Plea Challenging Tax Exemption For Northeast SC/ST: Supreme Court Says Misuse By Some Cannot Cast Doubt On All
The Supreme Court permitted the petitioner to approach the Parliamentary Committee, observing that alleged misuse of a statutory benefit by some individuals could not justify doubting an entire community and that the issue was essentially legislative in nature
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The Supreme Court on Tuesday declined to entertain a public interest litigation seeking implementation of a "creamy layer" principle in the income tax exemption granted to Scheduled Tribes residing in the North Eastern Region, observing that the issue falls within the legislative domain and is best addressed by Parliament.
The bench of Chief Justice of India Surya Kant and Justice V. Mohana granted the petitioner, Advocate Ashwini Upadhyay liberty to approach the appropriate parliamentary committee and serve copies of the petition on the respondents.
The PIL, filed through AoR Ashwani Kumar Dubey under Article 32 of the Constitution, challenged the constitutional validity of Section 11 read with Schedule III, Serial No. 19 of the Income-tax Act, 2025. The provision, which re-enacts Section 10(26) of the Income Tax Act, 1961, grants income tax exemption to Scheduled Tribes residing in the North Eastern Region.
Arguing the matter, Upadhyay contended that the socio-economic conditions that originally justified the exemption had substantially changed over the decades. He submitted that several beneficiaries today possess significant wealth and extensive commercial interests.
"How can tribals who converted to Christianity and now earn in hundreds of crores, have so many educational institutions and earn Rs 200 crore per year and still be exempted from paying tax?" he argued, adding that the issue involved the interpretation of Articles 14, 19 and 27 of the Constitution.
The petition argued that the blanket exemption had become arbitrary and overinclusive by treating affluent and economically disadvantaged members of Scheduled Tribes as a single homogeneous class. It further contended that the absence of any income ceiling, asset-based exclusion, creamy layer principle or periodic review mechanism violated Articles 14, 19(1)(g), 21 and 27 of the Constitution.
The plea also invoked the doctrine of temporal reasonableness, contending that a law that was constitutionally valid when enacted may become unconstitutional if the factual circumstances justifying the classification no longer exist.
However, the bench appeared unconvinced that judicial intervention was warranted.
"Only because someone has misused a provision does not mean that all have to be doubted," Chief Justice Surya Kant observed.
The Chief Justice further remarked that elected representatives and lawmakers were conscious of such concerns.
"It is a legislative issue. There is a committee in Parliament where every citizen can approach for enactment of law or correction in law. I am sure they will consider it," the Court said.
The Court ultimately disposed of the petition as withdrawn while granting liberty to the petitioner to approach the parliamentary committee and pursue his grievances through legislative channels.
The challenge came against the backdrop of increasing development in the North Eastern Region, with the petition pointing to substantial investments in infrastructure and economic growth over the past two decades. The petitioner argued that continuing an unrestricted tax exemption despite changed circumstances had created unequal commercial conditions and conferred a permanent fiscal advantage upon one class of citizens.
The Supreme Court, however, refrained from entering into the merits of the constitutional challenge, indicating that any reconsideration of the policy framework governing tax exemptions for Scheduled Tribes in the North East is a matter that lies primarily within Parliament's domain.