TMI Blog1993 (3) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... esident of India within the meaning of section 6 of the Income-tax Act, 1961, and in view of the fact that the Income-tax Act, 1961, has been extended to the State of Sikkim with effect from April 1, 1989, the income-tax, under any circumstances, cannot be deducted under the provisions of the Sikkim State Manual, 1948. It is humbly submitted that the income-tax of the petitioner is to be governed under the provisions of the Income-tax Act, 1961, and not under the Sikkim State Income-tax Manual, 1948." Sikkim Was a Himalayan kingdom ruled by the Chogyal of Sikkim (earlier known as the Maharaja of Sikkim). By virtue of the Government of Sikkim Act, 1974, an assembly of Sikkim was set up with legislative powers within the territory of Sikkim. On April 10, 1975, the Sikkim Assembly passed an unanimous resolution that led to a special poll of referendum on April 14, 1975, which in turn resulted in merger of Sikkim with India. This was followed by the amendment of the Constitution of India (Thirty-sixth Amendment) by which Sikkim was admitted as a State of the Union of India with effect from April 26, 1975. Article 371F was inserted in the Constitution providing for special provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (Thirty-sixth Amendment) Act, 1975, was given retrospective effect from April 26, 1975, no attempt was made to extend the Income-tax Act in Sikkim till November 7, 1988, when the following notification was issued : "Ministry of Home Affairs Notification New Delhi, the 7th November, 1988. S. O. No. 1028(E). In exercise of the powers conferred by clause (n) of article 371F of the Constitution, the President hereby extends to the State of Sikkim the enactments specified in the Schedule annexed hereto, subject to the modifications, if any, specified in that Schedule and the following further modifications, namely : (1) Any reference in the said enactments to a law not in force, or to a functionary not in existence, in the State of Sikkim shall be construed as a reference to the corresponding law in force, or to the corresponding functionary in existence in that State: Provided that if any question arises as to who such corresponding functionary, is or if there is no such corresponding functionary, the Central Government shall decide as to who such functionary will be and the decision of the Central Government shall be final. (2) Notwithstanding anything contained in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the previous year relevant to the assessment year commencing on the 1st day of April, 1989 ; (b) the 1st day of April, 1990, as the date on which the Wealth-tax Act, 1957, shall come into force in the State of Sikkim in respect of the net wealth of an assessee, residing in the State of Sikkim, on the valuation date being 31st March, 1990 ; (c) the 1st day of April, 1990, as the date on which the Gift-tax Act, 1958, shall come into force in the State of Sikkim in respect of the gifts made by a person, residing in the State of Sikkim, on or after the 1st day of April, 1958. (Vijay Mathur), Director (TPL-II). Ministry of Finance Department of Revenue." The aforesaid two notifications were followed by the Finance Act, 1989, section 26 of which provided "26. Notwithstanding anything contained in the notification of the Government of India in the Ministry of Home Affairs, No. S. O. 1028(E) dated the 7th November, 1988, and the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. S. O. 148(E) dated the 23rd February, 1989, in so far as it relates to the commencement of the Income-tax Act, 1961 (43 of 1961), in the State of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im State under the heading "Salary". Other employees of any other employers are not affected by this tax. There is also patta tax and also a tax on "principal loans in cash or in kind above Rs. 2,000". A uniform rate of three per cent. of tax has been provided in all the aforesaid headings. The field of operation of the Sikkim State Income-tax Manual appears to be quite distinct and separate from the Income-tax Act, which levies a tax on the "total income" of every person to be calculated in the manner laid down in the Income-tax Act. Assuming that there was an income-tax law in force in the Sikkim State before merger, even then the argument advanced by the Advocate General is not tenable. Section 26 of the Finance Act categorically provides for two things. It has laid down that the provisions of the Income-tax Act, 1961, shall come into force in the State of Sikkim with effect from the previous year relevant to the assessment year commencing from April 1, 1990. Section 26 has also made it clear that any law corresponding to the Income-tax Act, 1961, which immediately before such commencement was in force in the State of Sikkim shall be deemed never to have ceased to have effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the argument that, until rules were framed, there was no inconsistency and no supersession of the State Act. " The theory of implied repeal under the Indian Constitution was also noted by the Supreme Court in the case of Zaverbhai Amaidas v. State of Bombay, AIR 1954 SC 752. The question about Competence of the Indian Parliament to repeal the prevalent laws of Sikkim after merger is also of no substance. The State of Sikkim does not have any legislative competence to pass law in respect of tax on income which is exclusively within the domain of Parliament under entry 82 of List I of the Seventh Schedule. In view of the provisions of article 371F(k), any law relating to tax on income, if any, which was prevailing in Sikkim as "a law in force" has been repealed by a competent Legislature. It is only Parliament which can pass legislation on "Taxes on income other than agricultural income". In the case of Raj Kumar Rai v. State of Sikkim [1979] Crl. LJ 210, the Sikkim High Court held that the Indian Arms Act, 1959, had been validly extended to the State of Sikkim and thereby it impliedly repealed the corresponding State law on this subject. It was contended on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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