Article 289 of CoI : Article 289: Exemption of property and income of a State from Union taxation.

Explanation using Example

Example 1:

The Government of Maharashtra owns several buildings and land parcels across the state. According to Article 289(1) of the Constitution of India, the income generated from these properties, such as rent from government buildings, is exempt from Union taxation. This means that the Central Government cannot impose income tax on the revenue generated from these properties.

Example 2:

The Government of Karnataka runs a state-owned enterprise, Karnataka State Beverages Corporation Limited (KSBCL), which is involved in the trade of alcoholic beverages. According to Article 289(2), the income generated from this business can be taxed by the Union Government if Parliament enacts a law to that effect. Therefore, if Parliament passes a law imposing a tax on the income from state-run businesses, KSBCL would be subject to Union taxation on its earnings.

Example 3:

The Government of Tamil Nadu operates a public transportation service through the Tamil Nadu State Transport Corporation (TNSTC). Since public transportation is considered an ordinary function of the government, Article 289(3) states that the income generated from this service is not subject to Union taxation, even if it is a trade or business. Therefore, the revenue from TNSTC's operations would remain exempt from Union taxes.