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Synopsis

The Supreme Court on Friday held that Section 10(26AAA) of the Income Tax Act, 1961, to the extent it excludes the Old Indian settlers, who had settled in Sikkim prior to the merger of Sikkim with India on April 26, 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.

A bench of Justices MR Shah and BV Nagarathna thus held,

"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."

The Top Court added that “Sikkimese”, who are old Indian settlers and who have settled in Sikkim prior to the merger of Sikkim with India shall also be entitled to the exemption under Section 10(26AAA) of the Income Tax Act, 1961.

While referring to the challenge made to the Proviso to Section 10(26AAA) insofar as it excludes from the exempted category “a Sikkimese woman, who marries a non-Sikkimese after April 1, 2008” the bench held that there was no justification shown for the same.

The same is clearly hit by Articles 14, 15 and 21 of the Constitution of India, held the division bench, while adding that such discrimination was based on gender, which is wholly violative of Articles 14, 15 and 21 of the Constitution of India.

"It is to be noted that there is no disqualification for a Sikkim man, who marries a non-Sikkimese after 01.04.2008. As rightly submitted, 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", the Court observed while holding that a Sikkimese woman, who has married a non-Sikkimese prior to said cut off date is entitled to the benefit of exemption provided under Section 10(26AAA).

On the cut off date of April 1, 2008 being fixed, Court noted that there was no justification shown to fix the same.

"There is no rational nexus to the object sought to be achieved by excluding 'a Sikkimese woman, who marries a nonSikkimese 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", the court thus held.

Case Title: Association of Old Settlers of Sikkim and Ors. vs. Union of India and Anr.