Previous Year Question
Consider the following statements and select the correct answer from the code given below:
Assertion (A): State Finance Commission is a constitutional body.
Reason (R): Union Finance Commission cannot recommend financial assistance to panchayats.
Codes:
Both (A) and (R) are true and (R) is correct explanation of (A).
Both (A) and (R) are true, but (R) is not the correct explanation of (A).
(A) is true, but (R) is false.
(A) is false, but (R) is true.
Correct Answer: C
Detailed Solution
Assertion (A) is correct. The State Finance Commission is a constitutional body. Under Article 243-I, the Governor constitutes a State Finance Commission every fifth year to review the financial position of Panchayats.
The State Finance Commission recommends principles governing the distribution of net proceeds of taxes, duties, tolls and fees between the State and Panchayats, taxes that may be assigned to Panchayats, and grants-in-aid to Panchayats from the Consolidated Fund of the State. It also recommends measures to improve their financial position.
Reason (R) is incorrect. The Union Finance Commission can make recommendations relating to augmentation of the resources of Panchayats. Under Article 280(3)(bb), it can recommend measures needed to augment the Consolidated Fund of a State to supplement the resources of Panchayats on the basis of the recommendations of the State Finance Commission.
Thus, the Union Finance Commission does not operate a separate direct treasury for Panchayats, but it is constitutionally part of the financial augmentation and grant framework for Panchayati Raj Institutions. Hence, saying that it cannot recommend financial assistance relating to Panchayats is incorrect.
The targeted distinction is—
State Finance Commission → Article 243-I → State–Panchayat financial relations
Union Finance Commission → Article 280 → recommends augmentation of State Consolidated Funds to supplement Panchayat resources