TaxTMI 
TaxTMI 
2015 (4) TMI 270
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....zoram, Nagaland and Tripura or when he is posted anywhere in the country? (2) What is the scope and ambit of the words "residing" in the opening portion of section 10(26) of the Act? (3) Whether, a person belonging to the Scheduled Tribes and falling within the meaning of Clause 25 of Article 366 but not originally belonging to the areas specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution and not belonging to the States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura is entitled to benefit of section 10(26) when posted in such areas? (4) Whether, a person who is a member of the Scheduled Tribes and belongs to the areas specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution or belongs to the States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura is entitled to benefit of exemption under section 10(26) of the Act when he is posted outside these areas? (5) Whether, a member of the Scheduled Tribes is bound to obtain a certificate of exemption from the Income Tax Authorities in terms of section 197 of the Act? (6) Whether, such cert....
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....y way of dividend or interest on securities;" 3. Sub-section 26 grants certain benefits to members of the Scheduled Tribes residing in areas specified in Part I or Part II of the Table appended to paragraph 20 of the sixth Schedule to the Constitution or in the States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura or in the areas covered by notification dated 23rd February, 1951 issued by the Governor of Assam or to the Laddakh region of the State of Jammu & Kashmir (hereinafter these areas shall be referred to as the 'specified areas'). As per Clause (a) of sub-section 26 of Section 10 any income derived by a member of a Scheduled Tribe from any source in the specified areas is not to be included in his total Income. Furthermore, if the member of the Scheduled Tribe is residing in the specified areas then any income derived by way of dividend or interest is also not to be included in his total income even though that income may have accrued outside the specified areas. 4. When we read Section10(26) carefully and analyse the various provisions of this Section it is clear that before a person is entitled to claim benefit of the exemption granted under this Sectio....
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....ll for consideration. The stand of the income tax officer was that the Assam secretariat building which constituted the place of work of the assessee did not form part of the specified area and, therefore, the assessee was not entitled to the exemption provided under Section 10(26)(a) of the Act. On a writ petition being filed by the assessee the High Court struck down sub-clause (a) of Clause 26 on the ground that it was violative of Article 14 of the Constitution. The High Court relied upon the observations of the Apex Court in S K Dutta's case (supra). 7. The Apex Court in this case analyzed the provisions of this Section and held that there were three essential conditions which must co-exist; (1) that the person claiming exemption should be a member of a Scheduled Tribe as defined in Article 366(25) of the Constitution of India, (2) he should be residing in one of the specified areas and (3) the income should accrue to him from a source in the specified areas. The Apex Court thereafter held that sub-clause (a) of Section 10(26) could not be said to be „violative' of Article 14 of the Constitution. The Apex Court therefore upheld the Constitutional validity of this prov....
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....ference but a reasonable and substantial distinction having regard to the purpose of the law." Thereafter a learned single Judge of the Gauhati High Court in NEEPCO Tribal Employees' Welfare Association v. Union of India, 2005(4) GLT 463 held as follows : "37. Having regard to the underlying legislative intendment in incorporating the exemption provision in the form of Section 10(26) of the Act and the interpretation which Section 10(26) of the Act has received in the hands of the apex court as well as of this court in the earlier decisions as well as the judicially evolved principles bearing on the relevant aspect of statutory interpretation, I am of the considered view that a person to be qualified for the exemption contemplated in the above provision of the Act has to be essentially a member of a Scheduled Tribe notified under the 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 therein. It is only if the above three conditions co-exist that the benefit envisaged under the above provision of the Act would be available. The interpretation provided to Section 10(26) of the Act by the de....
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....d in Bodoland in relation to the areas where they are presently residing. 14. All the writ petitioners are transferred from different areas mentioned in the Table to paragraph 20. Therefore, their residence in the State of Meghalaya and in Bodoland cannot be construed to be "fleeting". The question would have been altogether different had their stay been casual, passing or purely temporary. The word "residing" occurring in Section 10(26) cannot be given restricted interpretation confining the benefit of exemption only to the local members of the Scheduled Tribes. We are unable to hold that the word "residing" connotes permanent residence relatable to the concept of "domicile". The benefit of exemption is given to the members of the Scheduled Tribe for economic advancement of the tribal areas vis-a-vis financial benefit to the individuals. Therefore, a very casual or passing presence of a person would be incompatible with the legislative intent. But so far as the writ petitioners are concerned, they have been residing in the State of Meghalaya, and in Bodoland areas in connection with their services. They cannot shift their residence at their sweet will. Therefore, their presence....
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....ub-section (26), which make the benefit provided under sub-section (26) available only to the members of the scheduled tribes "residing in any areas" specified in the said section. In other words, the members of the Scheduled Tribes residing in other parts of the country, other than the one specified under Section 10 Sub-section (26), are not entitled to the benefit of Section 10 Sub-section (26)." Thereafter, the Full Bench dealt with the issue as what it was the meaning of the phrase "residing in any area specified" occurring in Section 10. The Full Bench held as follows : "11. Eventually, the question involved in the present case turns upon the words "residing in any area specified" occurring in section 10 sub-section (26). To determine the true meaning of the expression the following questions are required to be examined: 1. Does it deal with the residence of an individual member of a scheduled tribe specified "with respect to" any State or Union territory; or 2. Does it deal with the residence of the entire tribe specified in relation to certain areas specified in section 10(26) of the Income-tax Act. In other words, is the expression synonymous with the express....
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....carrying his status of membership of scheduled tribe from one State to another State, but the question is one whether the State to which the claimant migrates is willing to extend any special treatment to such a person. In fact, the Supreme Court in the said judgment also took note of the fact that in the context of All India Services, the practice of the Government of India is to provide for reservation/special treatment attracting the provisions of article 16(4) of the Constitution in favour of scheduled castes and scheduled tribes without any reference to the State of their origin. Apart from the practice followed by the Government of India, in our humble opinion, that is the only option possible under the Constitution as under the scheme of the Constitution no separate list of either scheduled castes or scheduled tribes in relation to the Union of India can be prepared. Therefore, if the Union of India desires to provide for any special treatment (like reservation) in favour of the scheduled castes or tribes in the services under the Union of India necessarily the Union of India has to provide such special treatment only in favour of those scheduled castes or tribes notified....
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....eated exclusively under article 330(3)1 and 332(1)2. Therefore, in our view, the expression "residing in any area specified", occurring under section 10(26) is used by Parliament synonymously with the expression "in relation to any area specified" under the said sub-section. In our view, the expression "residing in any area specified" is not meant to be restrictive of the benefit provided under the said sub-section in the case of members of the scheduled tribes, who, otherwise, fall within the scope of the said section, but migrating to one of the places specified in the said sub-section but only descriptive of the limited number of scheduled tribes, which are residents of the areas specified under section 10(26) of the Income-tax Act. 29. It may also be kept in mind while interpreting the said sub-section that the benefit contemplated therein is sought to be given to a specific class of assessees with reference to the income arising or accruing out of a specified area, i.e., areas specified in section 10(26)(a) or certain sources specified in section 10(26)(b). While clause (a) of section 10(26) restricts the benefit to the incomes arising or accruing out of various sources, su....
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....ifference but a reasonable and substantial distinction, having regard to the purpose of the law." 31. Once it is held that such a classification of the Government servants from the scope of section 10(26) is violative of article 14 to say that a Government servant or the employees of the "State" (within the meaning of article 12) loses the benefit on the mere accident of his being posted out of his place of origin but within the areas specified under section 10(26) and entitled to the benefit of the said section if by an accident, he is posted in the same area of his origin. Such an interpretation, in our view, which is dependent upon pure accident and exigencies of the service, would lead to wholly arbitrary results and undesirable consequences." 14. The main issue which arises before us is whether those persons who are Scheduled Tribes but do not originally belong to the specified areas are entitled to the benefit of Section 10(26) or not. On behalf of the Revenue it is urged that Scheduled Tribes are declared as Scheduled Tribes only in respect of a particular State or area and, therefore, if they do not belong to the specified areas they cannot be deemed to be Scheduled T....
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....o and in Action Committee the Administrative Tribunal set aside their selections on the ground that these persons did not belong to the Union Territory of Pondicherry. 17. The Apex Court drew a distinction between benefits given by the Central Government and those given by a State or a Union Territory and held as follows : "19. Much emphasis has been laid by learned counsel for contesting respondents upon the expression "in relation to that State or Union territory, as the case may be" occurring in clause (1) of Article 341 of the Constitution, and it has been urged that only such of the castes as are mentioned in the schedule appended to the Constitution (Pondicherry) Scheduled Castes Order 1964 issued by the President can be deemed to be Scheduled Castes in relation to the U.T. of Pondicherry and none else and, consequently, migrant SC candidates would not be eligible at all. 20. Part XVI of the Constitution deals with special provisions relating to certain classes and contains Articles 330 to 341. Articles 330 and 332 make provision for reservation of seats in the House of People and Legislative Assemblies of the States respectively, for Scheduled Castes and Scheduled T....
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....servation in the matter of appointments in favour of "backward classes of citizens" which in its opinion are not adequately represented either numerically or qualitatively in services of the State. But it confers no constitutional right upon the members of the backward classes to claim reservation. Article 16(4) is not controlled by a Presidential Order issued under Article 341(1) or Article 342(1) of the Constitution in the sense that reservation in the matter of appointment on posts may be made in a State or Union territory only for such Scheduled Castes and Scheduled Tribes which are mentioned in the schedule appended to the Presidential Order for that particular State or Union territory. This Article does not say that only such Scheduled Castes and Scheduled Tribes which are mentioned in the Presidential Order issued for a particular State alone would be recognized as backward classes of citizens and none else. If a State or Union territory makes a provision whereunder the benefit of reservation is extended only to such Scheduled Castes or Scheduled Tribes which are recognized as such, in relation to that State or Union territory then such a provision would be perfectly valid. ....
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....under the Income Tax Act in favour of such Scheduled Castes and Scheduled Tribes the moment they start residing at a place other than the place of their origin. 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 State. 20. As far as Section 10(26) is concerned, the language of the said Section makes no differentiation amongst the Scheduled Tribes. In S K Datta's case the Apex Court held that the three conditions for getting benefit of Section 10(26) are, that the person should be a member of Scheduled Tribe as defined in Clause 25 of Article 366 of the Constitution, he should be residing in the specified area and the type of income which is exempted is also mentioned in Section 10(26). Section 10(26) does not use the words ' member of a Scheduled Tribe belonging to the specified areas' but uses the term 'member of a Scheduled Tribe as defined in Clause 25 of Article 366 of the Constitution'. Benefit of Section 10(26) is ava....
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....ds 'as defined in Clause 25 of Article 366 of the Constitution' the words which would have been used would be 'belonging to the areas specified hereinafter'. 23. We may also point out that after the Full Bench judgment passed in Pradip kr. Tayee's case the Gauhati High Court in a number of cases has granted the benefit of the Full Bench judgment to members of Scheduled Tribes not belonging to the specified areas and in this behalf reference may be made to the judgment in Nanda Kataki and another vs. Union of India and others, WP(C)4885 of 2013 decided on 29.8.2013 in which the second petitioner Raj Mal belonged to Himachal Pradesh. It would, however, be pertinent to mention that there is no detailed discussion in this judgment. 24. Next we come to the question as to what is the meaning to be given to the words 'residing in any specified areas'. We need not go into a very elaborate discussion. A person can reside in an area even if he does not belong to that area. Residence in a particular area may be for the purpose of employment or earning a living. However, such residence means having an abode and a 'fleeting residence' even for the purpose of earning a livelihood would not....
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....tax is required to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force under the provisions of sections 192, 193, 194, 194A, 194C, 194D, 194G , 194H, 194-I, 194Jm, 194K, 194LA and 195, the Assessing Officer is satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax , as the case may be, the Assessing Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate. (2) Where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be. [(2A) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (1) and the conditions subject to which such certificate may be granted and providing for all ....
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....to a Scheduled Tribe or not? Is he entitled to the benefit of Section 10(26) of the Act or not. These are not issues which the petitioner Society will decide. These are issues which the Income Tax Authority empowered under Section 197(1) alone can decide. It is Income Tax Authority which will determine whether a person is entitled to the benefit of Section 10(26) or not? [9] There can be no general order passed by this Court that no person belonging to a Scheduled Tribe who belongs to Tripura and is employed in Tripura should not be asked to apply for a certificate under Section 197 of the Act. This Court without knowing the factual background of each and every assessee cannot pass a general order in such terms. It is well settled law that orders of the Court should be clear and should be capable of implementation. A General order of the nature which is sought for may cause more problems than settle disputes." 29. As far as the validity of this certificate is concerned, here also many factual issues will arise. Where a person is in government employment or in employment in the organized sector and belongs to the Scheduled Tribe and works in the specified areas there would be ....