High Court Of Tripura (Full Bench)
Chandra Mohan Sinku vs. Union of India, New Delhi
Section : 10(26), 197
Deepak Gupta, CJ.
U.B. Saha And S. Talapatra, JJ.
Wp (C) Nos. 73, 101, 117, 122,126, 133 & 136 Of 2014
February 20, 2015
JUDGMENT
Deepak Gupta, CJ. – This Full Bench has been constituted to answer the following questions referred to it.
“(1) Whether, a member of a Scheduled Tribe as defined in Clause 25 of Article 366 of the Constitution of India is entitled to grant of exemption under section 10(26) only when he is working 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 Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura or when he is posted anywhere in the country?
(2) What is the scope and ambit of the words “residing” in the opening portion of section 10(26) of the Act?
(3) Whether, a person belonging to the Scheduled Tribes and falling within the meaning of Clause 25 of Article 366 but not originally belonging to the areas specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution and not belonging to the States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura is entitled to benefit of section 10(26) when posted in such areas?
(4) Whether, a person who is a member of the Scheduled Tribes and belongs to the areas specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution or belongs to the states of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura is entitled to benefit of exemption under section 10(26) of the Act when he is posted outside these areas?
(5) Whether, a member of the Scheduled Tribes is bound to obtain a certificate of exemption from the Income Tax Authorities in terms of section 197 of the Act?
(6) Whether, such certificate, if obtained, is valid for the entire service career of the member of the Scheduled Tribes or not?”
2. To appreciate the contentions raised by the parties and answer these questions it would be apposite to refer to Clause 25 of Article 366 of the Constitution of India which reads as follows :
“(25) Scheduled Tribes means such tribes or tribal communities or parts of or groups within such tribes or tribal communities as are deemed under Article 342 to be Scheduled Tribes for the purposes of this Constitution.”
Reference may also be made to Article 342 of the Constitution of India which reads as follows :
“342.(1) The President may with respect to any State or Union territory, and where it is a State, after consultation with the Governor thereof, by public notification, specify the tribes or tribal communities or parts of or groups within tribes or tribal communities which shall for the purposes of this Constitution be deemed to be Scheduled Tribes in relation to that State or Union territory, as the case may be.
(2) Parliament may by law include in or exclude from the list of Scheduled Tribes specified in a notification issued under clause (1) any tribe or tribal community or part of or group within any tribe or tribal community, but save as aforesaid a notification issued under the said clause shall not be varied by any subsequent notification.”
Section 10(26) of the Income-tax Act 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 —
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 States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura or in the areas covered by Notification No.TAD/R/35/50/109, dated the 23rd February, 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 9 or States aforesaid, or
(b) by way of dividend or interest on securities;”
3. Sub-section (26) grants certain benefits to members of the Scheduled Tribes residing in areas 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 Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura or in the areas covered by notification dated 23rd February, 1951 issued by the Governor of Assam or to the Laddakh region of the State of Jammu & Kashmir (hereinafter these areas shall be referred to as the ‘specified areas’). As per Clause (a) of sub-section (26) of Section 10 any income derived by a member of a Scheduled Tribe from any source in the specified areas is not to be included in his total Income.
Furthermore, if the member of the Scheduled Tribe is residing in the specified areas then any income derived by way of dividend or interest is also not to be included in his total income even though that income may have accrued outside the specified areas.
4. When we read Section10(26) carefully and analyse the various provisions of this Section it is clear that before a person is entitled to claim benefit of the exemption granted under this Section he should satisfy the following three conditions which are the essential ingredients of the sub-section :
(i) The person claiming exemption should be a member of a Scheduled Tribe as defined in Clause 25 of Article 366 of the Constitution;
(ii) he should be residing in the specified areas and
(iii) the income in respect of which exemption is claimed must be an income which accrues or which arises to him (a) from any source in the specified area or (b) by way of dividend or interest.
On a plain reading of the aforesaid Section it is apparent that a member of a Scheduled Tribe is entitled to benefit of this Section when he is residing in the specified area and when the income other than income by way of dividend or interest accrues to him from a source in the said area. It is thus obvious that when a member of the scheduled tribe is residing outside the specified areas he is not entitled to this benefit. Similarly, the member of the Scheduled Tribe is not entitled to such benefit if the source of income other than in the case of dividend or interest is outside the specified areas. This analysis answers most of the questions referred to the full bench.
5. Section 10(26) has been the subject matter of a number of decisions. Initially the benefit of exemption from income tax was extended to the members of the Scheduled Tribes residing in the specified areas by Section 4(3)(xxi) of the Income Tax Act, 1922 as amended by the Finance Act of 1958. The Income Tax Act was recast in the year 1961 and thereafter Section 4(3)(xxi) was reenacted as Clause 26 of Section 10. Amendments have been made from time to time and the Section has already been reproduced hereinabove. The sub-section, as originally incorporated, extended this benefit to all members of the Scheduled Tribes residing in such areas but this benefit was not available to those members of the Scheduled Tribes who were government servants. The Apex Court in S.K. Dutta, ITO v. Lawarence Singh Ingty [1968] 68 ITR 272 held that such discrimination was violative of Article 14 and, therefore, the benefit of Section 10(26) was extended to all members of the Scheduled Tribes including government servants.
6. Thereafter in ITO v. N Takin Roy [1976] 103 ITR 82 (SC) the constitutional validity and interpretation of sub-clause (a) of clause (26) of Section 10 of the Income Tax Act, 1961 fell for consideration. The stand of the income tax officer was that the Assam secretariat building which constituted the place of work of the assessee did not form part of the specified area and, therefore, the assessee was not entitled to the exemption provided under Section 10(26)(a) of the Act. On a writ petition being filed by the assessee the High Court struck down sub-clause (a) of Clause 26 on the ground that it was violative of Article 14 of the Constitution. The High Court relied upon the observations of the Apex Court in Lawarence Singh Ingy case (supra).
7. The Apex Court in this case analyzed the provisions of this Section and held that there were three essential conditions which must co-exist; (1) that the person claiming exemption should be a member of a Scheduled Tribe as defined in Article 366(25) of the Constitution of India, (2) he should be residing in one of the specified areas and (3) the income should accrue to him from a source in the specified areas. The Apex Court thereafter held that sub-clause (a) of Section 10(26) could not be said to be ‘violative’ of Article 14 of the Constitution. The Apex Court therefore upheld the Constitutional validity of this provision. The result is that if a tribal entitled to such benefit resides in the area and has two sources of income, (1) emanating from the scheduled area and (2) emanating outside the scheduled area, the benefit of exemption would be limited to only the income accruing within the specified/scheduled area. To give an example, if a tribal covered under this provision and residing in the scheduled area has any income accruing in the scheduled area that would be exempted from being counted towards his total income. If the same tribal owns some property or business in Kolkata or Delhi and derives business, rental or any other income (other than dividend or interest) from such business or ventures situated outside the scheduled area the benefit would not enure for such income.
8. Rejecting the contention of the Revenue that the benefit of Section 10(26) was available only to certain Scheduled Tribes due to their economic and social backwardness the Apex Court held as follows :
“14. It was the contention of the learned Solicitor-General that exemption from income-tax was given to members of certain scheduled tribes due to their economic and social backwardness, it is not possible to consider a government servant as socially and economically backward and hence the Exemption was justly denied to him. According to the Solicitor-General, once a tribal becomes a government servant he is lifted out of his social environment and assimilated into the forward sections of the society and therefore he needs no more any crutch to lean on. This argument appears to us to be wholly irrelevant. The exemption, in question was not given to individuals either on the basis of their social status or economic resources. It was given to a class. Hence individuals as individuals do not come into the picture. We fail to see in what manner the social status and economic resources of a government servant can be different from that of another holding a similar position in a Corporation or that of a successful medical practitioner, lawyer architect. etc. To over-paint the picture of a government servant as the embodiment of all power and prestige would sound ironical. Today his position in the society to put it at the highest is no higher than that of others who in other walks of life leave the same income. For the purpose of valid classification what is required is not some imaginary difference but a reasonable and substantial distinction having regard to the purpose of the law.”
Thereafter a learned single Judge of the Gauhati High Court in NEEPCO Tribal Employees’ Welfare Association v. Union of India [2007] 290 ITR 481 held as follows :
“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 interpretation which Section 10(26) of the Act has received in the hands of the apex court as well as of this court in the earlier decisions as well as the judicially evolved principles bearing on the relevant aspect of statutory interpretation, I am of the considered view that a person to be qualified for the exemption contemplated in the above provision of the Act has to be essentially a member of a Scheduled Tribe notified under the Scheduled Tribes Order to be so for the area(s), must be a permanent resident thereof and his income has to accrue from any source located therein. It is only if the above three conditions co-exist that the benefit envisaged under the above provision of the Act would be available. The interpretation provided to Section 10(26) of the Act by the departmental and other authorities to the contrary as is sought to be relied upon on behalf of the petitioners, in view of the judicial determination made in ITO v. N. Takin Roy Rymbai [1976] 103 ITR 82 (SC) and in Dr. Curzon G. Momin v. I.S. Phukan, 2nd Addl. ITO [1973] 92 ITR 425 (Gauhati) as well as the above is inconsequential and is of no assistance to the petitioners. The petitioners therefore cannot be adjudged to be eligible 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.”
9. A similar question arose in Smt. Dipti Doley Basumatary v. Union of India [2007] 290 ITR 498/163 Taxman 246 (Gauhati). The assessees were members of Scheduled Tribes notified by the respective States. It appears that all the assessees in that case were members of Scheduled Tribes belonging to the specified areas. They were, however, not working as employees in the States of their origin. They were residing in tribal areas other than the tribal areas in relation to which their respective tribes had been declared as Scheduled Tribes. On behalf of the Revenue it was urged that they could not carry the status of Scheduled Tribe conferred on them in their own states to the areas where they were living. The question before the Division Bench was whether they were entitled to the exemption in terms of Section 10(26). The Division Bench of the Gauhati High Court upheld the contention of the assessees and held as follows :
’13. As already noticed hereinabove, the writ petitioners in all the writ petitions are members of the Scheduled Tribe notified by their respective States. There is no controversy with regard to their status. Some of them are presently residing in the State of Meghalaya, comprising of Khasi Hills, Jaintia Hills 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. Therefore, they are residing in tribal areas other than the tribal areas in relation to which their respective tribes have been declared as scheduled Tribe. Obviously, they cannot ipso facto carry the status conferred upon them in their own areas to the areas where they are presently living. They would, however, be entitled to exemption from payment of income-tax if their respective tribe has also been notified as Scheduled Tribe in the State of Meghalaya and in Bodoland in relation to the areas where they are presently residing.
14. All the writ petitioners are transferred from different areas mentioned in the Table to paragraph 20. Therefore, their residence in the State of Meghalaya and in Bodoland cannot be construed to be “fleeting”. The question would have been altogether different had their stay been casual, passing or purely temporary. The word “residing” occurring in Section 10(26) cannot be given restricted interpretation confining the benefit of exemption only to the local members of the Scheduled Tribes. We are unable to hold that the word “residing” connotes permanent residence relatable to the concept of “domicile”. The benefit of exemption is given to the members of the Scheduled Tribe for economic advancement of the tribal areas vis-a-vis financial benefit to the individuals. Therefore, a very casual or passing presence of a person would be incompatible with the legislative intent. But so far as the writ petitioners are concerned, they have been residing in the State of Meghalaya, and in Bodoland areas in connection with their services. 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 “passing” so as to exclude them from the benefit of Section 10(26).
15. From the above discussion, it can be concluded that a member of a Scheduled Tribe notified in any tribal areas as mentioned in the Table to paragraph 20 of the Sixth Schedule will be entitled to the benefit of exemption under Section 10(26) of the Income-tax Act provided–(a) he is residing in any other tribal 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 belongs is also recognized as a scheduled Tribe in the other tribal area where he is residing in Connection with his avocation.’
10. In Smt. Dipti Doley Basumatary case (supra) the conclusion arrived at by the Gauhati High Court was that a member of a Scheduled Tribe notified in any of the specified areas would be entitled to the benefit of exemption under Section 10(26) provided that he was residing in any of the other specified areas and the income which accrues to him must arise from a source in such area and the tribe to which he belongs is also recognized as the Scheduled Tribe in the other tribal area where he is residing in connection with his work. The Gauhati High Court also held that when a person is transferred from one place of work to another his stay at the place of work cannot be said to be ‘temporary’ or ‘fleeting’.
11. In view of the two conflicting judgments in NEEPCO Tribal Employees’ Welfare Association case (supra) and Smt. Dipti Doley Basumatary case (supra) a Full Bench of the Gauhati High Court in Pradip kr. Taye v. Union of India [2010] 320 ITR 29/189 Taxman 483 was constituted to end the conflict and held follows :
“9. For deciding the tenability of the claim of the petitioners, an analysis of section 10 sub-section (26) is required. 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) 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).”
12. Thereafter, the Full Bench dealt with the issue as what it was the meaning of the phrase “residing in any area specified” occurring in Section 10. The Full Bench held as follows :
’11. Eventually, the question involved in the present case turns upon the words “residing in any area specified” occurring in section 10 sub-section (26).
To determine the true meaning of the expression the following questions are required to be examined:
1. Does it deal with the residence of an individual member of a scheduled tribe specified “with respect to” any State or Union territory; or
2. Does it deal with the residence of the entire tribe specified in relation to certain areas specified in section 10(26) of the Income-tax Act. In other words, is the expression synonymous with the expression “with respect to” occurring under article 342, for example, a person belonging to a scheduled tribe specified by the President “with respect to” the State of Andhra Pradesh or Tamilnadu migrates to one of the areas specified in section 10(26) and chooses to reside therein would be entitled to claim the benefit of section 10(26).
13. It is well settled that the specification of scheduled tribes is with reference to a particular State or Union Territory, i.e., a community or a tribe is specified to be a scheduled tribe only with reference to a particular locality/State/Union Territory. Such a community/tribe, even if it exists in some other parts of the country, if it is not specified by the President to be scheduled tribe with reference to such other part of the Country, the members of such tribe, inhabiting in such other part of the Country, do not get the recognition of belonging to a scheduled tribe. Similarly, members belonging to a tribe recognized to be a scheduled tribe with reference to a particular State, when they migrate to another State, are not entitled as a matter of right for recognition as members of a scheduled tribe in the State of their immigration and claim the benefits offered by such State to the scheduled tribes notified in relation to that State. (Marri Chandra Shekhar Rao v. Dean, Seth G.S. Medical College [1990] 3 SCC 130 and Action Committee on issue of Caste Certificate to Scheduled Castes and Scheduled Tribes in the State of Maharashtra v. Union of India [1994] 5 SCC 244).’
13. The argument made on behalf of the Revenue before the Full Bench was that a declaration that a particular tribe is a Scheduled Tribe is made in respect of a State and, therefore, when a member of a Scheduled Tribe migrates from the state/place of his origin where the tribe to which he belongs is notified to be a Scheduled Tribe in relation to that particular State to another State, he does not carry status of Scheduled Tribe along with him and consequently, is not entitled to the benefit of Section 10(26). This argument was repelled by the Full Bench in the following terms.
’24. We are unable to accept the submission made by the learned counsel for the Department for the following reasons:
As already noticed by us in S. Pushpa v. Sivachanmugavelu [2005] 3 SCC 1, the Supreme Court has already held that it is not the question of a person carrying his status of membership of scheduled tribe from one State to another State, but the question is one whether the State to which the claimant migrates is willing to extend any special treatment to such a person. In fact, the Supreme Court in the said Judgment also took note of the fact that in the Context of all India Services, the practice of the government of India is to provide for reservation/special treatment attracting the provisions of article 16(4) of the Constitution in favour of scheduled castes and scheduled tribes without any reference to the State of their origin.
Apart from the practice followed by the Government of India, in our humble opinion, that is the only option possible under the Constitution as under the scheme of the Constitution no separate list of either scheduled castes or scheduled tribes in relation to the Union of India can be prepared. Therefore, if the Union of India desires to provide for any special treatment (like reservation) in favour of the scheduled castes or tribes in the services under the Union of India necessarily the Union of India has to provide such special treatment only in favour of those scheduled castes or tribes notified by the President in relation to the States.
25. In our view, it would be a strange logic to hear that a member of a scheduled tribe, belonging to a particular tribe in relation to a particular State, can be logically considered for special treatment by the Union of India in the matters of employment, but Parliament cannot provide for an exemption under the Income-tax Act in favour of such persons the moment such a person starts residing at a place other than the place of his origin. It is a different matter that Parliament decided not to give any such exemption. Once Parliament decides to give such an exemption, the question would be whether Parliament intended to deny the benefit of the exemption in the cases of immigrants.
28. Examined thus, the crucial expression “residing in any area specified” occurring under section 10(26), in our view, cannot be given a narrow and restricted meaning to imply that the members of a scheduled tribe migrating from their place of origin, which happens to fall in one of the areas specified in the said sub-section, to another area although once again falling within the areas specified in the sub-section would not get the benefit of the exemption under section 10(26). If a literal meaning is to be given to the expression “residing in any area specified”, in our view, section 10(26) is capable of producing a result that any member of a scheduled tribe irrespective of the fact whether such a scheduled tribe is a scheduled tribe, in relation to those territories specified in the said sub-section or not, is entitled to the benefit of the said sub-section. It is not the case of either the petitioners or the Revenue that Parliament, while enacting section 10(26) intended such result. Therefore, the expression “residing in any area specified” must be interpreted in the context of the said sub-section. The context of the sub-section is that it is a special provision with reference to the specified areas of the country, that is, the areas comprising North East and Jammu and Kashmir of the country, which received a special treatment under the scheme of the Constitution in the various aspects of the application of the Constitution. It may also be worthwhile remembering that even in the matter of reservation of seats either in the Lok Sabha or the various Legislative Assemblies, the scheduled tribes of the State of “Assam” are treated exclusively under article 330(3)1 and 332(1)2. Therefore, in our view, the expression “residing in any area specified”, occurring under section 10(26) is used by Parliament synonymously with the expression “in relation to any area specified” under the said sub-section. In our view, the expression “residing in any area specified” is not meant to be restrictive of the benefit provided under the said sub-section in the case of members of the scheduled tribes, who, otherwise, fall within the scope of the said section, but migrating to one of the places specified in the said sub-section but only descriptive of the limited number of scheduled tribes, which are residents of the areas specified under section 10(26) of the Income-tax Act.
29. It may also be kept in mind while interpreting the said sub-section that the benefit contemplated therein is sought to be given to a specific class of assessees with reference to the income arising or accruing out of a specified area, i.e., areas specified in section 10(26)(a) or certain sources specified in section 10(26)(b) while clause (a) of section 10(26) restricts the benefit to the incomes arising or accruing out of various sources, such as, salaries, house properties, etc. (which are some of the heads of income) so long they arise or accrue within one of the territories/areas specified in the said sub-section, under clause (b) of section 10(26), such a restriction, regarding the territory (with reference to which the income arising out of dividend or interest on securities arise), is not applicable.
30. Yet another reason to reject the interpretation sought to be placed on the said sub-section by the Revenue is the history of the sub-section. It is already noticed earlier, originally the provision sought to exclude the employees of the Government from the purview of the benefit conferred by the said Sub-section, which was found to be unconstitutional by the Supreme Court as creating an unreasonable classification among the scheduled tribes. The Supreme Court in S.K. Dutta, ITO v. Lawarence [1968] 68 ITR 272 (SC) (supra) held such a classification to be illegal. At para- 14 of the said judgment, the Supreme Court held as follows:
“It was the contention of the learned Solicitor-General that exemption from income-tax was given to members of certain scheduled tribes due to their economic and social backwardness; it is not possible to consider a Government servant as socially and economically backward and, hence, the exemption was justly denied to him. According to the Solicitor-General, once a tribal becomes a government servant he is lifted out of his social environment and assimilated into the forward sections of the society and, therefore, he needs no more any crutch to lean on. This argument appears to us to be wholly irrelevant. The exemption in question was not given to individuals either on the basis of their social status or economic resources. It was given to a class. Hence, individuals as individuals do not come into the picture. We fail to see in what manner the social status and economic resources of a Government servant can be different from that of another holding a similar position in a corporation or that of a successful medical practitioner, lawyer, architect, etc. To over-paint the picture of a Government servant as the embodiment of all power and prestige would sound ironical. Today his position in the society to put it at the highest is no higher than, that of others who in other walks of life have the same income. For the purpose of valid classification what is required is not some imaginary difference but a reasonable and substantial distinction, having regard to the purpose of the law.”
31. Once it is held that such a classification of the Government servants from the scope of section 10(26) is violative of article 14 to say that a Government servant or the employees of the “State” (within the meaning of article 12) loses the benefit on the mere accident of his being posted out of his place of origin but within the areas specified under section 10(26) and entitled to the benefit of the said section if by an accident, he is posted in the same area of his origin. Such an interpretation, in our view, which is dependent upon pure accident and exigencies of the service, would lead to wholly arbitrary results and undesirable consequences.’
14. The main issue which arises before us is whether those persons who are Scheduled Tribes but do not originally belong to the specified areas are entitled to the benefit of Section 10(26) or not. On behalf of the Revenue it is urged that Scheduled Tribes are declared as Scheduled Tribes only in respect of a particular State or area and, therefore, if they do not belong to the specified areas they cannot be deemed to be Scheduled Tribes for such areas. On the other hand, on behalf of the assessees it is contended that under a central legislation like the Income Tax Act there can be no differentiation in this regard. It is contended that in the case of reservation to services under the Union of India, Scheduled Tribe candidates of any state or Union territory are eligible to apply because the post is a central post. On this analogy it is submitted that the benefit has been given to those persons who are declared to be Scheduled Tribe within the meaning of Article 342 of the Constitution of India regardless to the area to which they originally belonged. However, to get such benefit they must be residing in the scheduled areas.
15. Reliance in this behalf has been placed by the Revenue on the judgment of the Apex Court in Marri Chandra Shekhar Rao v. Dean, Seth G.S. Medical College [1990] 3 SCC 130 and the Constitution Bench judgment of the Apex Court in Action Committee on issue of Caste Certificate to Scheduled Castes and Scheduled Tribes in the State of Maharashtra v. Union of India [1994] 5 SCC 244. In the cases of Marri Chandra Shekhar Rao (supra) and in Action Committee on issue of Caste Certificate of Scheduled Castes and Scheduled Tribes in the State of Maharashtra (supra) the question before the Apex Court was whether a member of Scheduled Caste or Scheduled Tribe declared in relation to a particular state is entitled to the benefit of being Scheduled Castes or Scheduled Tribe when he migrates or settles in another state. The Court clearly held that members of Scheduled Castes and Scheduled Tribes are declared in respect of a particular Union territory or State and, therefore, they cannot as a matter of right claim such benefit in the State to which they have migrated.
16. However, when it comes to benefits granted by the Union of India the position is slightly different. The Apex Court in S. Pushpa v. Sivachanmugavelu [2005] 3 SCC 1 recognized the distinction between benefits granted by the State and the Union of India in the aforesaid case. In this case, a Bench of the Central Administrative Tribunal had struck down the appointment of certain persons appointed against the Scheduled Caste category on the ground that they were not Scheduled Caste candidates belonged to Pondicherry but some of them were originally Scheduled Castes in the states of Tamilnadu, Andhra Pradesh, Kerala etc. Relying upon the judgment of the Apex Court in Marri Chandra Shekhar Rao (supra) and in Action Committee on issue of Caste Certificate of Scheduled Castes and Scheduled Tribes in the State of Maharashtra (supra) the Administrative Tribunal set aside their selections on the ground that these persons did not belong to the Union Territory of Pondicherry.
17. The Apex Court drew a distinction between benefits given by the Central Government and those given by a State or a Union Territory and held as follows :
’19. Much emphasis has been laid by learned counsel for contesting respondents upon the expression “in relation to that State or Union territory, as the case may be” occurring in clause (1) of Article 341 of the Constitution, and it has been urged that only such of the castes as are mentioned in the schedule appended to the Constitution (Pondicherry) Scheduled Castes Order 1964 issued by the President can be deemed to be Scheduled Castes in relation to the U.T. of Pondicherry and none else and, consequently, migrant SC candidates would not be eligible at all.
20. Part XVI of the Constitution deals with special provisions relating to certain classes and contains Articles 330 to 341. Articles 330 and 332 make provision for reservation of seats in the House of People and Legislative Assemblies of the States respectively, for Scheduled Castes and Scheduled Tribes. Similar provisions have been made for Anglo-Indian community in Articles 331 and 333. Article 338 provides that there will be a commission for the scheduled castes to be known as National Commission for the scheduled castes and it also provides for its composition, powers and duties. Clause (2) of Article 330 provides that the number of seats reserved in the States or Union territories for Scheduled Castes or Scheduled Tribes shall bear, as nearly as may be, the same proportion to the number of seats allotted to that State or Union territory in the House of the People as the population of the Scheduled Castes in the State or Union territory or of the Scheduled Tribes in the State or Union territory, as the case may be, in respect of which seats are so reserved, bears to the total population of the State or Union territory. Similar provision for reservation of seats in favour of SC/ST in the Legislative Assembly of any State is contained in clause (3) of Article 332 of the Constitution. Therefore, in order to ascertain the number of seats which have to be reserved for Scheduled Castes or Scheduled Tribes in the House of the People or in the Legislative Assembly, it is absolutely essential to ascertain precisely the population of the Scheduled Castes or Scheduled Tribes in the State or Union territory. A fortiori, for the purpose of identification, it becomes equally important to know who would be deemed to be Scheduled Caste in relation to that State or Union territory. This exercise has to be done strictly in accordance with the Presidential Order and a migrant Scheduled Caste of another State cannot be taken into consideration otherwise it may affect the number of seats which have to be reserved in the House of People or Legislative Assembly. Though, a migrant SC/ST person of another State may not be deemed to be so within the meaning of Art. 341 and 342 after migration to another State but it does not mean that he ceases to be an SC/ST altogether and becomes a member of forward caste.
21. Clauses (1) and (2) of Article 16 guarantee equality of opportunity to all citizens in the matter of appointment to any office or of any other employment under the State. Clauses (3) to (5), however, lay down several exceptions to the above rule of equal opportunity. Article 16(4) is an enabling provision and confers a discretionary power on the State to make reservation in the matter of appointments in favour of “backward classes of citizens” which in its opinion are not adequately represented either numerically or qualitatively in services of the State. But it confers no constitutional right upon the members of the backward classes to claim reservation. Article 16(4) is not controlled by a Presidential Order issued under Article 341(1) or Article 342(1) of the Constitution in the sense that reservation in the matter of appointment on posts may be made in a State or Union territory only for such Scheduled Castes and Scheduled Tribes which are mentioned in the schedule appended to the Presidential Order for that particular State or Union territory. This Article does not say that only such Scheduled Castes and Scheduled Tribes which are mentioned in the Presidential Order issued for a particular State alone would be recognized as backward classes of citizens and none else. If a State or Union territory makes a provision whereunder the benefit of reservation is extended only to such Scheduled Castes or Scheduled Tribes which are recognized as such, in relation to that State or Union territory then such a provision would be perfectly valid. However, there would be no infraction of clause (4) of Article 16 if a Union territory by virtue of its peculiar position being governed by the President as laid down in Article 239 extends the benefit of reservation even to such migrant Scheduled Castes or Scheduled Tribes who are not mentioned in the schedule to the Presidential Order issued for such Union territory. The U.T. of Pondicherry having adopted a policy of Central Government whereunder all Scheduled Castes or Scheduled Tribes, irrespective of their State are eligible for posts which are reserved for SC/ST candidates, no legal infirmity can be ascribed to such a policy and the same cannot be held to be contrary to any provision of law.’
18. We are clearly of the view that though a member of Scheduled Caste or Scheduled Tribe is declared to be a member of such caste or tribe in respect to the State to which he belongs, there is nothing in the Constitution which prevents any state or the Union of India from extending this benefit to those members of the Scheduled Castes or Scheduled Tribes who have migrated from other States. As far as the Union of India is concerned, it may not make any distinction between Schedule Castes and Scheduled Tribes of different States. Indeed it would be impossible for the Union of India to limit reservation for Scheduled Castes and Scheduled Tribes on state wise basis.
19. In the context of all India services, the practice of the Government of India is to provide for reservation/special treatment in favour of Scheduled Castes or Scheduled Tribes without any reference to the state of their origin. As rightly observed in Pradip Kr. Taye case (supra) that this is the only option available to the Union of India under the Constitution, because under the scheme of the Constitution no separate list of either Scheduled Castes or Scheduled Tribes is prepared in relation to the Union of India. Therefore, if the Union of India desires to provide for any special treatment in favour of Scheduled Castes or Scheduled Tribes, then it is but necessary that the Union of India has to provide such special treatment in favour of those Scheduled Castes or Scheduled Tribes notified by the President in relation to the states. Dealing with this issue the Full Bench in paras 24 and 25 of the Pradip Kr. Taye’s case (supra) has clearly held that nothing prevents the Union of India from granting exemption under the Income Tax Act in favour of such Scheduled Castes and Scheduled Tribes the moment they start residing at a place other than the place of their origin. This exemption cannot be claimed as a matter of right but if the language of the Section giving such benefit does not restrict the benefit to only members of the Scheduled Tribes belonging to a particular state or states then the benefit would be extended to all members of the Scheduled Tribes residing in the State.
20. As far as Section 10(26) is concerned, the language of the said Section makes no differentiation amongst the Scheduled Tribes. In case Lqwarence Singh Ingty (supra) the Apex Court held that the three conditions for getting benefit of Section 10(26) are, that the person should be a member of Scheduled Tribe as defined in Clause 25 of Article 366 of the Constitution, he should be residing in the specified area and the type of income which is exempted is also mentioned in Section 10(26). Section 10(26) does not use the words ‘member of a Scheduled Tribe belonging to the specified areas’ but uses the term ‘member of a Scheduled Tribe as defined in Clause 25 of Article 366 of the Constitution’. Benefit of Section 10(26) is available to all members of the Scheduled Tribes declared as such under Article 342 as long as they are residing in the areas specified in part I or Part II of the table appended to para 20 of the 6th Schedule to the Constitution or in the States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura or in the areas covered by a notification No.TAD/R/35/50/109, dated the 23rd February, 1951 issued by the Governor of Assam under proviso to sub-paragraph 3 of the said Paragraph 20 as it stand immediately before the commencement of the North-Eastern Areas (Reorganization) Act, 1971(81 of 1971) or in the Laddakh region of the State of Jammu & Kashmir which areas have been referred to as “specified areas” in this judgment.
21. We are of the view that the intention of the Parliament was not to limit the benefit to members of the Scheduled Tribe belonging to these areas. The specified areas comprises of many diverse states mostly in the northeast but also the Laddakh region of Jammu & Kashmir. These are the most far-flung areas of the country. The intention of Parliament appears to be that persons who are earning their livelihood while residing in such areas and belong to the Scheduled Tribes should be given the benefit of exemption from payment of income tax. These areas are tribal areas and we see no reason why members of the Scheduled Tribes belonging to other states who works in the specified areas should be deprived of such benefit. It is settled law that when taxing statutes have to be interpreted if two interpretations are possible then the interpretation in favour of the assessee should normally be accepted.
22. In our view, though the declaration of Scheduled Castes or Scheduled Tribes under Article 342 is done with reference to a particular State or Union Territory when it comes to pan India Legisation such as the Income-tax Act or All India Services the benefits extendable to the Scheduled Tribes would be available to all members of the Scheduled Tribes irrespective of the State of origin unless the Parliament specifically restrict the benefit to the Scheduled Castes or Scheduled Tribes of a particular State or Union Territory. In Section 10(26) if the intention of the Parliament was to restrict the benefit of 10(26) to only those members of the Scheduled Tribes who originally hailed from any of the specified areas then instead of using the words ‘as defined in Clause 25 of Article 366 of the Constitution’ the words which would have been used would be ‘belonging to the areas specified hereinafter’.
23. We may also point out that after the Full Bench judgment passed in Pradip kr. Tayee’s case (supra) the Gauhati High Court in a number of cases has granted the benefit of the Full Bench judgment to members of Scheduled Tribes not belonging to the specified areas and in this behalf reference may be made to the judgment in Nanda kataki v. Union of India [WP(C) No. 4885 of 2013, dated 29-8-2013] in which the second petitioner Raj Mal belonged to Himachal Pradesh. It would, however, be pertinent to mention that there is no detailed discussion in this judgment.
24. Next we come to the question as to what is the meaning to be given to the words ‘residing in any specified areas’. We need not go into a very claborate discussion. A person can reside in an area even if he does not belong to that area. Residence in a particular area may be for the purpose of employment or earning a living. However, such residence means having an abode and a ‘fleeting residence’ even for the purpose of earning a livelihood would not amount to residence. To give an example, supposing a member of a Scheduled Tribe not belonging to the specified areas enters into a business contract in one of the specified areas and visits the specified area or resides there for a short time in connection with his business then he would not be entitled to benefit of Section 10(26) even if the income accrues from the specified area. He continues to be a resident of his original State. However, if he settles down in the specified areas for a reasonably long length of time then he may be entitled to the benefit of Section 10(26).
25. We are mainly concerned with the employees of government or government undertakings such as ONGC etc. The employees are posted in these far-flung areas not because of their choice but because of the exigencies of service. They have no say in the matter as to where they should be posted. When a member of any of the services, to give an example, an IAS officer who is a Scheduled Tribe belonging to a state outside the specified areas is given the cadre in a specified area and works there for a reasonably long time then he will be residing in that area. Whether a person is residing in the area or not is a question of fact which will have to be decided on the facts and circumstances of each case. However, as pointed out in the Full Bench judgment in Pradip Kr.Taye (supra) as well as in Division Bench judgment in Smt. Dipti Doley Basumatari (supra) such residence should not be fleeting in nature. The Full Bench in para 28 of its judgment has examined the expression ‘residing in any specified area’ and clearly held that this expression cannot be given a narrow and restrictive meaning.
26. Lastly, we come to the issue as to whether the members of Scheduled Castes and Scheduled Tribes are required to obtain a certificate under Section 197 of the Income Tax Act and what is the extent of validity of this certificate? It was contended on behalf of the members of the Scheduled Tribes that since their income in the specified areas is not to be included in their total income they are not assessees and, therefore, do not fall within the ambit of Section 197 of the Income Tax Act which reads as follows :
“197. Certificate for deduction at lower rate—(1) Subject to rules made under sub-section (2A), [where, in the case of any income of any person [or sum payable to any person], income-tax is required to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force under the provisions of sections 192, 193, 194, 194A, 194C, 194D, 194G , 194H, 194-I, 194J, 194K, 194LA and 195, the Assessing Officer is satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax , as the case may be, the Assessing Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate.
(2) Where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be.
(2A) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (1) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith.”
27. We are unable to accept this contention. Section 197 applies in cases of partial or total exemption. Section 10(26) is in the nature of an exemption and various questions will have to be decided before such certificate is granted. It is for the assessing officer to decide whether the person who claims such exemption is actually a member of a Scheduled Tribe or not, though this will have to be done on the basis of a certificate issued by a competent authority. All persons who claim exemption under Section 10(26) need not be government servants or employed in the organized sector. They could be professionals such as doctors or lawyers or even businessman. Furthermore, it is only their income which accrues in the State which is exempted from being counted to their total income. They may also have income outside the state which may not be exempted from tax. A member of a Scheduled Tribe of the specified area my migrate to a non-specified area and may for the purpose of payment of income tax continue to be registered with the income tax officer in the specified area where his profession or business income which he derives outside the State of the Tripura would not be exempted from tax. These are all questions of fact which will have to be decided by the assessment officer.
28. Therefore, we are of the considered view that the assessee will have to obtain an exemption certificate under Section 197. In this behalf reference may be made to the judgment of the Division Bench of this Court in Tripura Tribal Officer’s Welfare Forum v. Union of India [WP(C) No. 132 of 2014] wherein the Division Bench held as follows :
“[7] A bare reading of Section 197(1) of the Act shows that when the Assessing Officer is satisfied that the total income of the recipient justifies the deduction of income tax at any lower rate or that it justifies no deduction of income tax whatsoever than he shall issue a certificate on an application to be made by the assessee. The question whether a person is entitled to the benefit of Section 10(26) will be dependent on the certain factual matrix. The order which is impugned cannot be faulted on the ground that it requires the assessees to produce a certificate in terms of Section 197 of the Act. Who is to decide as to whether a person actually belongs to Tripura or not? Does the person belong to a Scheduled Tribe or not? Is he entitled to the benefit of Section 10(26) of the Act or not. These are not issues which the petitioner Society will decide. These are issues which the Income Tax Authority empowered under Section 197(1) alone can decide. It is Income-tax Authority which will determine whether a person is entitled to the benefit of section 10(2C) or not?
[9] There can be no general order passed by this Court that no person belonging to a Scheduled Tribe who belongs to Tripura and is employed in Tripura should not be asked to apply for a certificate under Section 197 of the Act. This Court without knowing the factual background of each and every assessee cannot pass a general order in such terms. It is well settled law that orders of the Court should be clear and should be capable of implementation. A General order of the nature which is sought for may cause more problems than settle disputes.”
29. As far as the validity of this certificate is concerned, here also many factual issues will arise. Where a person is in government employment or in employment in the organized sector and belongs to the Scheduled Tribe and works in the specified areas there would be no difficulty with regard to the certificate being extended from to year to year since there are no changed circumstances. We are, however, in the modern day dealing with various other issues. The income tax assessee may be a professional like a lawyer or doctor or an architect. Supposing such person, who is a member of a Scheduled Tribe and normally residing in the specified areas, on account of his work or business goes outside the specified area and earns some income in a particular area which has not accrued in the specified area then that would not be exempted from income tax. This is a question which the income tax officer will have to examine on the facts and circumstances of each case every year. To give an example, supposing a member of the Scheduled Tribe belonging to Tripura is a layer normally pructing in Tripura. He may, however, be engaged by clients based outside the State of Tripura to argue matters either in the Apex Court or in different High Courts in the Country. That income has not accrued in Tripura and would not fall within the ambit of Section 10(26). It will be for the assessing officer to decide whether the income is exempted or not. Therefore, the certificate will have to be obtained every year.
30. In view of the above discussion, we answer the six questions as follows :
(a) A member of a Scheduled Tribe would be entitled to the benefit of Section 10(26) only when he is posted in the specified areas. Once he is posted outside the specified areas then he ceases to reside in the specified are and the income does not accrue to him in the specified area.
(b) The scope and ambit of the word ‘residing’ has to be given its natural meaning that a person has an abode and is living in a particular area for his work and livelihood for a reasonably long length of time. However, whether a person is actually residing or not is a question of fact to be decided on the facts of each case.
(c) Question No.3 is answered in favour of the assessees by holding that any member of a Scheduled Tribe declared to be so under Article 342 of the Constitution, even though he does not belong to the specified area, would be entitled to benefit of section 10(26) when posted to at a station in the specified area and residing therewith in connection with his employment.
(d) Question No. 4 is answered by holding that a member of Scheduled Tribe originally hailing from the specified area would not be entitled to the benefit of exemption under Section 10(26) when he is residing outside the specified areas.
(e) A member of Scheduled Tribe is bound to obtain a certificate of exemption in terms of Section 197.
(f)Question No. 6 is answered by holding that the validity of the certificate will be for one assessment year only.
All the questions are answered accordingly. Now the writ petitions be listed before the appropriate Bench for disposal.
[Citation : 372 ITR 627]
