High Court Of Gauhati
Hara Kanta Pegu vs. Union Of India
Section 10(26)
Hrishikesh Roy And L.S. Jamir, JJ.
Writ Petition (C) No. 4098 Of 2013
November 8, 2016
JUDGMENT
Hrishikesh Roy, J. – Heard Mr. J.C. Gogoi, the learned counsel appearing for the writ petitioners. Mr. S. Sarma, the learned standing counsel for the Income Tax Deptt. appears for the respondent Nos. 2—
2. The petitioners belong to the Scheduled Tribe category and are residents of Jonai Circle of Dhemaji District of Assam. They are serving as faculty members of the Murkong Selek College, Jonai and they seek exemption of their salary earnings from tax, under Sub-section (26) of Section 10 of the Income Tax Act, 1961 (hereinafter referred to as ‘the I.T. Act’).
3. Under Section 10 of the I.T. Act, in computing total income of any person, the income falling under various categories under the different Sub-sections of Section 10, shall be excluded from the levy of income tax. The relevant provision in the present case is Section 10(26), which 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-…
(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 Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution or in the (State of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura) or in the areas covered by Notification No. TAD/R/35/50/109, dated the February 23, 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 of the North-Eastern Areas (Reorganisation) Act, 1971 (81 of 1971)) (or in the Ladakh region of the State of Jammu and Kashmir), any income which accrues or arises to him,-
(a) from any source in the areas (or States aforesaid), or
(b) by way of dividend or interest on securities;”
4. Broadly Sub-section (26) of Section 10 of the I.T. Act, provides that income of a member of the Scheduled Tribe, accruing or arising from whatever sources “in the areas”, referred to Sub-section (26), shall not be included in the total income of the person, for the previous year.
5. The petitioners claim that the Jonai Circle, where they reside and the Murkong Selek College, Jonai from where they earn their income, is included within the defined area, notified by the Assam Governor on 23rd February, 1951. They accordingly applied for exemption of the salary earnings, received by them as a faculty members of the Murkong Selek College, under Section 10(26) of the I.T. Act. However the plea was declared to be untenable by the ITO, North Lakhimpur on the ground that the petitioners do not reside in the areas covered by the 23.2.1951 notification and that their salary income does not accrue from such areas, as contemplated by Section 10(26) of the I.T. Act.
6. The scope of the exemption provided Section 10(26) of the I.T. Act was considered by the Full Bench of this Court in Pradip Kr. Taye v. Union of India [2010] 320 ITR 29/189 Taxman 483 and after analyzing the relevant legal provisions, the High Court observed as follows:—
“……………………………….
7. …………………………… In our view, section 10 sub-section (26) stipulates that in computing the total income of an assessee, who is a member of a scheduled tribe as defined in clause (25) 1 of article 366 of the Constitution, (1) any income, which accrues or arises to him from any source in the areas or States mentioned in sub-section (26), should be excluded, and also (2) income, arising by way of a dividend or interest on security, is also required to be excluded irrespective of the territory from which such accrual has taken place. However, there are certain other conditions, specified under sub-section (26) which make the benefit provided under sub-section (26) available only to the members of the scheduled tribes “residing in any areas” specified in the said section. In other words, the members of the scheduled tribes residing in other parts of the country, other than the one specified under section 10 sub-section (26), are not entitled to the benefit of section 10 sub-section (26).
8. Now, the first question is what are those areas specified in Section 10 sub-section (26). They are (1) ……………, (2) ……………., (3) areas covered by Notification No. TAD/R/35/50/109, dated the February 23, 1951, issued by the Governor of Assam, and (4)………………
…………………………………………..
…………………………………………..
9. Coming to the third of the categories mentioned above are the areas covered by a notification issued by the then Governor of the State of Assam. It may be worthwhile to mention here that by the date of the said notification, i.e., of 1951, the State of Assam included territories far larger than the territories comprised within the boundaries of the State of Assam today. Some of those territories were later carved out and separate States were created which is a historical fact. The abovementioned notification carne to be issued in exercise of the power conferred by the proviso to sub-paragraph (3) of paragraph 20 of the Sixth Schedule. It may be mentioned that paragraph 20 of the Sixth Schedule to the Constitution itself stood amended by an Act of Parliament known as the North-Eastern Areas (Reorganisation) Act, 1971 (81 of 1971). We need not examine the purpose of the said notification, but from the tenor of the notification, it appears that the Governor of the then State of Assam was authorized to specify some areas, which are otherwise declared to form part of the tribal areas under paragraph 20 of the Sixth Schedule as it then existed. On such specification, those areas cease to form part of the tribal areas for the purpose of the Sixth Schedule. In exercise of such power, the notification was issued specifying certain areas of the then State of Assam. However, for the purpose of conferring the benefits under section 10 sub-section (26), Parliament thought it fit that notwithstanding the scheme of paragraph 20 of the Sixth Schedule to the Constitution and the authority of the Governor to exclude certain areas and the consequential decision of the Governor to notify by the abovementioned notification, those areas are also required to be treated on par with other parts of the North Eastern areas of the country.”
7. From the above analysis of the exemption provision under Section 10(26) of the I.T. Act, made by the Full Bench one can say that the claim made by the petitioners in the present case hinges on the word “residing in any area specified”, occurring in Sub-section (26) of Section 10 of the I.T. Act. The scope and the true meaning of the exemption benefits and whether it applies to the petitioners, must be culled out with reference to the language of the notification dated 23.2.1951. The status of the areas where the petitioners reside and derive their income will have to be identified and it must also be decided whether such areas are covered by the notification of 23.2.1951.
8. In the case before us, some confusion is created by the petitioners by referring to another notification of 13th March, 1951, whereby the Murkong Selek area under the Jonai Revenue Circle were declared to be Tribal Belt area, under the Assam Land Revenue Regulation, 1886. But the learned counsel for the petitioners now contend that for considering the claim to tax exemption for the petitioners, the authorities need to take into account only the notification of 23.2.1951 and need not consider the implication of the declaration of Tribal Belt, by the notification of 13th March, 1951. Mr. J.C. Gogoi specifically submits that the later notification (Tribal Belt declaration) has nothing to do with exemption to income tax and therefore is not relevant for the present matter.
9. The respondents on the other hand contend that exemption under Section 10(26) of the I.T. Act is available on fulfillment of certain conditions i.e. firstly, the geographical area of the residents and 2ndly, the source of the area from which, the income is accruing. According to Mr. S. Sarma, the learned standing counsel for the Income Tax Deptt., the exemption under Section 10(26) of the I.T. Act is with reference to income deriving from a specified area, as the people of that area are in need of protection and upliftment. He however also contends that the notification of 13th March, 1951, is not at all relevant for the Income Tax Act and no exemption can be claimed by anyone, with reference to the Tribal Belt area, declared by this notification.
10. What emerges from the above discussion is that income accruing from the areas covered by the notification of 23.2.1951, by the Scheduled Tribe category earners, can only claim the benefit of tax exemption under Sub-section (26) of Section 10 of the I.T. Act. Therefore the question to be decided is whether by virtue of being residents of Jonai and salary being earned as faculty members of the Murkong Selek College, Jonai, the income of the petitioners is traceable to the defined area, under the notification of 23.2.1951. If this is answered in favour of the petitioners, their claim to exemption of income tax under Section 10(26) of the I.T. Act, will have legal basis.
11. From the communication of 27.4.2004 (Annexure-2) of the ITO, North Lakhimpur, it can be seen that the officer was influenced by the fact that Tribal Belt areas of Assam is not mentioned in Section 10(26) of the I.T. Act and on that basis, direction was issued to the college Principal to deduct tax at source from the salary of the petitioners. But the relevant question is whether the concerned area of the petitioners is covered under the notification of 23.2.1951. According to us, this factual aspect needs to be verified by the Tax Officer, without being influenced in any manner by the declaration of the Tribal Belt area by the Assam Governor, through the subsequent notification of 13.3.1951.
12. Having concluded thus, we direct the jurisdictional Income Tax Officer (ITO) to re-visit the petitioners claim for tax exemption, under Section 10(26) of the I.T. Act, by identifying the area where they reside and wherefrom they earn their salary income, in the context of the areas specified in the notification dated 23.2.1951. To enable the ITO to re-decide the issue, the petitioners will file individual representation(s) to claim tax exemption and the matter should thus be finalized with due opportunity to the petitioners. It is ordered accordingly. As the petitioners are protected by an interim order of the Court, the present position will continue but will abide by the final decision of the ITO.
13. With the above order, the writ petition stands allowed by leaving the parties to bear their respective costs.
[Citation : 392 ITR 247]
