TMI Blog2015 (4) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... esiding’ has to be given its natural meaning that a person has an abode and is living in a particular area for his work and livelihood for a reasonably long length of time. However, whether a person is actually residing or not is a question of fact to be decided on the facts of each case. Any member of a Scheduled Tribe declared to be so under Article 342 of the Constitution, even though he does not belong to the specified area, would be entitled to benefit of Section 10(26) when posted to at a station in the specified area and residing therewith in connection with his employment. A member of Scheduled Tribe originally hailing from the specified area would not be entitled to the benefit of exemption under Section 10(26) when he is residing outside the specified areas. A member of Scheduled Tribe is bound to obtain a certificate of exemption in terms of Section 197. - Validity of the certificate will be for one assessment year only. - Decided in favour of assessee. - WP (C) NOS. 73, 101, 117, 122,126, 133 & 136 OF 2014 - - - Dated:- 20-2-2015 - MR. DEEPAK GUPTA, MR. U B SAHA AND MR. S TALAPATRA, JJ. For The Petitioners : Mr. Ajoy Vohra, Sr. Advocate, Mr. Sajjan Kr. Tulsiy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle 342 to be Scheduled Tribes for the purposes of this Constitution. Reference may also be made to Article 342 of the Constitution of India which reads as follows : 342.(1) The President may with respect to any State or Union territory, and where it is a State, after consultation with the Governor thereof, by public notification, specify the tribes or tribal communities or parts of or groups within tribes or tribal communities which shall for the purposes of this Constitution be deemed to be Scheduled Tribes in relation to that State or Union territory, as the case may be. (2) Parliament may by law include in or exclude from the list of Scheduled Tribes specified in a notification issued under clause (1) any tribe or tribal community or part of or group within any tribe or tribal community, but save as aforesaid a notification issued under the said clause shall not be varied by any subsequent notification. Section 10(26) of the Income Tax Act reads as follows : 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included - In the case of a member of a Scheduled Tribe as defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rea or (b) by way of dividend or interest. On a plain reading of the aforesaid Section it is apparent that a member of a Scheduled Tribe is entitled to benefit of this Section when he is residing in the specified area and when the income other than income by way of dividend or interest accrues to him from a source in the said area. It is thus obvious that when a member of the Scheduled tribe is residing outside the specified areas he is not entitled to this benefit. Similarly, the member of the Scheduled Tribe is not entitled to such benefit if the source of income other than in the case of dividend or interest is outside the specified areas. This analysis answers most of the questions referred to the full bench. 5. Section 10(26) has been the subject matter of a number of decisions. Initially the benefit of exemption from income tax was extended to the members of the Scheduled Tribes residing in the specified areas by Section 4(3)(xxi) of the Income Tax Act, 1922 as amended by the Finance Act of 1958. The Income Tax Act was recast in the year 1961 and thereafter Section 4(3)(xxi) was reenacted as Clause 26 of Section 10. Amendments have been made from time to time and the Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xempted from being counted towards his total income. If the same tribal owns some property or business in Kolkata or Delhi and derives business, rental or any other income (other than dividend or interest) from such business or ventures situated outside the scheduled area the benefit would not enure for such income. 8. Rejecting the contention of the Revenue that the benefit of Section 10(26) was available only to certain Scheduled Tribes due to their economic and social backwardness the Apex Court held as follows : 14. It was the contention of the learned Solicitor-General that exemption from income-tax was given to members of certain scheduled tribes due to their economic and social backwardness, it is not possible to consider a government servant as socially and economically backward and hence the Exemption was justly denied to him. According to the Solicitor-General, once a tribal becomes a government servant he is lifted out of his social environment and assimilated into the forward sections of the society and therefore he needs no more any crutch to lean on. This argument appears to us to be wholly irrelevant. The exemption, in question was not given to individuals eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the above, I do not find any merit in the petitions, which are accordingly dismissed. No costs. 9. A similar question arose in Smt. Dipti Doley Basumatary v. Union of India, 2007(3) GLT 348. The assessees were members of Scheduled Tribes notified by the respective States. It appears that all the assessees in that case were members of Scheduled Tribes belonging to the specified areas. They were, however, not working as employees in the States of their origin. They were residing in tribal areas other than the tribal areas in relation to which their respective tribes had been declared as Scheduled Tribes. On behalf of the Revenue it was urged that they could not carry the status of Scheduled Tribe conferred on them in their own states to the areas where they were living. The question before the Division Bench was whether they were entitled to the exemption in terms of Section 10(26). The Division Bench of the Gauhati High Court upheld the contention of the assessees and held as follows : 13. As already noticed hereinabove, the writ petitioners in all the writ petitions are members of the Scheduled Tribe notified by their respective States. There is no controversy with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed in the Table to paragraph 20 ; (b) the income which accrues to him must arise from any source in such area; and (c) the tribe to which he belongs is also recognized as a Scheduled Tribe in the other tribal area where he is residing in connection with his avocation. 10. In Dipti Doley s case the conclusion arrived at by the Gauhati High Court was that a member of a Scheduled Tribe notified in any of the specified areas would be entitled to the benefit of exemption under Section 10(26) provided that he was residing in any of the other specified areas and the income which accrues to him must arise from a source in such area and the tribe to which he belongs is also recognized as the Scheduled Tribe in the other tribal area where he is residing in connection with his work. The Gauhati High Court also held that when a person is transferred from one place of work to another his stay at the place of work cannot be said to be temporary or fleeting . 11. In view of the two conflicting judgments in NEEPCO case and Dipti Doley s case a Full Bench of the Gauhati High Court in Pradip Kr. Taye and others v. Union of India and others, (2010)320 ITR 029(Gau) was constituted to en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , i.e., a community or a tribe is specified to be a scheduled tribe only with reference to a particular locality/State/Union Territory. Such a community/tribe, even if it exists in some other parts of the country, if it is not specified by the President to be a scheduled tribe with reference to such other part of the country, the members of such tribe, inhabiting in such other part of the country, do not get the recognition of belonging to a scheduled tribe. Similarly, members belonging to a tribe recognized to be a scheduled tribe with reference to a particular State, when they migrate to another State, are not entitled as a matter of right for recognition as members of a scheduled tribe in the State of their immigration and claim the benefits offered by such State to the scheduled tribes notified in relation to that State. (Marri Chandra Shekhar Rao Vs. Dean, Seth G.S. Medical College [1990] 3 SCC 130 and Action Committee on issue of Caste Certificate to Scheduled Castes and Scheduled Tribes in the State of Maharashtra Vs. Union of India *1994+ 5 SCC 244). 13. The argument made on behalf of the Revenue before the Full Bench was that a declaration that a particular tribe is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than the place of his origin. It is a different matter that Parliament decided not to give any such exemption. Once Parliament decides to give such an exemption, the question would be whether Parliament intended to deny the benefit of the exemption in the cases of immigrants. 28. Examined thus, the crucial expression residing in any area specified occurring under section 10(26), in our view, cannot be given a narrow and restricted meaning to imply that the members of a scheduled tribe migrating from their place of origin, which happens to fall in one of the areas specified in the said sub-section, to another area although once again falling within the areas specified in the sub-section, would not get the benefit of the exemption under section 10(26). If a literal meaning is to be given to the expression residing in any area specified , in our view, section 10(26) is capable of producing a result that any member of a scheduled tribe irrespective of the fact whether such a scheduled tribe is a scheduled tribe, in relation to those territories specified in the said sub-section or not, is entitled to the benefit of the said sub-section. It is not the case of either the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section by the Revenue is the history of the sub-section. It is already noticed earlier, originally the provision sought to exclude the employees of the Government from the purview of the benefit conferred by the said Sub-section, which was found to be unconstitutional by the Supreme Court as creating an unreasonable classification among the scheduled tribes. The Supreme Court in [1968] 68 ITR 272 (SC) (supra) held such a classification to be illegal. At para- 14 of the said judgment, the Supreme Court held as follows: It was the contention of the learned Solicitor-General that exemption from income-tax was given to members of certain scheduled tribes due to their economic and social backwardness; it is not possible to consider a Government servant as socially and economically backward and, hence, the exemption was justly denied to him. According to the Solicitor-General, once a tribal becomes a government servant he is lifted out of his social environment and assimilated into the forward sections of the society and, therefore, he needs no more any crutch to lean on. This argument appears to us to be wholly irrelevant. The exemption in question was not given to individuals ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se persons who are declared to be Scheduled Tribe within the meaning of Article 342 of the Constitution of India regardless to the area to which they originally belonged. However, to get such benefit they must be residing in the scheduled areas. 15. Reliance in this behalf has been placed by the Revenue on the judgment of the Apex Court in Marri Chandra Shekhar Rao v. Dean, Geth G. S. Medical College, (1990)3 SCC 130 and the Constitution Bench judgment of the Apex Court in Action Committee on issue of caste certificate to Scheduled Castes and Scheduled Tribes in the State of Maharashtra v. Union of India, (1994) 5 SCC 244. In the cases of Marri Chandra Shekhar Rao and in Action Committee(supra) the question before the Apex Court was whether a member of Scheduled Caste or Scheduled Tribe declared in relation to a particular state is entitled to the benefit of being Scheduled Castes or Scheduled Tribe when he migrates or settles in another state. The Court clearly held that members of Scheduled Castes and Scheduled Tribes are declared in respect of a particular Union territory or State and, therefore, they cannot as a matter of right claim such benefit in the State to which they h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be, the same proportion to the number of seats allotted to that State or Union territory in the House of the People as the population of the Scheduled Castes in the State or Union territory or of the Scheduled Tribes in the State or Union territory, as the case may be, in respect of which seats are so reserved, bears to the total population of the State or Union territory. Similar provision for reservation of seats in favour of SC/ST in the Legislative Assembly of any State is contained in clause (3) of Article 332 of the Constitution. Therefore, in order to ascertain the number of seats which have to be reserved for Scheduled Castes or Scheduled Tribes in the House of the People or in the Legislative Assembly, it is absolutely essential to ascertain precisely the population of the Scheduled Castes or Scheduled Tribes in the State or Union territory. A fortiori, for the purpose of identification, it becomes equally important to know who would be deemed to be Scheduled Caste in relation to that State or Union territory. This exercise has to be done strictly in accordance with the Presidential Order and a migrant Scheduled Caste of another State cannot be taken into consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uled Castes or Scheduled Tribes, irrespective of their State are eligible for posts which are reserved for SC/ST candidates, no legal infirmity can be ascribed to such a policy and the same cannot be held to be contrary to any provision of law. 18. We are clearly of the view that though a member of Scheduled Caste or Scheduled Tribe is declared to be a member of such caste or tribe in respect to the State to which he belongs, there is nothing in the Constitution which prevents any state or the Union of India from extending this benefit to those members of the Scheduled Castes or Scheduled Tribes who have migrated from other States. As far as the Union of India is concerned, it may not make any distinction between Schedule Castes and Scheduled Tribes of different States. Indeed it would be impossible for the Union of India to limit reservation for Scheduled Castes and Scheduled Tribes on state wise basis. 19. In the context of all India services, the practice of the Government of India is to provide for reservation/special treatment in favour of Scheduled Castes or Scheduled Tribes without any reference to the state of their origin. As rightly observed in Pradip Kr. Taye s cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said paragraph 20 as it stood immediately before the commencement of the North-Eastern Areas (Reorganization) Act, 1971(81 of 1971) or in the Laddakh region of the State of Jammu Kashmir which areas have been referred to as specified areas in this judgment. 21. We are of the view that the intention of the Parliament was not to limit the benefit to members of the Scheduled Tribe belonging to these areas. The specified areas comprises of many diverse states mostly in the northeast but also the Laddakh region of Jammu Kashmir. These are the most far-flung areas of the country. The intention of Parliament appears to be that persons who are earning their livelihood while residing in such areas and belong to the Scheduled Tribes should be given the benefit of exemption from payment of income tax. These areas are tribal areas and we see no reason why members of the Scheduled Tribes belonging to other states who works in the specified areas should be deprived of such benefit. It is settled law that when taxing statutes have to be interpreted if two interpretations are possible then the interpretation in favour of the assessee should normally be accepted. 22. In our view, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s down in the specified areas for a reasonably long length of time then he may be entitled to the benefit of Section 10(26). 25. We are mainly concerned with the employees of government or government undertakings such as ONGC etc. The employees are posted in these far-flung areas not because of their choice but because of the exigencies of service. They have no say in the matter as to where they should be posted. When a member of any of the services, to give an example, an IAS officer who is a Scheduled Tribe belonging to a state outside the specified areas is given the cadre in a specified area and works there for a reasonably long time then he will be residing in that area. Whether a person is residing in the area or not is a question of fact which will have to be decided on the facts and circumstances of each case. However, as pointed out in the Full Bench judgment in Pradip Kr.Taye (supra) as well as in Division Bench judgment in Smt. Dipti Doley Basumatari (supra) such residence should not be fleeting in nature. The Full Bench in para 28 of its judgment has examined the expression residing in any specified area and clearly held that this expression cannot be given a narro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificate issued by a competent authority. All persons who claim exemption under Section 10(26) need not be government servants or employed in the organized sector. They could be professionals such as doctors or lawyers or even businessman. Furthermore, it is only their income which accrues in the State which is exempted from being counted to their total income. They may also have income outside the state which may not be exempted from tax. A member of a Scheduled Tribe of the specified area may migrate to a non-specified area and may for the purpose of payment of income tax continue to be registered with the income tax officer in the specified area where his profession or business income which he derives outside the State of the Tripura would not be exempted from tax. These are all questions of fact which will have to be decided by the assessment officer. 28. Therefore, we are of the considered view that the assessee will have to obtain an exemption certificate under Section 197. In this behalf reference may be made to the judgment of the Division Bench of this Court in Tripura Tribal Officers Welfare Forum v. Union of India and others, WP(C) 132 of 2014 wherein the Divisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some income in a particular area which has not accrued in the specified area then that would not be exempted from income tax. This is a question which the income tax officer will have to examine on the facts and circumstances of each case every year. To give an example, supposing a member of the Scheduled Tribe belonging to Tripura is a lawyer normally practicing in Tripura. He may, however, be engaged by clients based outside the State of Tripura to argue matters either in the Apex Court or in different High Courts in the Country. That income has not accrued in Tripura and would not fall within the ambit of Section 10(26). It will be for the assessing officer to decide whether the income is exempted or not. Therefore, the certificate will have to be obtained every year. 30. In view of the above discussion, we answer the six questions as follows : (a) A member of a Scheduled Tribe would be entitled to the benefit of Section 10(26) only when he is posted in the specified areas. Once he is posted outside the specified areas then he ceases to reside in the specified are and the income does not accrue to him in the specified area. (b) The scope and ambit of the word residing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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