Thursday, November 12, 2015

Tax Exemption for Tribals : The Story so far

                                                                                                                   Hauthang Kilong   
                                                                                                                           
The issue of exemption of Income Tax for Tribals is a matter of interest and significance, among the members of Scheduled Tribes in general, and particularly for those hailing from the North-Eastern States of India. The subject has also found echo in both the Houses of Parliament from time to time. In a question raised by Ms Mabel Rachello in Rajya Sabha, the then Minister of State for Finance, Shri S. S. Palanimanickam replied that the exemption under Section 10(26) of the Income Tax Act, 1961 is provided both in the interest of the Scheduled Tribes and also in the interest of the areas which the tribes inhabit. It was further emphasized that the government was moving towards a moderate tax regime and gradual phasing out of various exemptions and deductions existing in the Income Tax Act and no proposal for extending such exemption to tribals of the rest of the country was under consideration1. For some time, there was lack of clarity regarding the applicability of the aforesaid exemption provided by the Act. This seems to have changed, at least for the moment.
 
Ambit of Section 10(26) :
 
Section 10(26) of the Income Tax Act, 1961 provides exemption from Income Tax to income accruing or arising to a member of a Scheduled Tribe residing in the state of Arunachal Pradesh, Manipur, Mizoram, Nagaland, Meghalaya & Tripura; North Cachar Hills District, Karbi Anglong District and the Bodoland Territorial Area District of Assam2; areas included in Balipora Frontier Tract, Sadiya Frontier Tract (Abor hills and Mishmi Hills districts) and Tirap Frontier Tract of Arunachal Pradesh & Assam as specified in relevant Notification 3 ; and Ladakh region of the state of Jammu & Kashmir. For purpose of tax exemption, such income has to accrue or arise from any source in the said areas or States, or by way of dividend or interest on securities.
 
 
Chronology of Landmark Judgments :
 
 
The issue of tax exemption for tribals has thrown up interesting instances of interpretation of law since inception.
 
·        In the case of S. K. Dutta, Income Tax Officer & Ors vs Lawrence Singh Ingty, the issue was whether in a Scheduled Area, a member of a Scheduled Tribe who is a government servant, should be considered eligible for exemption from Income Tax. The respondent was a member of a Scheduled Tribe residing in Scheduled Area, but, as he was a government servant, he was assessed to Income Tax. He challenged the validity of the assessments and the High Court quashed the assessments holding that the extent the exemption provisions in the Income Tax Act, excluded government servants from the benefit of the exemption given there under, were discriminatory and void. The matter came before the Supreme Court. The Supreme Court held that taking into consideration the reasons which persuaded the legislature to grant the exemption in question, it had no doubt that the legislature would have granted that exemption even if it was aware of the fact that it was beyond its competence to exclude the government servants from the exemption in question4.
  
·       In Dr Curzon G. Momin vs I.S. Phukan Additional ITO, Guwahati High Court held that if the assessees, being a member of a Scheduled Tribe has any income which accrues or arises in the area specified in section 10(26), that income will not be chargeable to income tax. But, it also held that if any income accrues or arises outside the area, he cannot take advantage of this provision5.
 
·       The Gauhati High Court in a writ petition under Art. 226 struck down section 10(26) as violative of Art. 14 on the ground that the exemption claim which was enacted for the benefit of Scheduled Tribes would be frustrated if the income of such person was made subject to tax merely because the source of the income was outside that area. The writ petition challenged the validity of section 10 (26) on the ground that the classification of members of a Scheduled Tribe into those having income within the Scheduled Areas and those having income from source outside the areas was arbitrary. In the case of Income Tax Officer vs Takim Roy Rymbai, the Supreme Court reversed the earlier judgment of the Gauhati High Court6.
  
·       In the case of Income Tax Officer vs Mahari & Sons, the Gauhati High Court held that the income earned by a Khasi family as a unit would be entitled to exemption under section 10(26) in the same manner as self earned income of an individual Khasi7. 
 
·       In the case of Utankamoni Chakma vs Income Tax Officer, the Gauhati High Court again upheld the view that income of a member of a Scheduled Tribe is exempt from Income Tax only if such income is earned from specified areas8. 
 
·       In the case of J. Lalhmingliana And Ors vs Union of India And Ors, Delhi High Court held that members of a Scheduled Tribe are entitled to benefits of exemption under section 10(26) of the Income Tax Act, 1961 if they are permanent resident of the specified Scheduled Areas and are also physically working in the said areas9 
 
·       In the case of Commissioner of Income Tax vs Smt. A.M. Marbaniang, the issue relates to assessee working within cantonment area. The Gauhati High Court has held that if the income accrues from a source in the areas specified in Part II of the Table appended to paragraph 20 of the Sixth Schedule, such assessee is entitled to exemption10.

·       In the case of Sing Killing vs Income Tax Officer, the Gauhati High Court held that regardless of the place at which payments in respect of such transactions are received, such income must be deemed to have originated from a Sixth Schedule area, if so, and hence section 10(26) of the Act must be held to be applicable11. 
 
·       In the case of Neepco Tribal Employees’ Welfare vs Union of India, the Gauhati High Court held that a person to be qualified for exemption contemplated by the Income Tax Act has to be essentially a member of Scheduled Tribe notified under 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 there12 
 
·       In the case of Dipti Doley Basumatary vs Union of India (UoI) And Ors, the Gauhati High Court held 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, 1961 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 avocation13. 
 
·       In the case of Pradip Kumar Taye vs Union of India, the Gauhati High Court clearly held that nothing prevents the Union of India from granting exemption under the Income Tax Act in favour of a Scheduled Castes or Scheduled Tribes the moment they start residing at a place other than the place of their origin. It further held that 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 State14. 

·       The latest of the judicial pronouncements comes from the Tripura High Court. In the case of Chandra Mohan Sinku vs Union of India, the Tripura High Court held that a member of a Scheduled Tribe would be entitled to benefit of section 10(26) only when he is posted in specified areas because once he is posted outside specified areas then he ceases to reside in specified area and income does not accrue to him in specified area. The Tripura High Court also held that 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 reasonably long length of time, however, whether a person is actually residing or not is a question of fact to be decided on facts of each case. It also held that any member of a Scheduled Tribe declared to be so under article 342 of Constitution, even though he does not belong to a specified area, would be entitled to benefit of section 10(26) when posted at a station in specified area and residing therewith in connection with his employment. The High Court also held that a member of a Scheduled Tribe is bound to obtain a certificate of exemption in terms of section 197 and validity of certificate will be for one assessment year only15. 

 
Present status  :
 
After the decision of the Gauhati High Court in Pradip Kumar Taye vs Union of India and judgment of Tripura High Court in Chandra Mohan Sinku vs Union of India, it has become clear that the income of a member of Scheduled Tribe shall be exempt from Income Tax if he resides in a specified area. It does not matter if he resides in a specified area other than the specified area where he originally belongs. What matters is that the source of the income which accrue or arises should be from the specified areas.

Further, the Hon’ble Supreme Court has dismissed the SLP filed by the department following full bench decision of Gauhati High Court in the case of Pradip Kumar Taye and Others.

Until further development, members of Scheduled Tribe (ST) who are not originally from an area covered under section 10(26) but residing and earning income in any area covered under section 10(26) is also entitled for exemption under section 10(26) of the Income Tax Act16, apart from those residing in the specified area of origin.


[The author is an Indian Revenue Service officer. Views expressed are personal and not of the Department]

***

References :
  1.  Reply of Shri S.S. Palanimanickam, MoS Finance in Rajya Sabha, BSC/BY/GN-267/06.
  2. Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution.
  3. Notification No. TAD/R/35/50/109, dated the 23rd February, 1951, issued by the Governor of  Assam.
  4. S.K. Dutta, Income Tax Officer &..vs Lawrence Singh Ingty [7 November, 1967], 1968 AIR 658 SC.
  5. Dr. Curzon G. Momin vs I.S. Phukan, 2nd Additional [23 February, 1973], 1973 92 ITR 425 Gauhati.
  6. Income Tax Officer, Shillong And…vs N. Takim Roy Rymbai [17 February, 1976], 1976 AIR 670 SC.
  7. Income Tax Officer vs Mahari And Sons [9 June, 1982], 1982 2 ITD 408 Gauhati.
  8. Utankamoni Chakma vs Income Tax Officer And Ors [2 July, 1988], 1989 175 ITR 280 Gauhati.
  9. J. Lalhmingliana And Ors. Vs Union of India And Ors [5 December, 1988], ILR 1988 Delhi 522.
  10. Commissioner of Income Tax vs Smt. A.M. Marbaniang[3 February, 1993],1993 202 ITR 502 Gauhati.
  11. Sing Killing vs Income Tax Officer [21 March, 2002], LAWS(GAU)-2002-3-33.
  12. Neepco Tribal Employees’ Welfare…vs Union of India (UoI) And Ors [22 June, 2005], 2007 290 ITR 481 Gauhati.
  13. Smt. Dipti Doley Basumatary vs Union of India (UoI) And Ors [27 February, 2007], 2007 29 ITR 498 Gauhati.
  14. Pradip Kumar Taye vs Union of India, 2009 12 TMI 285, Gauhati.
  15. Chandra Mohan Sinku vs Union of India, 2015 4 TMI 270, Tripura High Court.
  16. Letter of Income Tax Officer, TDS (Tech), dated 11.02.2015.

 

Saturday, October 3, 2015

Realities of Life

                                    ~ Merlyn Kaipeng

To appreciate the bad times of life
Is not easy as said
But come what may
One gotta be ready
To hit back the world
To be strong to survive

The world is not what it appear
No room for discouragement
Myriads share the same fate
In the midst of a cruel world
There is nothing like turning
Weakness into strength.

There is nothing wrong
In a sensitive and emotional heart
Let the heart cry out
Let the world know what's inside
But better be careful while expressing
People may not fathom the grief inside

The nature of beings are not same
Blame cannot be laid at someone's feet
None should be judged
None has the right to judge
God alone has the prerogative
You are not a judge; don't be fooled.

[Merlyn Kaipeng is a successful entrepreneur based in Agartala. She writes in her leisure time]

A Thing For Love

                             ~ Marlyn Kaipeng

Young and Old; Everyone need love
Have your ever imagined ?
Love is not simple as it seems
Love is something complicated
It would take a lifetime to describe.

Love is sacrifice
Real love is hard to find
Can't blame anyone for it though
For everyone is betrayed by love
One point of time or the other.

Trust is the essence of love
When someone breaks trust
It is difficult to trust again
This give way to flirtation
For scare of emotional attachments.

Love is pure; No lust involved
Where can one find true love ?
Each guy plays the right note
Hard to mark the good from the bad
Blinded to rely in the heart of others.

[Ms. Marlyn Kaipeng is a successful entrepreneur based in Agartala. She writes in her free time.]

Sunday, September 27, 2015

ODE TO GRANDPA

It was nearly mid-night of the 1st day of May
I was in a deep sleep when you're taken away
Dawn came, I heard the news, I was left speechless
I didn't know what to do!
I cried so hard cos' you're never coming back
I sat like a pillar, right there in the corner
Trying to keep myself calm, but the truth is you are gone and I can't bring you back
I've got sleepless nights in my life, My whole life's shattered
It hurts so bad to see you go....Life's hard without you grandpa
I won't forget you and I won't forget the things we did
You taught me how to talk, walk, sit, whatsoever
You're like my everything and I really want you back
I miss you so bad...I hope you could hear me!

Everything was destroyed the day you slipped away
Everywhere I look I see no destiny
I got a pain in the chest and I can't take a breath
I got nothing on my mind, got nothing to make me smile
I feel so helpless, I feel so down
Things aren't the way they are supposed to be !
Coz you're gone somewhere I can't bring you back
Why is life so complicated? It gets me so frustrated
May be I was insane cos' I miss you so bad
I wish you could see me now, see what I have gone through
I wish you could hear me now, hear what I sang for you.

[Ms. Jennifer Nengneithem Kilong is a student of Sielmat Christian Higher Secondary School, Churachandpur. She presently reads in Class XI. Her grandfather, Late Longkhohao Kilong passed away on 01.05.2011. 'Ode to grandpa' is written by Jennifer in remembrance of her grandfather.]