Smti Dipti Doley Basumatary, Power Grid Corpn of India Ltd. V. UNION OF INDIA and The Chairman, Central Board of Direct Taxes and The Secretary, Central Board of Direct Taxes and The Chief Commissioner of Income Tax and The Commissioner of Income Tax and The Commissioner of Income Tax (Appeals) and The Income Tax Officer, Ward - 3

WA/572/2005

AI Insights

This batch of writ appeals concerns the eligibility of members of Scheduled Tribes for income tax exemption under Section 10(26) of the Income Tax Act, based on their residence in specified tribal areas. The appellants, members of various Scheduled Tribes, argued that they were entitled to tax exemptions despite residing outside their traditionally recognized areas, as they were employed in tribal areas specified under the Sixth Schedule of the Constitution. The Revenue contended that the exemption only applies to those residing within their designated areas. The court examined the legislative intent and previous judicial interpretations, ultimately deciding that the petitioners could qualify for exemptions if they met certain conditions, including residing in specified tribal areas and their tribes being recognized as Scheduled Tribes in those areas.

• Counselvise Citation: [2007] 140 COUNSELVISE.COM (IT) 811673 (HC-ASSAM)
• Appeal Type: Others
• Pronouncement Date: 27-02-2007
• Assessment Year: misc
• Laws Referred To: Income Tax Act, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: U BHUYAN
• Assessee Lawyers: S P SHARMA; S C KEYAL; A K SARAF; D BARUAH
• Keywords: Income tax exemption; Scheduled Tribe; Section 10(26)
• Section: 10(26); 366(25)

Judgement Text

"WA 572/2005 BEFORE THE HON’BLE MR JUSTICE D. BISWAS, CHIEF JUSTICE (ACTING) THE HON’BLE SMT. JUSTICE ANIMA HAZARIKA WRIT APPEAL NO.572 OF 2005 WRIT APPEAL NO.573 OF 2005 WRIT APPEAL NO.574 OF 2005 AND WRIT APPEAL NO.7 OF 2006 IN WRIT APPEAL NO.572 OF 2005 Smti Dipti Doley Basumatary, Power Grid Corpn of India Ltd. Old A.P. Secretariat Building Military Hospital Road, Shillong - 793 001. & &.. APPELLANT - Versus - 1. UNION OF INDIA Represented by its Secretary (Finance); Government of India, New Delhi - 110 001. 2. The Chairman, Central Board of Direct Taxes, New Delhi - 110 001. 3. The Secretary, Central Board of Direct Taxes, New Delhi - 110 001. 4. The Chief Commissioner of Income Tax, Aaykar Bhawan, M.G. Road, Shillong - 793001. 5. The Commissioner of Income Tax, Aaykar Bhawan, M.G. Road, Shillong - 793 001 6. The Commissioner of Income Tax (Appeals); Aaykar Bhawan, M.G. Road, Shillong - 793 001. 7. The Income Tax Officer, Ward - 3, Aaykar Bhawan, M.G. Road, Shillong - 791 001 & &.. RESPONDENTS 8. The Deputy General Manager (Finance) Power Grid Corporation of India Ltd. Regional Head Quarters, Old Arunachal Pradesh Secretariat Bldg, Shillong -01. &..PROFORMA RESPONDENTS IN WRIT APPEAL NO.573 OF 2005 NEEPCO Tribal Employee’s Welfare Association, Shillong Represented by its Execut ive Member, Shri Dhrubajyoti Mushahary, having its registered Office at Brook L and , New Colony, Shillong - 793003, in the District of East Hills Meghalaya. & &.. APPELLANT - Versus - 1. UNION OF INDIA Represented by its Secretary Finance; Government of India, New Delhi - 110 001. 2. The Chairman, Central Board of Direct Taxes, New Delhi - 110 001. 3. The Secretary, Central Board of Direct Taxes, New Delhi - 110 001. 4. The Chief Commissioner of Income Tax, Aaykar Bhawan, M.G. Road, Shillong - 793001. 5. The Commissioner of Income Tax, Aaykar Bhawan, M.G. Road, Shillong - 793 001 6. The Income Tax Officer (TDS), Ward - 3, Aaykar Bhawan, M.G. Road, Shillong - 791 001 & &.. RESPONDENTS 7. The Chairman & Managing Director, NEEPCO LTD. Brook Land Compound, Lower New Colony Laitumkhrah, Shillong - 793003. 8. The Director (Finance) NEEPCO Ltd., Lower New Colony Shillong - 793 003. 9.The Dy. Manager (Finance) Bills, NEEPCO Ltd., Lower New Colony, Shillong - 793003. &..PROFORMA RESPONDENTS IN WRIT APPEAL NO.574 OF 2005 Shri Adhu Kumar Basumatary, Power Grid Corpn of India Ltd. Old A.P. Secretariat Building, Military Hospital Road, Shillong - 793001. & &.. APPELLANT - Versus - 1. UNION OF INDIA Represented by its Secretary (Finance); Government of India, New Delhi - 110 001. 2. The Chairman, Central Board of Direct Taxes, New Delhi - 110 001. 3. The Secretary, Central Board of Direct Taxes, New Delhi - 110 001. 4. The Chief Commissioner of Income Tax, Aaykar Bhawan, M.G. Road, Shillong - 793001. 5. The Commissioner of Income Tax, Aaykar Bhawan, M.G. Road, Shillong - 793 001 6. The Commissioner of Income Tax (Appeals); Aaykar Bhawan, M.G. Road, Shillong - 793 001. 7. The Income Tax Officer, Ward - 3, Aaykar Bhawan, M.G. Road, Shillong - 791 001 & &.. RESPONDENTS 8. The Deputy General Manager (Finance) Power Grid Corporation of India Ltd. Regional Head Quarters, Old Arunachal Pradesh Secretariat Bldg, Shillong -01. &..PROFORMA RESPONDENT IN WRIT APPEAL NO.7 OF 2006 Bongaigaon Refinery & Petrochemicals Limited Tribal Employees’ Welfare Associati on, an Association duly registered of the Tribal Employees of Bongaigaon Refiner y & Petrochemicals Limited having its office situated at P.O. Dhaligaon in the D istrict of Chirang, Assam, represented by its President, Shri Ajit Kumar Brahma, resident of Dhaligaon in the District of Chirang, Assam. & &.. APPELLANT - Versus - 1. UNION OF INDIA Represented by its Secretary (Finance); Government of India, New Delhi - 110 001. 2. The Chairman, Central Board of Direct Taxes, New Delhi - 110 001. 3. The Secretary, Central Board of Direct Taxes, New Delhi - 110 001. 4. The Commissioner of Income Tax, Saikia Commercial Complex, Sreenagar, G.S. Road, Guwahati. 5. Additional Commissioner of Income Tax, Range Bongaigaon, Bongaigaon, Assam. 6. The Income Tax Officer, Ward No.1, Bongaigaon in the District of Bongaigaon, Assam. 7. The Income Tax Officer, Ward No.2, Bongaigaon in the District of Bongaigaon, Assam. 8. The Chief Manager (P&A), Bongaigaon Refinery & Petro-chemical Limited, Bongaigaon in the district of Chir ang, Assam. & &.. RESPONDENTS P R E S E N T THE HON’BLE MR. JUSTICE D. BISWAS, CHIEF JUSTICE (ACTING) THE HON’BLE SMT. JUSTICE A. HAZARIKA For the appellants : Mr. S.P. Sharma, Mr. S.C. Keyal, Advocates (In W.A. Nos.572, 573 and 574 of 05) Dr. A.K. Saraf, Sr. Advocate, Mr. D. Baruah, Advocate. (in W.A. No.7 of 2006) For the respondents : Mr. U. Bhuyan, Standing Counsel, I.T. Deptt. Date of Hearing : 01.12.2006 Date of Judgment and : 27.02.2007 Order JUDGMENT AND ORDER (CAV) By D. Biswas, J. This batch of writ appeals arise out of a common Judgment and Or der dated 22.6.2005 passed by the learned Single Judge of this Court in Writ Pet ition (C) No. 200(SH)/2001, Writ Petition (C) No. 340(SH)/2002, Writ Petition ( C) No. 14(SH)/2004, Writ Petition (C) No.15(SH)/2004 and Misc Case No.188(SH)/20 01. 2. The writ petitions were filed claiming exemption from payment of income tax on the ground that the writ petitioners are members of Scheduled Tri bes as defined in Clause-(25) of Article 366 of the Constitution and residing in the area specified either in Part-I or Part-II of the Table appended to paragra ph 20 of the Sixth Schedule to the Constitution. Precisely, the dispute raised b y the writ petitioners centre around the scope and ambit of Section 10(26) of th e Income Tax Act vis-à-vis the constitutional provisions. Before the question is addressed, we may recapitulate the factual background of each case in brief. 2. Writ Petition (C) No.200(SH)/2001 has been filed by the NEEPCO E mployees Welfare Association, a registered Association, represented by its Organ izing Secretary. The Association comprised of members belonging to Scheduled Tri be Community serving under the NEEPCO. They have been enjoying the benefits of t ax exemption envisaged under Section10(26) of the Income Tax Act by virtue of th eir status as members of the Scheduled Tribe Community under Article 366(25) whi le they were posted within the specified areas mentioned in Section 10(26). The Income Tax Officer (TDS), Shillong by the impugned letter dated 29.6.2001 instru cted the Director (Finance), NEEPCO Limited, Shillong to start deduction of inco me tax under Section 192 with effect from 1.4.2001 from the salary bills of the members of the petitioner Association for the reason that they are ineligible fo r exemption under Section 10(26) of the Act. The reason for such a direction is that the member of any scheduled community coming from outside the Sixth Schedul e Area is not exempted from paying taxes under Section 10(26). Consequent thereu pon, the concerned authority of NEEPCO by the letter dated 20.7.2001 called upon the members of the petitioner Association to furnish exemption certificates fro m the income tax authorities for calculation and deduction of income tax. The In come Tax Officer, Ward-3, Shillong by the impugned letter dated 7.8.2001 informe d the NEEPCO authority that a member of a Scheduled Tribe Community who is not o rdinarily residing in the State of Nagaland, Manipur, Tripura, Arunachal Pradesh , Mizoram or any area specified in Part-I or Part-II of the table appended to pa ragraph 20 of the Sixth Schedule of the Constitution will not be eligible for ex emption under Section 10(26) of the Act even though he may presently reside and derive income from any of the States or areas mentioned therein. 3. The petitioner in W.P.(C) No.340(SH)/20002 is also a member of t he Scheduled Tribe recognized in the State of Assam. She is also aggrieved by th e impugned notice dated 23.7.2002 issued under Section 142 of the Income Tax Act directing her to file the return of her income. Her claim is that she is a memb er of the Kachari community in the State of Assam which is recognized as a Sched uled Tribe under the provisions of the Constitution. 4. The petitioner in W.P.(C) No.14(SH)/2004 was serving as a Deputy Manager in the Power Grid Corporation of India, Shillong. She belongs to Miri ( Mishing) tribe which is recognized scheduled tribe in the State of Assam. Her ap plication for tax exemption certificate was rejected and, consequent thereupon, her employer started deducting tax at source from her salary compelling her to f ile her return. She filed her return for the year ending 31.3.1999 claiming a re fund of Rs.13,064/-. The claim has been refused by the Assessing Officer by the order dated 7.8.2000 and further demand was raised. Being aggrieved, she preferr ed an appeal to the Commissioner of Income Tax (Appeals), yet to be disposed of. 5. The petitioner in W.P.(C) No.15(SH)/2004 was serving as Manager (Distribution Management Services) in the office of the Deputy General Manager ( Finance), Power Grid Corporation, Shillong. He was transferred from Salakati in Kokrajhar District of Assam. He is a member of the Bodo Kachari community which is a recognized scheduled tribe in the State of Assam. The petitioner also had t o file his return of income wherein he claimed refund of taxes deducted at sourc e. By the impugned order dated 7.8.2000, the Assessing Officer raised additional demand of Rs.2,846/-. The appeal preferred by the petitioner to the Commissione r of Income Tax (Appeals) was dismissed on 19.8.2003. 6. The question raised above was answered in favour of the Revenue. The learned Single Judge, by the judgment under appeal, dismissed the writ peti tions precisely on the following observation :- 37. Having regard to the underlying legislative intendment in incorporating the exemption provision in the form of section 10(26) of the Act and the interpr etation which section 10(26) of the Act has received the hands of the Apex Court as well as of this Court in the earlier decisions as well as the judicially evo lved principles bearing on the relevant aspect of statutory interpretation, I am of the considered view that a person to be qualified for the exemption contempl ated in the above provision of the Act has to be essentially a member of a sched uled tribe notified under the Scheduled Tribe Order to be so for the area(s), mu st be a permanent resident thereof and his income has to accrue from any source located therein. It is only if the above three conditions coexist that the benef it envisaged under the above provision of the Act would be available. The interp retation provided to section 10(26) of the Act by the department and other autho rities to the contrary as is sought to be relied upon on behalf of the petitione rs, in view of the judicial determination made in N Takim Roy Rymbai, supra, Dr. Curzon J. Momin, supra, as well as above is inconsequential and is of no assist ance to the petitioners. The petitioners therefore cannot be adjudged to be elig ible for the exemption under section 10(26) of the Act. In the wake of the above , I do not find any merit in the petitions, which are accordingly dismissed. No costs. . 7. It would appear from above observation of the learned Single Jud ge that there must exist the following three situations under which a person wou ld be entitled to exemption from payment of income tax under the provisions of S ection 10(26) of the Income Tax Act :- (a) the person concerned has to be a member of the scheduled tribe as define d in clause (25) of Article 366 of the Constitution of India; (b) he must reside in any area specified in Part-I or Part-II of the Table a ppended to paragraph 20 of the Sixth Schedule to the Constitution or in the area s of Arunachal Pradesh, Manipur, Nagaland and Tripura or in other areas/regions as mentioned in sub-section (26) of Section 10 of the Income Tax Act; and (c) the income must accrue or arise to him from any source in such area(s) o r by way of dividend or interest on securities. 8. There is no dispute with regard to the above proposition culled out from the provisions of the Income Tax Act read with the definition of Schedu led Tribes in Clause (25) of Article 366 of the Constitution. Dr. A.K. Saraf, le arned senior counsel argued that the writ petitioners are members of the Schedul ed Tribe Community as notified under Article 342 and they are serving in the Sta te of Meghalaya which is an area specified in Table appended to Sixth Schedule. Therefore, by virtue of their status as members of the Scheduled Tribe, they are entitled to the benefit of exemption under Section 10(26) of the Income Tax Act . Mr.S.P. Sarma, learned counsel for the other group of writ petitioners also ad vanced identical argument. 9. Mr. U. Bhuyan, learned counsel for the Revenue argued at length in support of the stand of the Revenue that member of the Scheduled Tribe residi ng outside the areas in relation to which the tribe he belongs to has been notif ied as Scheduled Tribe is not entitled to exemption from payment of income tax u nder Section 10(26). 10. There is no dispute that the writ petitioners in all the writ pe titions belong to Scheduled Tribe Community as notified under Article 342 in rel ation to their respective areas. Going by the interpretation of the law as above , all of them would have been entitled to exemption had they been residing in th eir respective areas with income accruing or arising from any source in such are as. But the writ petitioners are residing in the State of Meghalaya, and in Bodo land areas outside the area other than the area in relation to which the tribe t hey belong to have been notified as Scheduled Tribe by the respective State Gove rnment of such area. Problem cropped-up with them when the Revenue instructed th eir employers to ensure deduction of income tax under Section 192 with effect fr om 1.4.2001 from the salary bills. 11. We have given our anxious consideration to the submissions advan ced by the learned counsel for the parties. Before the controversy is addressed, we may quote herein below the relevant provisions of the Constitution as well a s the Act :- Article 366. Definition - In this Constitution, unless the context otherwise req uires, the following expressions have the meanings hereby respectively assigned to them, that is to say - & & & & (25) Scheduled Tribes means such tribes or tribal communities or parts of or g roups within such tribes or tribal communities as are deemed under article 342 t o be Scheduled Tribes for the purpose of this Constitution. Section 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 - & & & & (26) in the case 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 I or Par t II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitu tion or in the States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripu ra or in the areas covered by Notification No.TAD/R/35/50/109, dated the 23rd Fe bruary, 1951, issued by the Governor of Assam under the proviso to sub-paragraph (3) of the said paragraph 20 (as it stood immediately before the commencement o f the North Eastern Areas (Reorganisation) Act, 1971 (18 of 1971], [or in the La dakh region of the State of Jammu and Kashmir] any income which accrues or arise s to him,- (a) from any source in the areas, or States aforesaid, or (b) by way of dividend or interest on securities: . 12. As already noticed hereinabove, the writ petitioners in all the writ petitions are members of the Scheduled Tribe notified by their respective S tates. There is no controversy with regard to their status. Some of them are pre sently residing in the State of Meghalaya, comprising of Khasi Hills, Jaintia Hi lls and Garo Hills Districts, incorporated in Part-II of the table to paragraph- 20 of the Sixth Schedule. Others are residing in the Bodoland areas in Assam. Th erefore, they are residing in tribal areas other than the tribal areas in relati on to which their respective tribes has been declared as Scheduled Tribe. Obviou sly, they cannot ipso facto carry the status conferred upon them in their own ar eas to the areas where they are presently living. They would, however, be entitl ed to exemption from payment of income tax if their respective tribe has also be en notified as Scheduled Tribe in the State of Meghalaya and in Bodoland in rela tion to the areas where they are presently residing. 13. All the writ petitioners are transferred from different areas me ntioned in the Table to paragraph-20. Therefore, their residence in the State of Meghalaya and in Bodoland cannot be construed to be ’fleeting’. Question would have been altogether different had their stay been casual, passing or purely tem porary. The word residing occurring in Section 10(26) cannot be given restrict ed interpretation confining the benefit of exemption only to the local members o f the Scheduled Tribes. We are unable to hold that the words residing connotes permanent residence relatable to the concept of domicile . The benefit of exem ption is given to the members of the Scheduled Tribe for economic advancement of the tribal areas vis-à-vis financial benefit to the individuals. Therefore, a v ery casual or passing presence of a person would be incompatible with the legisl ative intent. But so far the writ petitioners are concerned, they have been resi ding in the State of Meghalaya, and in Bodoland areas in connection with their s ervices. They cannot shift their residence at their sweet will. Therefore, their presence in the State of Meghalaya, and in Bodoland cannot be said to be pass ing so as to exclude them from the benefit of Section 10(26). 14. From above discussion, it can be concluded that a member of a Sc heduled Tribe notified in any tribal areas as mentioned in the Table to Paragrap h-20 of the Sixth Schedule will be entitled to the benefit of exemption under Se ction 10(26) of the Income Tax Act provided- (a) he is residing in any other tri bal area as described 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 b elongs is also recognized as a Scheduled Tribe in the other tribal area where he is residing in connection with his avocation. 15. Consequent upon above discussion, all the writ appeals are dispo sed of with modification of the common judgment with direction to the Revenue to examine the case of the writ petitioners in the light of the observation made i n paragraph-14 with reasonable opportunity of hearing to the writ petitioners an d to issue exemption certificate to those who fulfill the required criteria. No costs. "