The correct answer is Only a.

• Since independence, the Centre has been gradually extending its functions in such a way that the states become self-reliant to promote federalism.
• Hence statement a is not correct.
• The financial resources of the Centre are inelastic.

• Financial Relations
  • Articles 268 to 293 in Part XII of the Constitution deal with Centre-state financial relations.
  • Finance Commission (Article 280) recommends to the President on the distribution of net proceeds of taxes between the centre and states.
  • Constitution divides the taxing powers between the Central and states in the following way:
    • Parliament has an exclusive power to levy taxes enumerated in the Union List.
    • State Legislature has exclusive power to levy the taxes enumerated in the state list. Both the Parliament and the state legislature can levy the taxes enumerated in the Concurrent List.
  • The residuary power of taxation (that is, the power to impose the taxes not enumerated in any of the three lists) is vested in the Parliament.
  • Under this provision, the parliament had imposed gift tax, wealth tax and expenditure tax.
  • Parliament can provide for grants-in-aid to states by the Centre. Such sums are charged on the Consolidated Fund of India (Article 275).
  • The Union can make public purpose grants to states and to any institution within the states (Article 282).
  • Grants-in-Aid to the States - Besides sharing of taxes between the Centre and the states, the Constitution provides for grants-in-aid to the states from the Central resources.  
  • Statutory Grants - Article 275 empowers the Parliament to make grants to the states which are in need of financial assistance and not to every state. These sums are charged on the Consolidated Fund of India every year.