Supreme Court amends section 10(26AAA) to extend exemptions to Sikkimese and women who marries non Sikkimese
ABCAUS Case Law Citation
ABCAUS 3641 (2023) (01) SC
In the instant case a writ was filed before the Hon’ble Supreme Court praying striking down Section 10(26AAA) of the Income Tax Act, 1961(the Act), more particularly, the definition of “Sikkimese” in Section 10(26AAA) to the extent it excludes Indians who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975.
The petitioners had also prayed for direction striking down the Proviso to Section 10(26AAA) insofar as it excludes from the exempted category, “Sikkimese women” who marries a non-Sikkimese after 01.04.2008.
Section 10(26AAA) provides for income tax exemption to income from any source in the State of Sikkim; or income from dividend or interest on securities to individual, being a Sikkimese. Explanation to the section provides definition of “Sikkimese” as under:
(i) an individual, whose name is recorded in the register maintained under the Sikkim Subjects Regulation, 1961 read with the Sikkim Subject Rules, 1961 (hereinafter referred to as the “Register of Sikkim Subjects”), immediately before the 26th day of April, 1975; or
(ii) an individual, whose name is included in the Register of Sikkim Subjects by virtue of the Government of India Order No. 26030/36/90-I.C.I., dated the 7th August, 1990 and Order of even number dated the 8th April, 1991; or
(iii) any other individual, whose name does not appear in the Register of Sikkim Subjects, but it is established beyond doubt that the name of such individual’s father or husband or paternal grand-father or brother from the same father has been recorded in that register;
It was the case of the petitioners that exclusion of Indians who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975 and consequently not granting the exemption granted under Section 10(26AAA) of the Act to the class of Indians, who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975 is arbitrary, discriminatory and the differentia do not have a rational nexus to the object sought to be achieved by the Statute.
It was also the case of the petitioners that Proviso to Section 10(26AAA), insofar as it excludes from the exempted category, “Sikkimese women” who marries a non-Sikkimese after 01.04.2008, is discriminatory and violative of Articles 14, 15 and 21 of the Constitution of India as the exclusion is based on gender.
The Hon’ble Supreme Court went through the history of Kingdom of Sikkim and the chronology of dates and events, which led to enactment of Section 10(26AAA) of the Act.
The Hon’ble Supreme Court issued the following directions while disposing of the Petitions:
(i) That the benefit of income-tax exemption presently is restricted only to those Sikkimese who fall within the three clauses of the Explanation to Section 10(26AAA) of the Act, or those persons domiciled in Sikkim, or are Sikkimese as covered under the 1961 Regulation.
(ii) In terms of the Sikkim (Citizenship) Order, 1975 as amended by the Sikkim (Citizenship) Amendment Order, 1989, issued by the Government of India any person who was a Sikkim Subject under the 1961 Regulation was to be deemed to be a citizen of India w.e.f. 26th April, 1975. Conversely, it is held that all citizens of India, having a domicile in Sikkim on the day it merged with India i.e. 26th April, 1975 must be covered under the Explanation in order to avail the benefit of the exemption under Section 10(26AAA).
(iii) The Union of India shall make an amendment to Explanation to Section 10 (26AAA) so as to suitably include a clause to extend the exemption from payment of income tax to all Indian citizens domiciled in Sikkim on or before 26th April, 1975. The reason for such a direction is to save the explanation from unconstitutionality and to ensure parity in the facts and circumstances of the case.
(iv) Till such amendment is made by the Parliament to the Explanation to Section 10(26AAA), any individual whose name does not appear in the Register of Sikkim Subjects but it is established that such individual was domiciled in Sikkim on or before 26th April, 1975, shall be entitled to the benefit of exemption.
(v) Proviso to Section 10(26AAA), insofar as it excludes from the exempted category, “a Sikkimese woman who marries a non-Sikkimese man after 1st April, 2008” is hereby struck down as being ultra vires Articles 14, 15 and 21 of the Constitution of India.”.
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