Domicile in Sikkim Pre-1975 Qualifies for Tax Exemption

The ITAT Kolkata allowed the appeal of the assessee, holding that despite not being a Sikkimese or in the Sikkim Register, the assessee's domicile in Sikkim before 26th April, 1975, qualifies for exemption under section 10(26AAA) of the Income Tax Act. The Supreme Court emphasized that individuals domiciled in Sikkim before 1975 are entitled to the exemption, directing the Union of India to amend the Explanation to include such citizens and striking down the proviso excluding certain individuals.

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Issues involved:
The judgment deals with the eligibility of the assessee for exemption under section 10(26AAA) of the Income Tax Act, 1961 based on domicile in Sikkim before 26th April, 1975.

Eligibility for Exemption under Section 10(26AAA):
The assessee claimed exemption under section 10(26AAA) of the Act, contending that being domiciled in Sikkim before 26th April, 1975, qualifies for the benefit. The Counsel referred to a residential certificate confirming the assessee's continuous residence in Sikkim since before 1975. The Hon'ble Supreme Court's judgment emphasized that individuals domiciled in Sikkim before 1975 are entitled to the exemption, even if their names are not in the Sikkim Register. The Court directed the Union of India to amend the Explanation to Section 10(26AAA) to include citizens domiciled in Sikkim before 26th April, 1975. The Court also struck down the proviso excluding certain individuals from the exempted category.

Assessment Proceedings and Appeal:
The assessee, engaged in trading business, deposited a sum in a bank account leading to a notice under section 148. During assessment, the assessee claimed exemption under section 10(26AAA). The Assessing Officer added the deposit as income due to the pending matter before the Supreme Court. The appeal before the CIT(A) did not provide relief.

Decision and Conclusion:
The ITAT Kolkata, after considering the facts and the Supreme Court's judgment, found that the assessee, though not a Sikkimese and not in the Sikkim Register, was domiciled in Sikkim before 26th April, 1975. Therefore, the assessee is entitled to exemption under section 10(26AAA) for income earned in Sikkim. The ITAT allowed the appeal of the assessee based on the Supreme Court's decision.

This summary provides a detailed overview of the judgment, highlighting the issues, arguments, and final decision regarding the eligibility of the assessee for exemption under section 10(26AAA) of the Income Tax Act, 1961.

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