INCOME TAX OFFICER, SHILLONG AND ANR. ETC. versus N. TAKIM ROY RYMBAI ETC. ETC.

Citation: [1976] 3 S.C.R. 413 · Decided: 17-02-1976 · Supreme Court of India · Bench: R.S. SARKARIA · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

I 
' 
413 
INCOME TAX OFFICER, SHILLONG AND ANR. ETC. 
A 
v. 
N. TAKIM ROY RYMBAI ETC. ETC. 
February 17, 1976 
[R. S. SARKARIA AND S. MURTAZA FAZAL ALI, JJ.] 
Income-tax Act, 1961-S. 10(26) (a)-Scope of-Assessee, a person belong-
ing to Scheduled Tribe residing in the specified area-Income accruing or aris-
ing in a non-scheduled area-If entitled to exemption. 
Section 10(26) (a), Income-tax Act, 1961 provides that a person is entitled 
to exemption from income-tax if ( 1) he is a member of a Scheduled Tribe as 
defined· in Art. 366(25) of the Constitution, (2) he is residing in any area 
specified in Part A or Part B of the Table appended to paragraph 20 of the 
Sixth Schedule to the Constitution, or the State or Union Territories mentioned 
ins. 10(26)(a), and .(3) the income in respect of which.exemption is claimed 
is income which accrues or arises to him from any source in the area, State 
or Union Territories mentioned in the section. 
The assessee belonged to the Jaintia Scheduled Tribe and was a permanent 
resident of the United Khasi-Jaintia Hills Autonoinous . District referred to in 
para 20 of the Sixth Schedule to the Constitution. He was employed in the 
Secretariat of the Assam Government, and his place of work was within the 
Shillong Municipality, and was not a part of the area described in para 20 
of the Sixth Schedule to the Constitution. The Income-tax Officer held that 
the income of the . assessee from his salary arose in the non-scheduled area 
and was not covered by the tax exemption provided under s. 
10(26)(a). In 
a writ petition under Art. 226 the assessee challenged the validity of s. 10(26)(a) 
on the 2round that the classification of meinbers of Scheduled Tribes into 
those ha~ing income from a source within the s~cified areas and those having 
income from tt source outside the areas was arbitrary. The High Court struck 
it down as violative of Art. 14 on the ground that the exemption clause which 
was enacted for the benefit of the Scheduled Tribes would be frustrated if the 
income of such person/was made subject to tax merely because the source of 
that income was outside that area. 
Allowing the_ appeals of the Dep~rtment, 
HEW : 
The High Court was in error in holding that the classification 
B 
c 
D 
E 
contemplated by s. 10(26)(a), Income Tax Act, 1961, was artificial and wa• 
F 
not based on any intelligible differentia. [422D] 
l(a). A taxation law, like any other law, has to pass the equality test 
of Art. 14. but given the legislative competence, the legislature has ample 
freedom to select and classify persons, incomes and objects which it ·would or 
would not tax. The mere fact that a tax falls more heavily on sorrie _in the 
same catel!:ory, is not by itself a ground to render the law invalid. It is 
only when, within the rarui;e of its selection, the law operates unequally and 
cannot be iustified on the basis of a valid classification, that there would be a 
G 
violation of Art. 14. [420B-D] 
East India Tobacco Co. v. State of Andhra Pradesh, [1963) 1 S.C.R. 404· 
Vivan loseph Ferriera 
v. 
Municipal Council of Greater Bombay, [1972] i 
S.C.C. 70 and Jaipur Hosiery Mills v. State of Rajastlian, [1970) 2 S.C.C. 27, 
followed. 
(b) Classification for the purpose of taxation or for exempting from tax 
with reference to the source of the income is integral to the fundamental scheme 
of the Incpm~ Tax Act. Tbe classification made by sub-cl. (a) for the purpose 
H 
of ex:mpbon lS not l_lnrea~ ?r unk?own ~ut conforms. to a well recognised pattern 
and ts ~ased on 
tn!elhg1ble dt!J'erenlta. The obiect of this 
differentiation 
between income accnung or received from a source in the specified areas and 
12-522SCl/76 
I 
414 
SUPREME COURT REPORTS 
[1976] 3 S.C.R. 
A 
the income accruin_g or received from a source outside such areas is to benefit 
not only the members of the Scheduled Tribes residing in the specified areas 
but also to benefit such areas economically. 
[420F; 421E-F] 
B 
c 
D 
(c) If it is held that a rnember of the Scheduled Tribe residing in a 
specified area was entitled to the exemption irrespective of whether the source 
of his income lay within or outside such area, it may lead to mischievous results. 
A non-Tribal assessee in India n1ay enter into a sham partnership with a member 
of the Scheduled Tribe residing in the specified area and ostensibly give him 
a substantial share of the profits of the business but really give him only 
a nominal amou11t and

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