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Issues: Whether the exclusion of Government servants from the income-tax exemption available to members of Scheduled Tribes residing in the specified Sixth Schedule areas under section 4(3)(xxi) of the Indian Income-tax Act, 1922 and section 10(26) of the Income-tax Act, 1961 was discriminatory and violative of article 14 of the Constitution.
Analysis: The exemption was framed on the basis of membership of a Scheduled Tribe residing in the specified area, and the exclusion of Government servants had to satisfy the test of reasonable classification under article 14. Taxation statutes are entitled to a wide latitude in selection, but the classification must still rest on a real and substantial distinction having a rational nexus with the object of the provision. The Court found no material basis for treating Government servants as a separate class for this purpose. Administrative convenience was not shown to be a real and substantial justification, and past notifications or legislative practice did not establish a constitutional basis for the discrimination. The Court also held that the exclusionary words were severable from the rest of the exemption provisions.
Conclusion: The exclusion of Government servants from the exemption was held to be unconstitutional and the challenge to the assessments succeeded.
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