TMI Blog2005 (6) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... l facts is advisable. The petitioner in W. P. (C) No. 200 (SH)/2001 is a registered association comprised of the members of the Scheduled Tribes community serving in the Department. According to it, the members thereof by virtue of their status as members of the Scheduled Tribes under article 366(25) of the Constitution of India have been enjoying the benefit of tax exemption envisaged under section 10(26) of the Act while posted in the specified areas as mentioned thereunder. By the impugned communication dated June 29, 2001, the Income-tax Officer (RDS), Ward-3, Shillong, directed deduction of tax from the salary of the members of the petitioner association. Accordingly, the concerned authority of NEEPCO issued letters dated July 20, 2001, to the aggrieved members of the association requiring them to furnish exemption certificates from the income-tax authorities with particulars for calculation and deduction of tax from their salaries. The departmental authorities having been approached for the income-tax exemption certificates, by the impugned communication dated August 7, 2001, the concerned members of the association were informed, for reasons recorded therein, that they wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anager (Finance), Power Grid Corporation of India Ltd., Shillong, on being transferred from Salakati in Kokrajhar District of Assam. He belongs to the Bodo Kachari community, a recognised Scheduled Tribe of the State of Assam. He too, on February 4, 2000, submitted an application to the Income-tax Officer, Ward-3, Shillong for exemption from payment of income-tax. He was eventually informed on June 26, 2000, that the matter had been referred to the Commissioner of Income-tax who had opined that the benefit of tax exemption was not available to him. The petitioner in the circumstances thus, filed his return of income claiming therein refund of the tax deducted at source. He submitted his return on June 24, 1999, for the period ending March 31, 1999, and claimed a refund of Rs. 5,522. No refund was made and instead, the Assessing Officer passed the impugned assessment order dated August 7, 2000, under section 154 of the Act raising an additional demand of Rs. 2,846. Being aggrieved, the petitioner filed an appeal before the Commissioner of Income-tax (Appeals), which was dismissed on August 19, 2003. As the employer company continued to deduct tax at source from his salary, the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, the word "residing" appearing in the above provision of the Act does not connote a domicile of the persons concerned in the area specified therein and a member of the Schedule Tribe within the meaning of article 366(25) of the Constitution even if posted in such an area by way of incidence of service is entitled to the benefit of exemption. Mr. Sharma, has asserted that having regard to the underlying purpose of the exemption, insistence on the requirement of permanent residence or stay of the concerned member of such Scheduled Tribe would be opposed to the legislative objective. Drawing the attention of the court to the interpretation of various departmental authorities, vis-a-vis, section 10(26) of the Act in the same lines, learned counsel has argued that the respondents are estopped in law from taking a contrary view. Mr. Sharma placed reliance on a decision of the apex court in ITO v. N. Takin Roy Rymbai [1976] 103 ITR 82 and of the Delhi High Court in J. Lalhmingliana v. Union of India [1989] 177 ITR 24. In reply, Mr. Bhuyan has urged that the purpose of providing exemption from tax as contemplated in section 10(26) thereof, is to grant relaxation in the matter of paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in any area specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution or in the other areas/region as mentioned therein. (c) The income must accrue or arise to him from any source in such area(s) or by way of dividend or interest on securities. As the said provision of the Act provides for the exemption from exigibility of income-tax, the essential pre-conditions therefor as envisaged thereby logically will have to be complied with to avail of such benefit. Article 366(25) of the Constitution defines "Scheduled Tribes" as here-under: "'Scheduled Tribes' means such tribes or tribal communities or parts of or groups within such tribes or tribal communities as are deemed under article 342 to be Scheduled Tribes for the purposes of this Constitution." In view of the definition, as above, reference to article 342 of the Constitution of India becomes imperative. Under the said provision of the Constitution, the President may with respect to any State or Union territory, after consultation with the Governor, if it relates to a State, may by public notification specify, any tribe or tribal communities or parts of or groups wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a member thereof migrates, he does not and cannot carry any special right or privilege attributed or granted to him in the original State. It was of the view that if such a member is not accorded the rights or privileges of the reserved category of his State in the migrated State, it does not interfere with his constitutional right of equality or of migration or of his carrying on trade or business or profession. This opinion of the Constitution Bench of the Supreme Court found reiteration in the decision of another Constitution Bench 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, where it was held as under: "What is important to notice is that the castes or tribes have to be specified in relation to a given State or Union Territory. That means a given caste or tribe can be a Scheduled Caste or a Scheduled Tribe in relation to the State or Union Territory for which it is specified." The same view was taken in Municipal Corporation of Delhi v. Veena [2001] 6 SCC 571 holding that the considerations for specifying a particular caste in a particular group belonging to OBC de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 366(25) of the Constitution of India vis-a-vis the area mentioned in section 10(26) of the Act. It is necessary at this stage to trace the incorporation of section 10(26) of the Act. The Indian Income-tax Act, 1922, did not contain any provision exempting members of the Scheduled. Tribes from the levy of income-tax. Such a provision was introduced for the first time by the Finance Act, 1955, in the said Act. The original provision after its, amendment and regularisation by section 3 of the Finance Act, 1958, assumed the form of section 4(3)(xxi) which is extracted herein below: "Section 4. (3)(xxi) Any income of a member of a Scheduled Tribe as defined in clause (25) of article 366 of the Constitution, residing in any area, specified in Part A or Part B of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution or in the Union Territories of Manipur and Tripura, provided that such member is not in the service of Government." This clause was re-enacted in the Income-tax Act, 1961, as section 10(26). The State of Nagaland was added to the areas specified in section 10(26) by the State of Nagaland (Adaptation of Laws of Union Subjects) Order, 1965, so tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the exclusionary clause in the then existing provision of the Act was not entitled to the benefit of exemption. The apex court held that the exemption under section 4(3)(xxi) of the Indian Income-tax Act, 1922, and section 10 (26) of the Income-tax Act, 1961, was intended to be provided to the members of certain Scheduled Tribes and, therefore, some of the members of that tribe could not be denied the benefit thereof unless they could be considered as belonging to another well defined class for the purpose of income-tax. It observed that there was no distinction between the income earned by a Government servant and that earned by persons serving in a company or by a private individual and, therefore, the differentiation borne by the provision was discriminatory. Consequently, as alluded hereinabove, the words "who is not in service of the Government" were deleted from section 10(26) of the Act by the Taxation Laws (Amendment) Act, 1970, (Act 42 of 1970). In ITO v. N. Takin Roy Rymbai [1976] 103 IJR 82 (SC) the respondent who belonged to the Jaintia Scheduled Tribe and was a permanent resident of the United Khasi-Jaintia Hills Autonomous District under the Sixth Schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities and also questioned the validity of the said provision of the Act. This court before which the grievance was brought declined to interfere on the ground that the petitioner's claim was not within the purview of section 10(26) of the Act as his income did not accrue or arise within the area mentioned in the said clause. It was held that the incorporation of the exemption clause was in the interest of the Scheduled Tribe as well as of the area in which the member thereof resides and by exempting his income accruing or arising in such area not only the members of the tribe are assisted but also the interest of the area is furthered. Holding that the members of the Scheduled Tribes earning income accruing in the tribal area as specified are a well defined class and that there is a reasonable nexus for exempting this class from the other members of the Scheduled Tribe deriving income from a place or area outside the specified areas, this court concluded that the classification was founded on an intelligible differentia having a rational nexus with the object sought to be achieved by the exemption clause. The same question arose before the Delhi High Court in J. Lalhminglian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xus with the assessable income. As economic advancement of the area is made consequential on the benefit of exemption granted to the members of the Scheduled Tribe(s) thereof, a passing presence of the person concerned in such area(s) would be incompatible with the legislative objective. For the desired contribution by such a member of the Scheduled Tribe for the economic growth of the specified area, his continuous presence is indispensable. The economic prosperity of the area, being inextricably linked with the individual empowerment of the residing member of the Scheduled Tribe(s), any transient stay in the specified area would not subserve the purpose comprehended through the exemption. It is a trite principle of statutory interpretation that a construction that effectuates the object of a legislation has to be preferred to the one which defeats it. In my view, therefore, the word "residing" connotes permanent residence of the members of the. Scheduled Tribe(s) visualised in section 10(26) of the Act in the areas specified therein. Had the Legislature thought otherwise, the provision would have been accordingly worded. The apex court in State of Jharkhand v. Ambay Cements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to the underlying legislative intendment in incorporating 42 the exemption provision in the form of section 10(26) of the Act and the interpretation which section 10(26) of the Act has received in the hands of the apex court as well as of this court in the earlier decisions as well as the judicially evolved principles bearing on the relevant aspect of statutory interpretation, I am of the considered view that a person to be qualified for the exemption contemplated in the above provision of the Act has to be essentially a member of a Scheduled Tribe notified under the Scheduled Tribes Order to be so for the area(s), must be a permanent resident thereof and his income has to accrue from any source located therein. It is only if the above three conditions co-exist that the benefit envisaged under the above provision of the Act would be available. The interpretation provided to section 10(26) of the Act by the departmental and other authorities to the contrary as is sought to be relied upon on behalf of the petitioners, in view of the judicial determination made in N. Takin Roy Rymbai [1976] 103 ITR 82 (SC) and in Dr. Curzon G. Momin [1973] 92 ITR 425 (Gauhati) as well as the above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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