed the government to acquire mutt-owned land, reducing his religious property.

Why Did He Approach the Supreme Court?

• He challenged the law under Article 26 (right to manage religious property) and Article 19 (freedom to hold property).
• The case became a battle between Parliament’s power to amend the Constitution vs. Fundamental Rights.

The Bigger Constitutional Crisis

• Earlier, in Golaknath Case (1967), the Supreme Court ruled that Parliament cannot amend Fundamental Rights.
• To bypass this, the 24th Amendment (1971) gave Parliament unlimited power to amend any part of the Constitution (Article 368).
• Keshavananda Bharati’s case was a direct challenge to this absolute power.

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2. The Historic Judgment: Basic Structure Doctrine

Key Questions Before the Supreme Court

1. Can Parliament amend any part of the Constitution, including Fundamental Rights?
2. Is there any implied limitation on Parliament’s amendment powers?
3. Can the judiciary strike down constitutional amendments if they violate core principles?

The 7-6 Majority Decision (April 24, 1973)

• Parliament can amend any part of the Constitution, BUT…
• It cannot alter the "Basic Structure" of the Constitution.

 

What is the "Basic Structure"?

The Supreme Court did not define it exhaustively but listed key elements, including:
✅ Supremacy of the Constitution
✅ Rule of Law & Judicial Review
✅ Federalism (Balance between Centre & States)
✅ Secularism & Democratic Republic
✅ Fundamental Rights (Including Right to Property at the time)

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3. How Did This Judgment Impact Indian Taxation?

A. Protection Against Arbitrary Tax Laws

• Before 1973, the government could introduce retrospective taxes (applying new taxes to past transactions).
• After Keshavananda Bharati, tax laws must align with constitutional principles (fairness, non-arbitrariness).
• Example: The Vodafone Tax Case (2012) – SC struck down a retrospective tax amendment as unconstitutional.

B. Right to Property & Taxation (Article 31 vs. Article 300A)

• Originally, Article 31 guaranteed the right to property as a Fundamental Right.
• 44th Amendment (1978) downgraded it to a legal right (Article 300A).
• Impact on Tax Laws:
• Wealth Tax, Capital Gains Tax, and Property Tax must follow due process.
• No excessive taxation that amounts to illegal confiscation of property.

C. GST & Constitutional Validity

• The 101st Constitutional Amendment (2017, introducing GST) was carefully drafted to avoid violating federalism (a Basic Structure principle).
• Supreme Court later ruled (2022) that GST Council’s recommendations are not binding on states, reinforcing federalism.

D. Judicial Review of Tax Laws

• Courts can strike down tax laws if they violate:
• Fundamental Rights (Equality under Article 14, Freedom under Article 19).
• Federal Structure (State vs. Centre taxation powers).
• Example: In 2023, the Supreme Court ruled that states cannot impose extra taxes on mineral rights beyond constitutional limits.

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4. Recent Tax Disputes Influenced by Keshavananda Bharati

Case	Issue	Judgment Based on Basic Structure Doctrine
Vodafone v. UoI (2012)	Retrospective Tax Amendment	Struck down as unfair & arbitrary
GST Council Recommendations (2022)	Whether states must follow GST Council’s tax rates	No – States have autonomy under federalism
Mineral Taxation Cases (2023)	Can states impose additional taxes on mining?	No – Violates constitutional division of powers

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5. Why is This Judgment Still Relevant in 2024?

✅ Prevents Tax Terrorism: Ensures no government can impose oppressive taxes without judicial checks.
✅ Balances Centre-State Tax Powers: GST, Stamp Duties, and other taxes must respect federalism.
✅ Protects Taxpayers’ Rights: No retrospective taxes, arbitrary fines, or confiscatory taxation.

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6. Conclusion: A Pillar of Indian Tax Jurisprudence

The Keshavananda Bharati case is not just a constitutional milestone—it is a safeguard for taxpayers against unfair fiscal policies. By establishing the Basic Structure Doctrine, it ensures that no government, no matter how powerful, can rewrite the Constitution to impose unjust taxes.

For businesses, investors, and common taxpayers, this case remains a legal shield against arbitrary taxation.

 

FAQs: Keshavananda Bharati Case & Its Tax Implications

1. What is the Keshavananda Bharati case (1973) famous for?

The case established the "Basic Structure Doctrine", ruling that Parliament cannot amend the Constitution in a way that destroys its core principles (like fundamental rights, federalism, or judicial review). This doctrine acts as a shield against arbitrary laws, including unfair taxation.

 

2. How does this case affect tax laws in India?

• Prevents retrospective taxes: Struck down laws like the 2012 Vodafone tax amendment.
• Protects taxpayers: Ensures taxes align with Article 14 (equality) and Article 19 (freedom).
• Balances federalism: GST and state taxes must respect Centre-State power division.

 

3. Did the case abolish the Right to Property?

No! It initially protected property rights under Article 31, but the 44th Amendment (1978) later moved it to Article 300A (a legal right, not fundamental). Taxes on property (capital gains, wealth tax) must still be reasonable.

 

4. Can the government still introduce retrospective taxes?

Technically yes, but after Vodafone’s backlash (2012), India scrapped such taxes in 2021. Courts now strictly review them under the Basic Structure Doctrine.

 

5. How did this judgment impact GST?

The 101st Amendment (GST, 2017) was designed to respect federalism (a Basic Structure). In 2022, the SC even ruled that states aren’t bound by GST Council’s rates, reinforcing this balance.

 

6. What’s a modern example of this doctrine protecting taxpayers?

• 2023 Mineral Rights Case: SC barred states from imposing extra mining taxes beyond constitutional limits.
• Retrospective Tax Repeal (2021): Government refunded Vodafone/Cairn Energy after global criticism.

 

7. Can Parliament override the Basic Structure Doctrine?

No! Even a constitutional amendment (like the 99th Amendment for NJAC) can be struck down if it violates the Basic Structure (as happened in 2015).

 

8. Why should taxpayers care about a 50-year-old case?

Because it’s the legal backbone protecting you from:

• Arbitrary tax hikes
• Confiscatory policies (like sudden property seizures)
• Unfair Centre-State tax wars

 

People Also Ask:

1. Which cases saved taxpayers due to the Basic Structure Doctrine?

• Vodafone (2012), Mineral Rights Cases (2023), and GST Council Ruling (2022) all relied on this doctrine to strike down unfair taxes.

2. Can the GST Council force states to accept tax rates?

• No! SC ruled (2022) that GST Council’s decisions are recommendations, not binding laws—protecting states’ rights.

3. How can a taxpayer challenge an unfair tax law?

• File a writ petition (Article 32/226) if the tax violates:
• Fundamental Rights (e.g., arbitrary fines under Article 14).
• Federalism (e.g., states overstepping tax powers).

4. Is the Right to Property still a fundamental right?

• Not since 1978 (44th Amendment)—but taxes on property must still be non-confiscatory (Article 300A).

5. Did Keshavananda Bharati case affect income tax laws?

• Indirectly! It ensured income tax rules comply with equality (Article 14) and due process (no retrospective harassment).

 

💬 Did you know this case saved Indian taxpayers from retrospective taxes? Share your thoughts below!