Question

Consider the following statements about the Central Finance Commission:

i. It is a quasi-judicial body constituted under Article 280 of the Constitution.

ii. Its recommendations are advisory and not binding on the Government of India.

iii. It recommends measures to improve the financial position of municipalities directly.

Which of the statements given above is/are correct?

• A. i and ii only
• B. i and iii only
• C. ii and iii only
• D. All of the above

Answer 1

Answer:

A. i and ii only

Central Finance Commission:

• Constitutional Basis: The Finance Commission is established under Article 280 of the Indian Constitution. This makes it a constitutional body, ensuring its importance in India's federal structure.

• Quasi-Judicial Nature: It functions as a quasi-judicial institution. This implies it has powers similar to a court in certain matters, such as summoning witnesses and requiring the production of documents, but it is not a full-fledged judicial body.

• Appointment and Tenure: The President of India appoints the Finance Commission, typically every five years, or earlier if deemed necessary. The Chairman and members hold office during the pleasure of the President.

• Advisory Role: The recommendations made by the Finance Commission are essentially advisory in nature. While the government usually accepts them, they are not legally binding. Parliament can choose to accept or reject them.

• Key Functions: The primary role is to recommend the distribution of net proceeds of taxes between the Union and the States, and among the States themselves. It also suggests the principles that should govern grants-in-aid to States.

• Role in Local Bodies: While the Finance Commission makes recommendations regarding the distribution of the net proceeds of taxes for States, it does not directly recommend measures for the financial improvement of municipalities. This function is primarily handled by State Finance Commissions, constituted under Article 243-I and 243-Y of the Constitution.

• Composition: The Finance Commission consists of a Chairman and four other members appointed by the President. Parliament may by law determine the qualifications for appointment and the manner of selection.

• Significance: The Finance Commission plays a crucial role in maintaining fiscal balance and promoting cooperative federalism by ensuring a fair devolution of financial resources from the Union to the States.