Summary
Section 10(26AAA) of the Income Tax Act exempts 'Sikkimese' from income tax, defining them by reference to the Register of Sikkim Subjects. This left out old Indian settlers who had not given up Indian citizenship before Sikkim's merger in 1975. Its proviso also removed the exemption from Sikkimese women who married non-Sikkimese men on or after 01.04.2008. Both Judges struck the proviso down as gender discrimination violating Articles 14, 15 and 21, with no rationale for the cut-off date. Shah J. held that excluding pre-merger Indian settlers was arbitrary and read them into the definition. Nagarathna J. directed the Union to amend the Explanation. Meanwhile, under Article 142, a clause covering anyone domiciled in Sikkim on or before 26.04.1975 was to be read in.
Issues
- Whether the definition of 'Sikkimese' in the Explanation to Section 10(26AAA) of the Income Tax Act, 1961 is discriminatory insofar as it excludes Indians settled in Sikkim before its merger on 26.04.1975 whose names are not in the Register of Sikkim Subjects.
- Whether the proviso excluding a Sikkimese woman who marries a non-Sikkimese on or after 01.04.2008 violates Articles 14, 15 and 21.
Provisions considered
- Section 10(26AAA), proviso and Explanation, Income Tax Act, 1961The exemption for income of Sikkimese from Sikkim sources or by way of dividends or interest depends on registration in the Register of Sikkim Subjects or descent from a registered person, and the proviso excludes certain married women. (¶¶ 2, 13, 21, 66, 71)
- Articles 14, 15, 21, 142 and 371-F, Constitution of IndiaClassification must rest on an intelligible differentia with a rational nexus to the object (D.S. Nakara, Manohar Singhji, Shayara Bano); gender-based exclusion and arbitrary cut-offs fail that test; Article 142 was invoked to fill the legislative gap pending amendment. (¶¶ 13.2, 13.3, 13.4, 15, 56, 77)
- Regulations 3, 4 and 7, Sikkim Subjects Regulation, 1961Registration required a declaration of not being a citizen of any other country, which led Indian settlers to stay off the Register; after the merger 'any other country' is to be read as excluding India. (¶¶ 68.1, 68.3, 68.4, 68.5)
Held
- Per Shah J., the object of the exemption is to benefit residents of Sikkim, and Indians permanently settled there before 26.04.1975 are similarly situated with registered Sikkim Subjects; their exclusion merely because their ancestors did not surrender Indian citizenship lacks any intelligible differentia or nexus, the Union being unable to justify it, and is struck down as violating Article 14. (¶¶ 9, 13, 13.1, 13.2, 13.4, 14, 17)
- The proviso is struck down by both Judges: no justification was shown for excluding Sikkimese women marrying non-Sikkimese men when Sikkimese men face no such bar, a woman is not chattel and does not lose her identity on marriage, and the cut-off of 01.04.2008 has no rational nexus. (¶¶ 15, 15.1, 16, 47, 51, 53, 55, 56, 65)
- Per Nagarathna J., the 'individual' in the Explanation includes all genders and a proviso cannot override the main provision; the gender-stereotyped reasoning in Air India v. Nergesh Meerza and Yeshaswinee Merchant calls for reconsideration in light of C.B. Muthamma, Anuj Garg and Babita Puniya. (¶¶ 52, 53, 54, 57, 58, 59)
- Per Nagarathna J., the Explanation is saved as a reasonable classification, but to remove discrimination against old settlers the Union must amend it; until then, under Article 142, an individual not in the Register but shown to have been domiciled in Sikkim on or before 26.04.1975 is entitled to the exemption, while later settlers are not. (¶¶ 74, 75, 76, 77, 78, 79)
Result
Writ Petition (C) No. 59 of 2013 and Writ Petition (C) No. 1283 of 2021 under Article 32 disposed of: the proviso to Section 10(26AAA) struck down, and the exemption extended to Indians domiciled or permanently settled in Sikkim before 26.04.1975, with Nagarathna J. directing amendment of the Explanation and an interim reading-in under Article 142; parties to bear their own costs.