The Committee felt themselves precluded from considering any
modification of the proposals of the Joint Report for the separation of
the finances of the Government of India and of Provincial Governments.
No opinion is expressed on memoranda received at a late stage from Sir
James Meston making proposals for substantial departure from the plan of
dealing with provincial finance set forth in the Joint Report.
It may be recalled that Mr. Montagu and Lord Chelmsford proposed that,
if the residue of the provincial revenues is not sufficient, it should
be open to Ministers to suggest fresh taxation. The Committee take the
view that when any new provincial tax or any proposed addition to an
existing tax requires legislation to give effect to it, the decision
whether that legislation should be undertaken must rest with the
Governor and Ministers. Since the whole balance of the revenues of the
province will be at the disposal of the Ministers for the administration
of the transferred departments, the Committee consider that when an
existing tax cannot be reduced or remitted without legislation, the
decision whether legislation should be undertaken must also rest with
the Governor and Ministers. To that extent taxation for provincial
purposes should be regarded as a transferred subject.
The assessment or collection of the tax would be reserved or
transferred, according as the agency employed belonged to a reserved or
to a transferred department. The view is also taken that, when
alterations in taxation can be effected without any change in the law,
the decision whether any alteration should in fact be made must be
recognized as resting with the Governor in Council if the department is
reserved, and with the Governor and Ministers if it is transferred.
In respect to the powers of borrowing on the sole credit of provincial
revenues which are to be conferred, the Committee propose that, if after
joint deliberation there is a difference of opinion between the
Executive Council and the Ministers, the final decision whether a loan
should be raised and as to the amount of the loan must rest with the
Governor.