According to this Doctrine, The Legislature of a State may make laws for the whole or any part of the State. This means that State Laws would be void if it has extra-territorial operation i.e. it is applied to subjects or objects located outside the territory of the state.However, there, is one exception of the general rule. A State law of extra-territorial operation will be valid if there is sufficient nexus between the object and the  State.It is done by the application of “doctrine of territorial nexus”.

This doctrine was first evolved by the Privy Council in WALLACE BROS VS CIT, BOMBAY (AIR 1948 PC 118). In this case, a company which was registered in England was a partner in a firm in India. The Indian Income-tax Authorities sought to tax the entire income made by the company. The Privy Council applied the doctrine of territorial nexus and held the levy of tax valid. It said that derivation from British India of major part of its income for a year gave to company for that year sufficient territorial connection to justify its being treated as at home in India for all purposes of tax on its income for that year from whatever source income may be derived. The doctrine explains that it is not necessary that the object to which the law is applied should be physically located within the boundaries of the state making the law. It is enough if there is sufficient territorial nexus between the object and the state making the law.

The Supreme applied the doctrine in STATE OF BOMBAY VS R.M.D.C.(AIR 1957 SC 699).In this case; the Bombay State levied a tax on lotteries and prize competitions. The tax was extended to a newspaper printed and published in Bangalore but had wide circulation in Bombay. The respondent conducted the prize competitions through this paper. The Court held that there existed a sufficient territorial nexus to enable the Bombay State to tax the newspaper. If there is sufficient nexus between the person sought to be charged and the State seeking to tax him, the taxing statute would be upheld. For the application of the doctrine, there must be connection between the State and the subject matter of law which must be real and not illusory and; the liability sought to be imposed must be pertinent to that connection. Whether there is sufficient connection is a question of fact and will be determined by Courts in each accordingly. Parliamentary law having extra territorial Operation.

 In the case of A.H. WADIA VS CIT (AIR 1947 FC 18), the Gwalior Government had loaned at Gwalior large sums of money to a company in British India on the mortgage of debentures over property in British India. The interest on loan was payable at Gwalior. It was taxed under the Indian Income tax Act. Upholding the levy, the Supreme Court held :

“In the case of a sovereign Legislature question of extra-territoriality of any enactment can never be raised in the municipal court as a ground for challenging its validity. The legislation may offend the rules of international law, may not be recognized by foreign courts, or there may be practical difficulties in enforcing them but these are quest of policy with which the domestic tribunals are concerned.”

In the case of SONDUR GOPAL VS SONDUR RAJINI (2013) AIR 2678 S.C., Court observed that, the laws which are made by state that laws do not have operation in other state as per general rule. The law which have Extra- Territorial operation do not have direct imposition on other state but It is not null and void because of the Territorial Nexus doctrine and Article 245(2) of the Indian Constitution. 

Reference:

https://rjhssonline.com/HTMLPaper.aspx?Journal=Research%20Journal%20of%20Humanities%20and%20Social%20Sciences;PID=2016-7-1-9#:~:text=to%20subject%20matter.-,With%20respect%20to%20subject%20matter%2C%20The%20Constitution%20adopts%20a%20three,State%20List%20and%20Concurrent%20List.

Aishwarya Says:

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