Gauhati H.C : The petitioner belongs to the Chakma tribe of Tripura which is a scheduled tribe as defined in cl. 25 of Art. 366 of the Constitution.

Counsel Appeared

P.K. Barua, for the Assessee : A.K. Das, for the Revenue

B.L. HANSARIA, J. :

The petitioner belongs to the Chakma tribe of Tripura which is a scheduled tribe as defined in cl. 25 of Art. 366 of the Constitution. He is a permanent resident of village Hajachara in Sub-room division of Tripura. He joined the defence service as a Commissioned Officer of the Indian Army in 1946. Thereafter, he became a member of the Indian Frontier Administrative Service in 1954 and served at various places in the then North Eastern Frontier Agency (NEFA) , now Arunachal Pradesh. From 1972, he started working as a Security Commissioner of Arunachal Pradesh and at the relevant time was posted at Tezpur. The occasion to file this writ application under Art. 226 of the Constitution arose following the advice of the ITO, Tezpur, to the Treasury Officer, Darrang, Tezpur, to deduct income-tax from the salary of petitioner. His assertion is that he is not liable to pay any income- tax in view of what has been stated in s. 10(26) of the IT Act, 1961, hereinafter “the Act”. The stand of the petitioner not having been accepted, he has approached this Court to seek a direction not to deduct any income-tax from his salary.

2. The stand of the Department is that the petitioner’s case is not covered by the aforesaid section inasmuch as (1) he is not residing in the area mentioned in s. 10(26), and (2) the source of his income is not from the area in question. We may note the relevant provision of law. Sec. 10(26) reads as below : “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 cl. (25) of Art. 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 States of Nagaland, Manipur and Tripura or in the Union Territories of Arunachal Pradesh and Mizoram or in the areas covered by Notification No. TAD/R/35/50/109 dt. the 23rd Feb., 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 (18 of 1971)], any income which accrues or arises to him,— (a) from any source in the areas, States or Union Territories aforesaid, or, (b) by way of dividend or interest on securities.”

3. This section had come up for consideration before the Hon’ble Supreme Court in ITO vs. N. Takin Roy Rymbai 1976 CTR (SC) 154 : (1976) 103 ITR 82 (SC) : TC32R.842, when it was pointed out that in order to entitle a person to the exemption under the aforesaid section, three conditions must co-exist — (i) He should be a member of a Scheduled Tribe as defined in cl. (25) of Art. 366 of the Constitution; (ii) He should be residing in any area specified in Part A or Part B of the Table (as these parts were then described) appended to paragraph 20 of the Sixth Schedule to the Constitution or the State or Union Territories mentioned in this provision ; (iii) The income in respect of which exemption is claimed must be an income which accrues or arises to him— (a) from any source in the area, State or Union Territories mentioned in the provision; or (b) by way of dividend or interest on securities.

In so far as the question of residence is concerned, the contention of the Department, as appears from Annexure 6, is that as the petition was residing at Tezpur at the relevant time, which town is admittedly not within the area mentioned by the aforesaid section, the income is not exempt from taxation. This stand undoubtedly has some force. The fact that the petitioner is a permanent resident of the State of Tripura may not be of much significance for the purpose at hand when the reason behind the exemption, as explained in Rymbai’s case (supra), is borne in mind, the rationale being benefitting economically such areas. We do not, however, propose to deny exemption to the petitioner on this short ground because the other ground is more weighty and convincing.

Before examining the validity of the second reason mentioned above, we may say that sub-cl. (a) of cl. (26) of s. 10 of the Act dealing with the source of income had been held violative of Art. 14 of the Constitution by a Full Bench of this Court in the aforesaid case of Rymbai (Civil Rules Nos. 292-293, etc., of 1970, etc., disposed of on 11th Oct., 1974), but that decision was set aside on appeal by the Supreme Court in 1976 CTR (SC) 154 : (1976) 103 ITR 82 (SC) : TC32R.842. So, to claim exemption, the source of income must be in the specified area. Shri Barua has accordingly urged that the income in question had accrued or arisen in the Union Territory of NEFA and not in Tezpur. To satisfy us in this regard, it is urged by Shri Barua that to decide the situs of accrual or arising of income, the place where the same is received is not material. In this connection, learned counsel had referred us to CIT vs. Anamallais Timber Trust Ltd. (1950) 18 ITR 333 (Mad),” where it was held that to decide the place where the income accrues or arises, the actual receipt of the income is not material but these words have to be understood as conveying the area of an enforceable right to receive the income. In E.D. Sassoon & Co. Ltd. vs. CIT (1954) 26 ITR 27 (SC), the place of accrual or arising of income was held to be the place where the right to receive the income had arisen. In so far as the present case is concerned, it is difficult to say that the right to receive the income had accrued in Arunachal Pradesh merely because the petitioner is a Government servant of Arunachal Pradesh. According to us, the right to receive income had arisen at Tezpur. To fortify his submission, Shri Barua has, however, referred us to a case law noted at page 179 of the Law and Practice of Income-tax by Kanga and Palkhivala, 7th Edn., where the decision rendered in CIT vs. P.P. Salarak (1928) 3 ITC237 was noted, where a Forest Officer of the Siamese Government employed at a fixed remuneration was posted to work in India in whose case it was held that the income had accrued in Siam where the agreement of service was entered into and the remuneration was payable and, in fact, paid. This case cannot assist the petitioner inasmuch as in the present case, the salary had not been paid in Arunachal Pradesh but was paid at Tezpur. The observations made in Shoorji Vallabhdas & Co. vs. CIT (1960) 39 ITR 775 (SC), would also support the aforesaid view taken by us because it has been held in this case that the commission payable to the managing agent accrues at the place where the business is actually done, i.e., where the services of the managing agent are performed. In the present case, the services of the petitioner were rendered at Tezpur and it can well be said that the salary had accrued at Tezpur.

In his strenuous effort to satisfy us that the income had actually accrued or arisen in Arunachal Pradesh in the present case, Shri Barua has also referred us to In re Right Rev. C.J. G. Sounders AIR 1932 All 151 and V.G. Every, In re (1937) 5 ITR 216 (Cal), where it was pointed out that the words accrued or arising mean something different from receiving.

Even if it is conceded that the concept of accrual or arising is different from receiving, there is still another difficulty in the way of the petitioner in claiming exemption under s. 10(26) of the Act inasmuch as the income must accrue or arise from any source within the area in question. Now, the meaning of the word “source” as given in Webster’s New Twentieth Century Dictionary is “place of origin from which something comes or develops, that which gives rise to anything”. In the present case, the place wherefrom the income had originated is Tezpur. By no stretch of imagination, it can be said that the source of income of the petitioner is Arunachal Pradesh merely because the petitioner is an employee of the Arunachal Pradesh Government. Because of what has been stated above, we are not in a position to uphold the contention of the petitioner that his income from salary in question is exempt from being taxed in view of what has been provided in s. 10(26) of the Act. The petition is, therefore, dismissed.

S.P. RAJKHOWA, J. :

I agree.

[Citation : 175 ITR 280]