Exclusion of Sikkimese woman from IT exemption because she married a non-Sikkimese is unconstitutional: SC

The exclusion of a Sikkimese woman from exemption allowed under the Income Tax Act merely because she has married a non-Sikkimese man after April 1, 2008 is "discriminatory and unconstitutional", the Supreme Court ruled on Friday.

A bench of Justices M R Shah and B V Nagarathna said no justification has been shown to exclude a Sikkimese woman from the Income Tax exemption.

“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.

Article 14 relates to equality before law, while Article 15 forbids discrimination on grounds of religion, race, caste, sex or place of birth, and Article 21 provides for right to life and personal liberty.

“It is to be noted that there is no disqualification for a Sikkim man, who marries a non-Sikkimese after April 1, 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 bench said.

The top court said 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 2008, "is arbitrary, discriminatory and violative of Article 14 of the Constitution of India". 

Under Section 10(26AAA) of the IT Act, the income of a Sikkimese individual arising either in the state of Sikkim or by way of dividend or interest on securities is not to be included in total income for tax calculation.

"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 April 1, 2008 has to be struck down," it said. 

The two judges, however, delivered differing verdict on the issue of whether the Old Indian Settlers, who settled in Sikkim prior to the merger of Sikkim with India on April 26, 1975 but whose names are not recorded as “Sikkim Subjects”, are exempted or not.

While Justice Shah held that it is "ultra vires, arbitrary, discriminatory and violative of Article 14 of the Constitution of India", Justice Nagarathna said they are not entitled to exemption.

Justice Nagarathna reminded that in accordance to the merger of Sikkim with India, the State has become a part of India and "all Sikkim Subjects and all Sikkimese domiciled in the territory of Sikkim have become Indian citizens".

On the other hand, Justice Shah observed that women heirs have to be treated equally with their male counterparts. "Gender equality is recognised by the global community in general in the human rights regime," the judge noted.

Justice Nagarathna in her separate verdict said the Union of India shall make an amendment to Explanation to Section 10 (26AAA) of IT 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 April 26, 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. Till such amendment is made by the Parliament to the Explanation to Section 10 (26AAA) of IT 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," Justice Nagarathna said.

The top court's verdict came on appeal filed by the Association of Old Settlers of Sikkim and others seeking striking down of Section 10(26AAA) of the Income Tax Act, 1961, more particularly, the definition of "Sikkimese" in Section 10 (26AAA) to the extent it excludes Indians who have settled in Sikkim prior to the merger of Sikkim with India on April 26, 1975.