Income Tax Act, 1961 – s.10(26AAA) – Sikkim Subjects Regulations, 1961 – rr.3 and 4 – Right to Equality – Prohibition of discrimination – Clause 26AAA to s.10 of the Income Tax Act, 1961 granted exemption to “Sikkimese” people – Explanation to Clause 26AAA defined the term “Sikkimese” – Definition of “Sikkimese” in Explanation to s.10(26AAA) to the extent it excludes the Indians, who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975; and proviso to s.10(26AAA) insofar as it excludes from the exempted category “a Sikkimese woman, who marries a non-Sikkimese after 01.04.2008” – Challenge to – Held (per M.R. Shah, J.): Total 95% of the population of Sikkim are getting the benefit of s. 10(26AAA) of the Income Tax Act and only 5% are left out and out of which only 1% are the persons like the Old Indian Settlers, but their names could not be registered as “Sikkim Subjects” like the petitioner – Purpose of s.10(26AAA) is to grant exemption to the residents of Sikkim from payment of income tax – All such Indians/citizens, who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975 are to be treated at par – They form the same group/class and are entitled to the exemption u/s.10(26AAA) – There is no difference and/or distinction between those “Sikkim Subjects”, whose names are recorded in the register maintained under the Regulations, 1961 and those Indians, who have settled in Sikkim prior to the merger of Sikkim, but whose names were not recorded as “Sikkim Subjects” in the register – Merely because at the relevant time and when the Regulations, 1961 was enacted, the Indians settled in Sikkim did not surrender their Indian citizenship or their fathers/forefathers’ names were not entered into the register maintained under the Regulations, 1961, by itself, it cannot be said that they cease to be the “Sikkimese” – Exclusion *Ed. Note: Subsequent order dated February 8, 2023 reported in [2023] 10 S.C.R. 368 to be read as part and parcel of the present judgements dated January 13,2023. of old Indian settlers, who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975 from the definition of “Sikkimese” in s.10(26AAA) is arbitrary, discriminatory and violative of Art. 14 – The exclusion has no nexus with the object and purpose of enacting s. 10(26AAA) of to be achieved – No reasonable intelligible differentia has been shown and therefore, the same can be termed as arbitrary – Hence, petitioners and similarly situated persons who are old Indian settlers who have settled in Sikkim prior to the merger of Sikkim with India on 26th April, 1975 shall also be entitled to the exemption under s.10 (26AAA) of the I.T. Act, 1961 – Further, there is no justification shown and/or demonstrated to exclude “a Sikkimese woman, who marries a nonSikkimese after 01.04.2008” from the exempted category – The discrimination is based on gender which is wholly violative of Arts. 14, 15 and 21 of the Constitution – To deny the benefit of exemption u/s. 10(26AAA) of the Income Tax Act to “a Sikkimese woman, who marries a non-Sikkimese after 01.04.2008” is arbitrary, discriminatory and violative of Art. 14 – Therefore the Proviso to s.10(26AAA) insofar as it excludes from the exempted category “a Sikkimese woman, who marries a non-Sikkimese after 01.04.2008” has to be struck down – Held (per B.V. Nagarathna, J.): Under the 1961 Regulation, for women marriage has been the basis of acquiring the status of having a domicile in Sikkim and being a Sikkim Subject or losing domicile or status as a Sikkim Subject – Marriage of a Sikkimese woman is also the basis for discrimination against her whereas there is no such discrimination vis-à-vis a Sikkimese man marrying a Sikkimese or a non-Sikkimese woman on or after 1st April, 2008 – When the Explanation to s.10(26AAA) refers to an “individual”, it includes both Sikkimese men and women, in fact, all genders – Therefore, it cannot have a restrictive or myopic reference to only Sikkimese men and exclude those Sikkimese women – In the instant case, the proviso is overriding the provision as well as the Explanation in respect of those categories of married Sikkimese women – The proviso is inherently arbitrary and discriminatory against a particular category of Sikkimese women – Hence, all Sikkimese women are entitled to the benefit of s.10(26AAA) as per the Explanation thereto irrespective of whether they marry a Sikkimese or a non-Sikkimese – The proviso to Clause(26AAA) of s. 10 of the I.T. Act, 1961 is struck down as being in violation of Arts. 14 and 15 – The object and purpose of the exemption is only to exempt the settlers in Sikkim or persons domiciled in Sikkim in terms of the 1961 Regulation or the Government Orders – All individuals domiciled in Sikkim till 26th April, 1975 and who have since become citizens of India are entitled to exemption from payment of income tax – Only such individuals are entitled to the exemption who fall within the three clauses of the Explanation – All other citizens of India who do not fall within the ambit of the Explanation and who have been domiciled in Sikkim State subsequent to 26th April, 1975 would not have the benefit of exemption – This would be discriminatory insofar as those settlers in Sikkim are concerned who have been domiciled in Sikkim subsequent to promulgation of 1961 Regulation and till 26th April, 1975 – Such individuals are old settlers who have become citizens of India from 26th April, 1975 but who were domiciled in Sikkim prior to the said date – These old settlers are also entitled to the exemption under s.10 (26AAA) – Hence, directions in that regard have to be issued to fill the Legislative vacuum and amendment to the Explanation is necessary – Directions issued to eliminate the discrimination and to save the Explanation from being rendered unconstitutional – Constitution of India – Arts. 14, 15, 21 and 142.
Interpretation of Statutes – Internal Aid – Proviso – Function of – Held: The normal function of a proviso is to except something out of the provision or to qualify something enacted therein which, but for the proviso, would be within the purview of the provision – A proviso is added to an enactment to qualify or create an exception to what is in the enactment – A proviso cannot be construed as nullifying the provision or as taking away completely a right conferred by the enactment – If it does so and is discriminatory then it falls foul of the equality clauses of the Constitution of India.
Disposing of the writ petitions, the Court
HELD:
per M.R. Shah, J.
1. The purpose of Section 10(26AAA) of the Income Tax Act, 1961 is to grant exemption to the residents of Sikkim from payment of income tax under the Income Tax Act. Therefore, all such Indians/citizens, who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975 are to be treated at par and they form the same group/class and are entitled to the exemption under Section 10(26AAA) of the Income Tax Act. As such, there is no difference and/or distinction between those “Sikkim Subjects”, whose names are recorded in the register maintained under the Sikkim Subjects Regulations, 1961 and those Indians, who have settled in Sikkim prior to the merger of Sikkim, but whose names were not recorded as “Sikkim Subjects” in the register maintained under the Sikkim Subjects Regulations, 1961. All are “Sikkimese”. Merely because at the relevant time and when the Sikkim Subjects Regulations, 1961 was enacted, the Indians settled in Sikkim did not surrender their Indian citizenship or their fathers/forefathers’ names were not entered into the register maintained under the Sikkim Subjects Regulations, 1961, by itself, it cannot be said that they cease to be the “Sikkimese”. All of them are similarly situated with those “Sikkimese” / “Sikkim Subjects”, who all have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975. The object and purpose of Section 10(26AAA) is to grant benefit of exemption from payment of income tax under the Income Tax Act to the residents of Sikkim. Therefore, there is no nexus sought to be achieved in excluding the Indians, who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975 but their names are not recorded as “Sikkim Subjects”. The Union of India has failed to satisfy any reasonable classification and/or nexus to exclude such class of Indians, who, in fact, have settled in Sikkim prior to 26.04.1975. Therefore, exclusion of old Indian settlers, who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975 from the definition of “Sikkimese” in Section 10(26AAA) is arbitrary, discriminatory and violative of Article 14 of the Constitution of India.[Para 13.1][312-D-H; 313A-B]
2. In the present case, the exclusion has no nexus with the object and purpose of enacting Section 10(26AAA) of the Income Tax Act to be achieved. No reasonable intelligible differentia has been shown and therefore, the same can be termed as arbitrary. This Court is of the firm opinion that Section 10(26AAA) to the extent it excludes the Old Indian settlers, who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975, but whose names are not recorded as “Sikkim Subjects”, from the definition of “Sikkimese” is ultra vires, being arbitrary, discriminatory and violative of Article 14 of the Constitution of India. The definition of “Sikkimese” in Section 10(26AAA) of the Income Tax Act shall also include all Indians, who have permanently settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975 irrespective of the fact that whether their names have been recorded in the register maintained under the Sikkim Subjects Regulations, 1961 or not. Therefore, the “Sikkimese” like the petitioners, who are old Indian settlers and who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975 shall also be entitled to the exemption under Section 10(26AAA) of the Income Tax Act, 1961. [Paras 13.4 and 14][313-G; 314-B-D]
3. So far as the challenge to the Proviso to Section 10(26AAA) insofar as it excludes from the exempted category, “a Sikkimese woman, who marries a non-Sikkimese after 01.04.2008” is concerned, there is no justification shown and/or demonstrated to exclude “a Sikkimese woman, who marries a non-Sikkimese after 01.04.2008” from the exempted category. Apart from the above, the same is clearly hit by Articles 14, 15 and 21 of the Constitution of India. The discrimination is based on gender, which is wholly violative of Articles 14, 15 and 21 of the Constitution of India. There is no disqualification for a Sikkim man, who marries a non-Sikkimese after 01.04.2008. A woman is not a chattel and has an identity of her own, and the mere factum of being married ought not to take away that identity. [Para 15][314-D-G]
4. There is no justification shown to exclude “a Sikkimese woman, who marries a non-Sikkimese after 01.04.2008”. A Sikkimese woman, who has married a non-Sikkimese prior to 01.04.2008 is entitled to the benefit of exemption provided under Section 10(26AAA). There is no justification shown to fix the cut off date of 01.04.2008. There is no rational nexus to the object sought to be achieved by excluding “a Sikkimese woman, who marries a non-Sikkimese after 01.04.2008” and to include “a Sikkimese woman, who has married a non-Sikkimese before 01.04.2008”. Therefore, to deny the benefit of exemption under Section 10(26AAA) of the Income Tax Act to “a Sikkimese woman, who marries a non-Sikkimese after 01.04.2008” is arbitrary, discriminatory and violative of Article 14 of the Constitution of India. Therefore, also, the Proviso to Section 10(26AAA) insofar as it excludes from the exempted category “a Sikkimese woman, who marries a non-Sikkimese after 01.04.2008” has to be struck down. Therefore, Proviso to Section 10(26AAA) inasmuch as it excludes from the provision of exemption a Sikkimese woman merely because she marries a non-Sikkimese after 01.04.2008 is totally discriminatory and violative of Articles 14, 15 and 21 of the Constitution of India, which requires to be struck down. [Paras 15.1 and 16][315-A-D] D. S. Nakara v. Union of India (1983) 1 SCC 305 : [1983] 2 SCR 165 ; State of Rajasthan v. Manohar Singhji II [1954] SCR 996 and Shayara Bano v.Union of India (2017) 9 SCC 1 : [2017] 9 SCR 797 - followed. G. Sekar v. Geetha & Ors. (2009) 6 SCC 99 : [2009] 5 SCR 1005- relied on.
Vishundas Hundumal v. State of M.P. (1981) 2 SCC 410: [1981] 3 SCR 234 and Anuj Garg & Ors. v. Hotel Association of India & Ors. (2008) 3 SCC 1: [2007] 12 SCR 991- referred to.
per B. V. Nagarathna, J.
1. Under the Sikkim Subjects Regulations, 1961, as far as women are concerned, marriage has been the basis of acquiring the status of having a domicile in Sikkim and being a Sikkim Subject or losing domicile or status as a Sikkim Subject. Marriage of a Sikkimese woman is also the basis for discrimination against her whereas there is no such discrimination vis-à-vis a Sikkimese man marrying a Sikkimese or a non-Sikkimese woman on or after 1st April, 2008. When the Explanation to Clause 26AAA to Section
10 of the Income Tax Act, 1961 refers to an “individual”, it includes both Sikkimese men and women, in fact, all genders; it cannot have a restrictive or myopic reference to only Sikkimese men and exclude those Sikkimese women covered under the proviso. A proviso cannot over arch a provision. But in the instant case, the proviso to Section 10(26AAA) of the Act, 1961 is overriding the provision as well as the Explanation in respect of those categories of married Sikkimese women referred to in the proviso which is impermissible. Thus, the proviso is inherently arbitrary and discriminatory against a particular category of Sikkimese women. In other words, the Explanation to Section 10(26AAA) of the I.T. Act, 1961 includes both Sikkimese men as well as women. Such being the interpretation, the proviso is antithetical to the Explanation and the Section as well. The expression “an individual” in the Explanation to Section 10 (26AAA) of the I.T. Act, 1961, must include all genders including Sikkimese women. There cannot be a discrimination only on the ground of sex and race. Hence, all Sikkimese women are entitled to the benefit of Section 10 (26AAA) of the I.T. Act, 1961, as per the Explanation thereto irrespective of whether they marry a Sikkimese or a non-Sikkimese. [Paras 50,51, 53 and 55][340-C, D; 341-E-G; 342-C-D]
2. Pursuant to the merger of Sikkim with India by virtue of which, Sikkim has become one of the States of India and all Sikkim Subjects and all Sikkimese domiciled in the territory of Sikkim have become Indian citizens, there cannot be a discrimination vis-à-vis Sikkimese women marrying a non-Sikkimese individual, whether an Indian citizen or a foreigner, that too, on or after 1st April, 2008. Such discrimination, is therefore, in violation of the guarantee of equality provided under Articles 14 and 15 of the Constitution of India as it is on the basis of sex and race. Hence, the proviso to clause (26AAA) of Section 10 of the I.T. Act, 1961, is a stark example of an unconstitutional sex-based discrimination and is liable to be struck down. [Para 56][342-D-F]
3. The proviso runs counter to the Explanation and is thus manifestly arbitrary. This is because the Explanation intends to give the benefit of Section 10 (26AAA) of the I.T. Act, 1961 to all Sikkimese who are defined under the said Explanation as those ‘individuals’ whose names have been recorded and registered in the Register of Sikkim Subjects immediately before 26th April, 1975 or included pursuant to the Government of India Order No. 26030/36/90/I.C.I. dated 7th August, 1990 and Order of even number dated 8th April, 1991, or those persons whose names do not appear in the Register of Sikkim Subjects but it has been established that the name of such individual’s father or husband or paternal grandfather or brother from the same father had been recorded in that Register. Hence, the benefit of the Explanation must be extended to all Sikkimese women, irrespective of whether they have married a Sikkimese or a non-Sikkimese after the 1st April, 2008. Thus the proviso to Clause (26AAA) of Section 10 of the I.T. Act, 1961 is struck down as being in violation of Articles
14 and 15 of the Constitution of India. [Paras 64 and 65][352-H; 353-A-C]
4. The Explanation restricts the exemption only to those Sikkimese individuals who fall within the three clauses of the Explanation, as the object and purpose of the exemption is only to exempt the settlers in Sikkim or persons domiciled in Sikkim in terms of the 1961 Regulation or the Government Orders referred to above. Even though the 1961 Regulation has been repealed, nevertheless, the Register of Sikkim Subjects which is maintained under the said Regulation, which had acquired a sanctity, has been the basis for grant of an exemption and particularly in the form of clause (iii) of the Explanation to Section 10(26AAA) of the I.T. Act, 1961. This would imply that all those individuals who fall outside the scope and ambit of the Explanation would not be granted the exemption. Then, the questions of discrimination against persons such as the petitioners and others similarly situated would arise. Individuals having become citizens of India and were domiciled in Sikkim as on 26th April, 1975 are also entitled to the benefit of registration and exemption. Thus all individuals domiciled in Sikkim till 26th April, 1975 and who have since become citizens of India are entitled to exemption from payment of income tax as per Section 10 (26AAA) of the I.T. Act, 1961. [Paras 73 and 74][364-D-G]
5. Only such individuals are entitled to the exemption who fall within the three clauses of the Explanation. Hence, the Explanation must be construed strictly as it is in the nature of a definition of the expression “Sikkimese” for the purpose of granting an exemption from payment of income tax under the I.T. Act, 1961. However, the exemption must be extended to incorporate all such individuals who have been domiciled in Sikkim as on 26th April, 1975 and who have since then become citizens of India. This would mean that all other citizens of India who do not fall within the ambit of the Explanation as interpreted above and who have been domiciled in Sikkim State subsequent to 26th April, 1975 would not have the benefit of exemption under Section 10 (26AAA) of the I.T. Act, 1961. Thus, any individual not falling within the said clause would not be entitled to the said exemption. This would however be discriminatory insofar as those settlers in Sikkim are concerned who have been domiciled in Sikkim subsequent to promulgation of 1961 Regulation and till 26th April, 1975 when Sikkim merged with India. Such individuals are old settlers who have become citizens of India from 26th April, 1975 but who were domiciled in Sikkim prior to the said date. They are also entitled to the exemption under Section 10 (26AAA). Hence, directions in that regard have to be issued to fill the Legislative vacuum and amendment to the Explanation is necessary. However, those individuals who have been domiciled in Sikkim subsequent to 26th April, 1975 shall not be entitled to the benefit of exemption from payment of income tax. [Paras 75 and 76][364-H; 365-A-B; D-F]
6. This Court has on previous occasions, sought to enforce rights of citizens even in areas of legislative vacuum. To this end, Article 142 of the Constitution of India has been invoked and the law so declared in order to fill the vacuum has been treated as law declared by this Court under Article 141 until a proper legislation is made. [Para 77; 365-G]
7.1 The Union of India shall make an amendment to Explanation to Section 10 (26AAA) of I.T. Act, 1961, so as to suitably include a clause to extend the exemption from payment of income tax to all Indian citizens domiciled in Sikkim on or before 26th April, 1975. The reason for such a direction is to save the explanation from unconstitutionality and to ensure parity in the facts and circumstances of the case.[Para 79; 367-B]
7.2 Till such amendment is made by the Parliament to the Explanation to Section 10 (26AAA) of I.T. Act, 1961, any individual whose name does not appear in the Register of Sikkim Subjects but it is established that such individual was domiciled in Sikkim on or before 26th April, 1975, shall be entitled to the benefit of exemption. This direction is being issued in exercise of powers under Article 142 of the Constitution so as to eliminate discrimination and disparity in respect of the aforesaid category of Sikkimese, who subsequently have become citizens of India w.e.f. 26th April, 1975 and to save the Explanation from being rendered unconstitutional vis-à-vis such individuals who form a small percentage of Sikkimese. [Para 79; 367-C-E]
7.3 Proviso to Section 10 (26AAA), insofar as it excludes from the exempted category, “a Sikkimese woman who marries a non-Sikkimese man after 1st April, 2008” is hereby struck down as being ultra vires Articles 14, 15 and 21 of the Constitution of India.” [Para 79; 367-E-F]
Vishaka and Ors. v. State of Rajasthan, A.I.R. 1997 SC 3011 : [1997] 3 Suppl. SCR 404 - followed. S.K. Dutta v. Lawrence Singh Ingty, A.I.R. 1968 SC
658 : [1968] 2 SCR 165; Southern Electricity Supply Co. of Orissa Ltd. v. Sri Seetaram Rice Mill (2012) 2 SCC 108 : [2011] 15 SCR 211; Aphali Pharmaceuticals Ltd. v. State of Maharashtra (1989) 4 SCC 378 : [1989]
1 Suppl. SCR 129; Anuj Garg and Ors. v. Hotel Association of India and Ors. (2008) 3 SCC 1 : [2007]
12 SCR 991; G. Sekar v. Geetha (2009) 6 SCC 99 : [2009] 5 SCR 1005; Air India v. Nergesh Meerza AIR 1981 SC 1829 : [1982] 1 SCR 438; Air India Cabin Crew Assn. v. Yeshaswinee Merchant and others AIR 2004 SC 187 : [2003] 1 Suppl. SCR 455; C.B.
Muthamma v. Union of India AIR 1979 SC 1868 : [1980]
1 SCR 668; Mackinnon Mackenzie and Co. Ltd. v. Audrey D’costa and Another AIR 1987 SC 1281 : [1987]
2 SCR 659; Githa Hariharan v. Reserve Bank of India (1999) 2 SCC 228 : [1999] 1 SCR 669; Anuj Garg & Ors. v. Hotel Association of India & Ors. (2008) 3 SCC
1 : [2007] 12 SCR 991; G. Sekar v. Geetha & Ors. (2009)
6 SCC 99 : [2009] 5 SCR 1005; State of Maharashtra v. Indian Hotel and Restaurants Association (2013) 8 SCC 519 : [2013] 7 SCR 654 and Secretary, Ministry of Defence v. Babita Puniya and others (2020) 7 SCC
469 : [2020] 3 SCR 833- referred to.
Bhe and Ors. v. The Magistrate, Khayelisha and Ors. (2004) 18 BHRC 52 : (2005) 1 BCLR 1 (CC); Reed v. Reed 404 U.S. 71, 92 S. Ct. 251 (1971); Weinberger vs. Wiesenfeld 420 U.S. 636, 95 S. Ct. 1225 (1975); Duren vs. Missouri 439 U.S. 357, 99 S. Ct. 664 (1979); Hishon vs. King & Spalding 467 U.S. 69, 104 S. Ct. 2229 (1984); United States v. Virginia 518 U.S. 515 (1996)– referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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