Gauhati High Court
Commissioner Of Income-Tax vs Smt. A.M. Marbaniang on 3 February, 1993
Equivalent citations: [1993]202ITR502(GAUHATI)
Author: Chief Justice
Bench: Chief Justice
JUDGMENT U.L. Bhat, C.J.
1. The following questions have been referred by the Income-tax Appellate Tribunal under Section 256(1) of the Income-tax Act, 1961 (for short, "the Act"), at the instance of the Revenue :
"1. Whether, on the facts and in the circumstances of the case, and on the proper construction of entry 1 in the relevant part of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution, the Tribunal was justified in holding that the income of the assessee arising from the cantonment area of Shillong town is exempt under Section 10(26) of the Income-tax Act, 1961, merely by reason of the sources of income being located in the Khasi and Jaintia Hills District in spite of the fact that the sources of income of the assessee were at the cantonment area of Shillong ?
2. Whether item 1 of the relevant part appended to paragraph 20 of the Sixth Schedule to the Constitution has not to be read and understood having regard to the provisions contained in sub-paragraphs (1) and (2) of paragraph 20 of the Sixth Schedule to the Constitution for the purpose of determining the scope and effect of Section 10(26) of the Income-tax Act, 1961, and whether the Tribunal did not err in law in reading and applying the said Table in isolation, without having regard to the provisions of sub-paragraph (1) and the decision of the Tribunal is, therefore, not sustainable in law?"
The assessee is a member of the Khasi tribe, a Scheduled Tribe as defined in Clause (25) of Article 366 of the Constitution. She is working as the principal of a Government college which is situated in the cantonment area which is not a part of the tribal area. Her residence is within the tribal area of Meghalaya State. The capital of the State of Meghalaya is in Shillong town. The Income-tax Officer assessed her overruling her contention that there is no liability to income-tax. In appeal, the Appellate Assistant Commissioner held that her income is entitled to be exempted under Section 10(26) of the Act. In appeal, at the instance of the Revenue, this order was confirmed. Hence this reference.
2. Section 10 of the Act deals with income which is not included in the total income. Sub-section (26) reads thus :
"(26) in the case of a member of a Scheduled Tribe as defined in Clause (25) of Article 366 of the Constitution, residing in any area specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution or in the States of Nagaland, Manipur and Tripura or in the Union Territories of Arunachal Pradesh and Mizoram or in the areas covered by Notification No. TAD/R/35/50/109, dated the 23rd February, 1951, issued by the Governor of Assam under the proviso to sub-paragraph (3) of the said paragraph 20 (as it stood immediately before the commencement of the North-Eastern Areas (Reorganisation) Act, 1971 (18 of 1971)), any income which accrues or arises to him,--
(a) from any source in the areas, States or Union Territories aforesaid ; or
(b) by way of dividend or interest on securities ; . . ."
Arunachal Pradesh and Mizoram are now States.
3. In order that income derived by the assessee is not to be reckoned for the purpose of the Act, three conditions must be satisfied, namely, (1) the assessee must be a member of a Scheduled Tribe as defined in Article 366(25) of the Constitution, (2) the assessee must reside in any area specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule or in the State of Nagaland or other States referred to therein, and (3) the income must have accrued or arisen from any source in the areas, States or Union Territories aforesaid, or by way of dividend or interest on securities. There is no controversy that the first condition is satisfied. The dispute is about the two latter conditions.
4. The person claiming exemption must be residing in any of the areas specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution. We are not concerned with the other areas specified in the provision for the purpose of this case. Paragraph 20 of the Sixth Schedule defines tribal areas. Paragraph 20 reads as follows :
"20. Tribal areas,--(1) The areas specified in Parts I, II and III of the Table below shall respectively be the tribal areas within the State of Assam, the States of Meghalaya and the Union Territory of Mizoram.
(2) Any reference in the Table below to any district shall be construed as a reference to the territories comprised within the autonomous district of that name existing immediately before the day appointed under Clause (b) of Section 2 of the North-Eastern Areas (Reorganisation) Act, 1971 :
Provided that, for the purposes of Clauses (e) and (f) of sub-paragraph (1) of paragraph 3, paragraph 4, paragraph 5, paragraph 6, sub-paragraph (2), Clauses (a), (b) and (d) of sub-paragraph (3) and sub-paragraph (4) of paragraph 8 and Clause (d) of sub-paragraph (2) of paragraph 10 of this Schedule, no part of the area comprised within the municipality of Shillong shall be deemed to be within the Khasi Hills Districts."
An examination of paragraph 20 of the Sixth Schedule shows that the description of tribal areas has three facets, the first is a description in sub-paragraph (1) stating that the areas specified in Part II of the Table shall be the tribal areas within the State of Meghalaya. The 'second facet is the description in sub-paragraph (2) that the reference in the Table to any district shall be construed as a reference to the territories comprised within the autonomous district of that name existing immediately before the day appointed under Clause (b) of Section 2 of the North-Eastern Areas (Reorganisation) Act, 1971 (for short, "the 1971 Act" ). The third facet is the one contained in the proviso to the effect that, for the purposes of some other paragraphs and sub-paragraphs of the Sixth Schedule, no part of the area comprised within the municipality of Shillong shall be deemed to be within the Khasi Hills District. The proviso is relevant only for the purposes of some of these and other provisions of the Sixth Schedule and has no relevance in the application of any other provisions of the Income-tax Act, 1961.
5. We have to find what is an area specified in Part II of the Table in paragraph 20 of the Sixth Schedule. The area shown is Khasi Hills District. Khasi Hills District was earlier part of the United Khasi-Jaintia Hills District and after the formation of the Meghalaya State, it is an independent district and includes the areas within the Shillong cantonment and the tribal and normal areas of Shillong municipality. Thus, the areas specified in Part II of the Table will include the cantonment area and the tribal and normal areas of the Shillong municipality.
6. Sub-paragraph (2) of paragraph 20 states that any reference in the Table to any district shall be construed as a reference to the territories comprised within the autonomous district of that name existing immediately before the day specified in Clause (b) of Section 2 of the 1971 Act. The autonomous district of Meghalaya came into existence by virtue of the Assam Reorganisation (Meghalaya) Act, 1969 (for short, "the 1969 Act"). The State of Meghalaya came into existence by virtue of the 1971 Act. The 1969 Act was in force till the coming into force of the 1971 Act. The territories comprised within the autonomous district of Meghalaya, existing immediately before the day appointed under the 1971 Act, are the territories included in the autonomous State of Meghalaya by the 1969 Act. According to Section 3 of the 1969 Act, the autonomous State of Meghalaya shall, subject to the provisions of Sub-section (2), comprise the area described in two Clauses. Clause (1) takes in the United Khasi-Jaintia Hills District as described in sub-paragraph (2) of paragraph 20 of the Sixth Schedule to the Constitution, as it then stood, exclusive of the proviso thereto. Sub-paragraph (2) of paragraph 20, as it then stood, took in the United Khasi-Jaintia Hills District comprising the territories which, before the commencement of the Constitution, were known as the Khasi State and the Khasi and Jaintia Hills District, excluding any areas for the time being comprised within the cantonment and municipality of Shillong, but including so much of the area comprised within the municipality of Shillong as formed part of the Khasi State of Mylliem. It is, therefore, clear that the traditional tribal areas of the erstwhile United Khasi-Jaintia Hills District or the successor Khasi Hills District excluded the areas comprising the cantonment and municipality of Shillong, other than the areas which formed part of the Khasi State of Mylliem. Thus, according to sub-paragraph (2) of paragraph 20, the reference in Part II of the Table to Khasi Hills District shall be construed as reference to the area comprised in the Khasi Hills District excluding the areas comprised within the cantonment and municipality of Shillong, other than the area which formed part of the Khasi State of Mylliem. According to Section 5 of the 1971 Act, there shall be a new State of Meghalaya comprising the territories of the autonomous State of Meghalaya and so much of the territories comprised within the cantonment and municipality of Shillong as did not form part of the autonomous State of Meghalaya. This means that the State of Meghalaya comprises areas included in the autonomous State of Meghalaya plus some more areas, namely, the areas comprised within the cantonment and municipality of Shillong, which did not form part of the autonomous State of Meghalaya. In other words, while the area specified in Part II of the Table includes the larger area (cantonment and municipality area), and narrower connotation is given by sub-paragraph (2) of paragraph 20 as it stood at the time of the 1969 Act.
7. The reference in Section 10(26) of the Act is to a member of a Scheduled Tribe "residing in any area specified in Part I or Part II of the Table appended to the Sixth Schedule". The reference is to the area specified in the Table and not to the areas specified in the Table as restricted by sub-paragraph (2) of paragraph 20.
8. The reference in Section 10(26) of the Act is by incorporation, that is, incorporating the Table in the Act. What is incorporated in Section 10(26) of the Act is the Table appended to paragraph 20 of the Sixth Schedule and not paragraph 20 or to sub-paragraph (2) of the Sixth Schedule. Since Section 10(26) refers only to the Table, for the purpose of understanding as to what are the areas in which a member of the Scheduled Tribe is required to reside in order to be eligible for the benefit of Section 10(26) of the Act, reference must be made only to the areas as are specified in the Table appended to paragraph 20 and not to any other provision of paragraph 20. See paragraphs 9 and 10 of Onkarlal Nandlal v. State of Rajasthan, AIR 1986 SC 2146. Part II of the Table takes in Khasi Hills District in the State of Meghalaya which includes areas within the Shillong municipality inclusive of tribal and normal areas. We have to go by the areas specified in Part II of the Table and not by the areas as restricted or explained in sub-paragraph (2) of paragraph 20. Thus, we hold that the area of residence contemplated by Section 10(26) of the Act is the Khasi Hills District which includes areas of Shillong municipality and cantonment. The assessee resides within the Shillong municipality and satisfies the second condition contemplated in Section 10(26) of the Act.
9. The third condition is that the income must have accrued or arisen from any source in the areas, States or Union Territories aforesaid. The Government college where the assessee is working is within the cantonment area. Her salary is paid by the State Government of Meghalaya whose capital is in Shillong town. In either view of the case, the income accrues from a source in the areas specified in Part II of the Table appended to paragraph 20 of the Sixth Schedule. The third condition is also satisfied. It must, therefore, follow that the assessee is entitled to exemption under Section 10(26) of the Act.
10. We, therefore, answer the questions in the affirmative, that is, in favour of the assessee and against the Revenue. A copy of this judgment under the signature of the Registrar and the seal of the High Court shall be transmitted to the Income-tax Appellate Tribunal. In the circumstances, there will be no direction as to costs.