WRIT PETITION (C) NO. 59 OF 2013
Association of Old Settlers of Sikkim and Ors. …Appellant(s)
Versus
Union of India and Anr .…Respondent(s)
Facts
Before the merger of Sikkim in India the ruler of Sikkim (the Chogyal) introduced the Sikkim Subject Regulations, 1961 on 03.07.1961 and under these regulations: (a) the persons falling under Clause 3 of the Regulations were to be registered as a “Sikkim Subject” in the Register; and (b) Persons who were citizens of another country were not to be registered as a “Sikkim Subject” unless he give up their citizenship of the other country. So in order to becomes Sikkimese citizen one has to give up their other citizenship to get citizenship of Sikkim and the term ‘Sikkim Subject’ was defined as a person who was born in the Sikkim and was resident therein and similarly situated persons, but with a caveat that “a person shall not be a “Sikkim Subject” in section, unless he makes a declaration/statement that he is not a citizen of any other country at the time of addition of his name in the register of “Sikkim Subjects”.
When the Sikkim merged in India and Indian government discussed with Sikkim government to give benefits to ST population after Sikkim’s MP rejected Indian tax laws in Sikkim and after that a committee was formed by both government which suggested that income tax exemption must be given to Sikkimese people and “a Sikkimese women who marries a non-Sikkimese after 01.04.2008” is excluded from getting the benefit of tax exemption under Section 10(26AAA).
For the purposes of this Clause, “Sikkimese” shall mean: –
i) A person, whose name is recorded in the register maintained under the Sikkim Subjects Regulations, 1961 will be referred to as the “Sikkim Subjects”, immediately before the 26th day of April 1975.
ii) an individual, whose name is included in the Register of Sikkim Subjects by the result of Government of India Order No. 26030/36/90 dated the 7th of August 1990 and Order of even number dated the 8th of April 1991.
(iii) any other individual, whose name is not listed in the Register of Sikkim Subjects, but it is established beyond doubt that the name of such individual’s father or husband or paternal grandfather or brother from the same father has been recorded in that register;”
the main issue was that the exemption was given to 95% of people of Sikkim however, 5% of the residents of Sikkim of which about 1% are the people like the petitioners, who, as such are also the bona fide settlers of Sikkim, are being singled out from exemption from payment of income tax on the sole ground that they are not recorded in the register under the Sikkim Subjects Regulation 1961. It appears that approximately 500 such families are affected by the definition of the “Sikkimese” as they didn’t give up their Indian citizenship for settling in Sikkim and that’s why their name was not registered even though they were Bonafide settlers.
Felling aggrieved and dissatisfied with Sikkimese definition and exclusion of Sikkimese women married to non-Sikkimese from exempted category, the writ petition was filed under article 32 of the Constitution of India by petitioners – Association of Old Settlers of Sikkim and Others seeking appropriate direction and order against the two said issues.
Issues Raised
1. whether the definition of “Sikkimese” in Section 10(26AAA) of the Income Tax Act is discriminatory, arbitrary and unfair.
2. whether exclusion of the old Indian settlers from the definition of ‘Sikkimese’ in Clause 10(26AAA) of the Income Tax Act violates Article 14 of the Constitution of India.
3. whether Proviso to Section 10(26AAA) which excludes a Sikkimese woman, who marries a non-Sikkimese from exempted category is discriminatory and based on gender in inequality and violative of article 14, 15 and 21 of the Constitution of India.
Contentions of Petitioners
1.) That the definition of “Sikkimese” in Section 10(26AAA) of the Income Tax Act 5 is discriminatory and arbitrary as it violates the fundamental rights of those Indians, who have settled in Sikkim and didn’t gave their Indian citizenship prior to 26.04.1975 under Articles 14 and 15 of the Constitution of India;
2.) The exclusion of the old Indian settlers from the definition of ‘Sikkimese subject’ in Clause 10(26AAA) of the Income Tax Act clearly violates Article 14 of the Constitution of India and does not satisfy any of the tests laid down by Supreme Court under article 14.
3.) It was contented by petitioners that via amendment one single class of person that is Indian are sought to be treated differently without any rationale.
4.) It was contended that there no nexus with the object sought to be achieved.
5.) Petitioners contented that that there is no reasonable classification between the residents of Sikkim whose names were registered as “Sikkim Subjects” under the Sikkim Subjects Regulations, 1961 and those Indian old Sikkim settlers, whose names could not be registered as “Sikkim Subjects” as their forefathers did not surrender the Indian citizenship.
6.) All residents of Sikkim and those who settled in Sikkim prior to merger are all to be treated at par as they all are similarly situated and hence the classification into two different groups is violative of article 14
Contentions of Respondent party
1. ASG Shri N. Venkataraman tried to justify classification by stating that it’s the decision of legislature to grant benefit of exemption to only those who are defined as “Sikkim Subjects” under the Sikkim Subjects Regulations, 1961 and therefore is should not be interfered with.
2. He failed to justify the classification and satisfy court on how this classification will achieve the objectives and purpose
Rationale
1. No reasonable classification – Court held that the Indian citizen and who have settled in Sikkim prior to the merger and didn’t have their name registered are equal and to be treated at par as they are of same group and class as those who have their names resisted in “Sikkim Subject”, just because there their ancestors didn’t surrendered their Indian citizenship at that particular time can’t make them cease to be the “Sikkimese. All of them are similarly situated and Union of India failed to satisfy any reasonable classification hence exclusion of old Indian settlers who settled in Sikkim prior to the merger from the definition of Sikkimese is arbitrary and violative of article 14.
2. Twin test of classification
Article 14 forbids class legislation but permits reasonable classification for the object and purpose of legislation and classification must satisfy twin test of classification as observed in the case of D.S. Nakara case.
Article 14 states that the state shall not deny any citizen equal protection of law and equality before law and discrimination can be only allowed on the ground of reasonable classification.
3. No nexus with the object
The court in this case held that exclusion of old settlers of Sikkim has no nexus with the object and purpose of the said section. Arbitrariness is not a ground in India since it comes with the restriction of article 14 held by supreme court in Shayara Bano case hence any law, act and provision which is arbitrary and discriminatory will be struck down as it’s violative of article 14
Finally, the court held that the Sikkimese, like the petitioners, are entitled for the tax exemption under Income Tax Act, 1961.
4. Discrimination based on gender
Exclusion of Sikkimese women who are married to non-Sikkimese from tax exemption is based on gender discrimination and hence violates Article 14, 15 and 21. Exclusion of women from inheritance based on gender is violation of constitution. Such exclusion of women merely on the basis of gender is discriminatory and violates article 14 and needs to be struck down.
Conclusion
1. Supreme court held that Section 10(26AAA) of Income Tax Act which excludes old settlers of Sikkim is ultra vires to article 14 and hereby struck down.
2. Exclusion of Sikkimese women from tax exemption is ultra vires of article 14 and 21 and hence struck down
Inference
The Supreme court in this landmark judgment reaffirmed that the discrimination can only be valid on the grounds of reasonable classification and classification based on arbitrariness is violative of article 14.
Here are some key inferences from the judgment
1. The definition of “Sikkimese” in the Income Tax Act was discriminatory. The court found that excluding old Indian settlers who lived in Sikkim before the merger was arbitrary and not based on a reasonable classification. This suggests the previous definition was arbitrary in nature
2. Ancestral documentation may not be the sole criteria for rights. The court said that not having a registered name shouldn’t disqualify someone from benefits if they belong to the same group and in a similar situation as those who did got benefits.
3. Gender discrimination – The court struck down the exclusion of Sikkimese women married to non-Sikkimese from tax benefits as it was based on gender discrimination. This shows a strong stance against gender-based discrimination
4. Equality before law – This case again upholds the Article 14 of the Indian Constitution, which guarantees equality before the law.
References
[1] Section 10(26AAA) of Income Tax Act 1961
[2] D.S. Nakara & Others vs Union Of India on 17 December, 1982
[3] Shayara Bano vs Union Of India And Ors.
[4] G.Sekar vs Geetha & Ors on 15 April, 2009
[5] Association Of Old Settlers Of Sikkim vs Union Of India on 13 January, 2023 (indiankanoon.org)
[6] Ashok KM, Exclusion Of ‘Old Indian Settlers’ From Definition Of Sikkimese In Section 10(26AAA) Income Tax Act Unconstitutional: Supreme Court, LiveLaw (Jan. 13, 2023).
Name – Akash Pal
College – Law Centre 2, Faculty of Law, Delhi university