The partition of the country in August 1947 necessitated certain adjustments in financial arrangements, but Sir Otto Neimeyer's basic scheme was retained.
The financial relations between the Centre and the units came up for review in connection with the drafting of a new Constitution for independent India. The financial provisions in the Draft Constitution were referred by the Constituent Assembly to an Expert Committee of three under the chair-manship of Nalini Ranjan-Sarker, with V.S. Sundaram and MY. Rangachari as members. The Committee recommended a pattern of Union-States division of tax sources which was broadly the one finally adopted in the Constitution. Customs and excise duties were to be retained by the Centre while income tax was to be shared.
Significantly, the Committee recommended the sharing of corporation tax with the States, where 20 per cent, 35 per cent and 5 per cent of the proceeds would be distributed under population, collections and an adjusting factor respectively. The Committee recommended a Finance Commission with a High Court Judge as Chairman for considering such grants. After detailed discussions in the Constituent Assembly, the provisions as now in the Constitution were agreed to.
During the period between attainment of independence in 1947 and the coming into force of the Constitution in 1950, a great achievement took place under the leadership of Sardar Patel, that is the unification of the country through the peaceful integration of the Princely States. During this period, some major Princely States like Hyderabad and Mysore were retained. Others were either merged with a neighbouring state or formed into sizeable units (PEPSU, Madhya Bharat, Travancore-Cochin, etc.) All such states were designated Part 'B' states in the Constitution. Chief Commissioners' Provinces became Part 'c' States.
The Indian States Finances Enquiry Committee was set up in October 1948 under the chairmanship of V.T. Krishnamachari towards achieving financial integration of the Part 'B' states. The Committees recommendations were accepted and, with slight modifications, embodied in the agreements entered into by the Government of India with the Princely States.
As a Finance Commission could be set up only after the Constitution came into force on 26 January '195O, the states' share of income tax and its distribution and the payment of grants-in-aid under Articles 273 and 275 of the Constitution had to be regulated by Order of the President for the period between the commencement of the Constitution and the appointment of a Finance Commission. Some of the states had expressed dissatisfaction with the arrangements for the allocation of income tax and jute export duty made by the Government of India, immediately after Partition.
Hence, it was decided that these matters should be referred to an impartial authority for reconsid-eration. Towards the end of 1949, CD. Deshmukh was requested to look into these matters. The Deshmukh Award was given effect to from 1 April 1950 and remained in force for two years ending with 31 March 1952.
The First Finance Commission was constituted under Art. 280 by a Presidential Order dated 22 November 1951, under the chairmanship of K.C. Neogy.
The financial relations between the Centre and the units came up for review in connection with the drafting of a new Constitution for independent India. The financial provisions in the Draft Constitution were referred by the Constituent Assembly to an Expert Committee of three under the chair-manship of Nalini Ranjan-Sarker, with V.S. Sundaram and MY. Rangachari as members. The Committee recommended a pattern of Union-States division of tax sources which was broadly the one finally adopted in the Constitution. Customs and excise duties were to be retained by the Centre while income tax was to be shared.
Significantly, the Committee recommended the sharing of corporation tax with the States, where 20 per cent, 35 per cent and 5 per cent of the proceeds would be distributed under population, collections and an adjusting factor respectively. The Committee recommended a Finance Commission with a High Court Judge as Chairman for considering such grants. After detailed discussions in the Constituent Assembly, the provisions as now in the Constitution were agreed to.
During the period between attainment of independence in 1947 and the coming into force of the Constitution in 1950, a great achievement took place under the leadership of Sardar Patel, that is the unification of the country through the peaceful integration of the Princely States. During this period, some major Princely States like Hyderabad and Mysore were retained. Others were either merged with a neighbouring state or formed into sizeable units (PEPSU, Madhya Bharat, Travancore-Cochin, etc.) All such states were designated Part 'B' states in the Constitution. Chief Commissioners' Provinces became Part 'c' States.
The Indian States Finances Enquiry Committee was set up in October 1948 under the chairmanship of V.T. Krishnamachari towards achieving financial integration of the Part 'B' states. The Committees recommendations were accepted and, with slight modifications, embodied in the agreements entered into by the Government of India with the Princely States.
As a Finance Commission could be set up only after the Constitution came into force on 26 January '195O, the states' share of income tax and its distribution and the payment of grants-in-aid under Articles 273 and 275 of the Constitution had to be regulated by Order of the President for the period between the commencement of the Constitution and the appointment of a Finance Commission. Some of the states had expressed dissatisfaction with the arrangements for the allocation of income tax and jute export duty made by the Government of India, immediately after Partition.
Hence, it was decided that these matters should be referred to an impartial authority for reconsid-eration. Towards the end of 1949, CD. Deshmukh was requested to look into these matters. The Deshmukh Award was given effect to from 1 April 1950 and remained in force for two years ending with 31 March 1952.
The First Finance Commission was constituted under Art. 280 by a Presidential Order dated 22 November 1951, under the chairmanship of K.C. Neogy.