Explanation:

No law made by Parliament shall be deemed to be invalid on the ground that it would have extra territorial operation.

Article 245) Extent of laws made by parliament and by the legislatures of states.

• Subject to the provisions of this constitution, Parliament may make laws for the whole or any part of the territory of India, and the legislature of a State may make laws for the whole or any part of the state.
• According to clause 2 of Article 245, a law made by Parliament shall not be deemed to be invalid on the ground that it has extra-territorial operation.

The Doctrine of Territorial nexus can be invoked under the following circumstances-

• Whether a particular state has extra-territorial operation.
• If there is a territorial nexus between the subject- matter of the Act and the state making the law.
• It signifies that the object to which the law applies need not be physically located within the territorial boundaries of the state,but must have a sufficient territorial connection with the state.
• A state may levy a tax on a person, property ,object or transaction not only when it is situated within its territorial limits,but also when it has a sufficient and real territorial connection with it.

Hence option 1st is correct.