Section 10(26AAA) proviso struck down; discriminatory exclusion of Sikkimese women removed; exemption for eligible domiciles from Apr 1, 2022

SC struck down the proviso to clause (26AAA) of Section 10, IT Act, as arbitrary and discriminatory under Articles 14 and 15 for excluding Sikkimese women who married non-Sikkimese after 1 Apr 2008; the Explanation to clause (26AAA) includes all genders. The Court directed that all Indian nationals domiciled in Sikkim on or before 26 Apr 1975 are entitled to the tax exemption under Section 10(26AAA) even if not presently registered, and ordered steps to enable registration and preserve the Explanation by appropriate amendment. Individuals domiciled after 26 Apr 1975 remain excluded; exemption effective from 1 Apr 2022.

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Issues Involved:
1. Constitutionality of the definition of "Sikkimese" under Section 10(26AAA) of the Income Tax Act, 1961.
2. Constitutionality of the proviso to Section 10(26AAA) excluding Sikkimese women who marry non-Sikkimese after 01.04.2008.

Issue-Wise
Detailed Analysis:

1. Constitutionality of the definition of "Sikkimese" under Section 10(26AAA) of the Income Tax Act, 1961:

Background and Arguments:
- The petitioners argued that the definition of "Sikkimese" under Section 10(26AAA) is discriminatory as it excludes Indians who settled in Sikkim before its merger with India on 26.04.1975. They claimed this exclusion is arbitrary and violates Articles 14 and 15 of the Constitution, as it fails to provide a rational nexus to the objective of the statute.
- The petitioners contended that the exclusion of old Indian settlers from the benefits of tax exemption under Section 10(26AAA) is unjustified, as these settlers are similarly situated to those whose names are recorded in the Sikkim Subjects Register.
- The respondents argued that the classification is based on historical and social considerations unique to Sikkim and its integration with India. They maintained that the distinction between Sikkim Subjects and other residents was necessary to maintain social harmony.

Judgment:
- The court noted that the purpose of Section 10(26AAA) is to grant tax exemptions to residents of Sikkim. It found no rational basis for excluding old Indian settlers who settled before 26.04.1975 but whose names were not recorded in the Sikkim Subjects Register.
- The court held that the exclusion of old Indian settlers from the definition of "Sikkimese" is arbitrary, discriminatory, and violative of Article 14 of the Constitution. It ruled that the definition of "Sikkimese" should include all Indians who settled in Sikkim before 26.04.1975, regardless of whether their names are recorded in the Sikkim Subjects Register.
- The court directed that old Indian settlers who settled in Sikkim before 26.04.1975 are entitled to the tax exemption under Section 10(26AAA).

Separate Opinion:
- Another judgment emphasized the need for an amendment to the Explanation to Section 10(26AAA) to include all Indian citizens domiciled in Sikkim on or before 26.04.1975. It suggested that until such an amendment is made, the benefit of the exemption should be extended to these individuals.

2. Constitutionality of the proviso to Section 10(26AAA) excluding Sikkimese women who marry non-Sikkimese after 01.04.2008:

Background and Arguments:
- The petitioners argued that the proviso is discriminatory and violates Articles 14, 15, and 21 of the Constitution, as it excludes Sikkimese women who marry non-Sikkimese men after 01.04.2008 from the tax exemption.
- They contended that this exclusion is based on gender and lacks any rational basis, as it does not apply to Sikkimese men who marry non-Sikkimese women.
- The respondents attempted to justify the proviso based on customary laws and social considerations but failed to provide a convincing rationale.

Judgment:
- The court found the proviso to be discriminatory and violative of Articles 14, 15, and 21 of the Constitution. It noted that the proviso creates an unjustifiable distinction between Sikkimese women and men, as well as between Sikkimese women married before and after 01.04.2008.
- The court emphasized that a woman's identity should not be compromised by marriage, and the proviso's gender-based discrimination is unconstitutional.
- The court struck down the proviso to Section 10(26AAA) as it excludes Sikkimese women who marry non-Sikkimese men after 01.04.2008.

Separate Opinion:
- Another judgment concurred with the main judgment, providing additional reasons and emphasizing the need to eliminate gender-based discrimination. It highlighted international conventions and previous judicial decisions supporting gender equality.

Conclusion:
- The exclusion of old Indian settlers from the definition of "Sikkimese" in Section 10(26AAA) is unconstitutional, and they are entitled to tax exemptions.
- The proviso excluding Sikkimese women who marry non-Sikkimese men after 01.04.2008 is discriminatory and unconstitutional, and it has been struck down.

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