NAYUD.J (1) In this Civil Rule the validity of the demand notices issued by the 1st respondent-Income-tax Officer, Shillong, on the petitioner, demanding payment of income-tax is questioned (2) The main facts on which the petition is based are as follows: The petitioner is a member of one of the Scheduled Tribes in Assam belonging to Mikir Scheduled Tribe and permanently residing in the United Khasi and Jaintia Hills Autonomous District, which is included in Part A of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution of India. He joined the State Government service in the year 1940 and had been serving the Government at various places including Naga Hills, Mizo Hills, Garo Hills, United Khasi-Jaintia Hills and other Districts in Assam The petitioner had served as the Deputy Commissioner of the Mizo Autonomous District, one of the autonomous districts forming part of Tribal Areas included in Part A of the Table to paragraph 20 of the Sixth Schedule. During the years 1958 to 1960 ho was Deputy Commissioner of the Mizo District at Aijal and thereafter served as Deputy Development Commissioner and Additional Secretary to the Government of Assam, Shillong in the autonomous district of the United Khasi and Jaintia Hills and thereafter as the Chairman of the Gauhati Development Authority at Gauhati. Having constructed a residential house in Malki within the autonomous district of the United khasi and Jainlia Hills, the petitioner's family had been residing therein and which property, under the customary law to which the petitioner claims to be subject, belongs to the wife of the petitioner. The petitioner, in spite of the fact that he belonged to the Scheduled Tribe, was assessed to income-tax by the 1st respondent, the Income-tax Officer, Shillong, on the following dates in regard to the following amounts in the assessment rear mentioned below Date of Amount of Assessment year Assessment Income-tax 1959-60 5-1-1963 Rs 1056-90 1960-61 5-1-1963 Rs. 1195-23 1961-62 5-1-1963 Rs. 619 31 1962 63 10-1-1963 Rs. 1754 56 and demand notices were, accordingly, issued in respect of those amounts. The income for the purpose of these assessments, the petitioner claims, was made up of the salary drawn by the petitioner from the Government and the income on the house property situated at Malki in the United Khasi and Jaintia Hills District.
1754 56 and demand notices were, accordingly, issued in respect of those amounts. The income for the purpose of these assessments, the petitioner claims, was made up of the salary drawn by the petitioner from the Government and the income on the house property situated at Malki in the United Khasi and Jaintia Hills District. (3) The petitioner's main contention is that as he belongs to a Scheduled Tribe and is n permanent resident of the autonomous district forming part of Part A of the Table to paragraph 20 of the Sixth Schedule to the Constitution, he was not liable to pay any income-tax as no member of the Scheduled Tribe is liable to pay any income-tax and that, therefore, the demand notice could not have been served on the petitioner and he could not be assessed to any income-tax on any part of his income. (4) The respondents contend that as the provisions of law do not apply to the Scheduled Tribes in Government Service, the assessments had been validly done and no exception could be taken to the same and the petitioner is liable to pay income-tax demanded under the demand notices served on the petitioner. (5) In order to appreciate the contentions of the parties, it would be necessary to refer to the relevant provisions of the Income-tax Act that are applicable. It is not disputed that in regard to the demand for the payment of the income-tax for the assessment years 1959 60, 1960-61 and 1961-62 covered by Annexures Bl, B2 and B3 respectively the demand was made under the old Income-tax Act, whereas the demand for the assessment year 1962-63 covered by Annexure B was made under the new Act. Section 4 of the previous Income-lax Act, namely, the Indian Income-tax Act, 1922, hereinafter referred to as the Old Act, relates to the application of the Act. In sub-section(S) of section 4 of the Old Act.
Section 4 of the previous Income-lax Act, namely, the Indian Income-tax Act, 1922, hereinafter referred to as the Old Act, relates to the application of the Act. In sub-section(S) of section 4 of the Old Act. clause (xxi) was inserted by S. 4 of the Finance Act, 1955 and this reads as follows "(3) Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them: ******* (xxi) Any income 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 A or Part B of the table appended to paragraph 20 of the Sixth Schedule to the Constitution, provided that such member is not in the service of Government." It is seen from above, provision that the income of a member of a Scheduled Tribe residing in any areas specified in Part A or Part B of the Table appended to para 20 of the Sixth Schedule to the Constitution is exempt from income-tax, provided he is not in the service of the Government. It is not disputed that the petitioner is a member of the Scheduled tribes to whom the exemption under cl. (xxi) would apply. The only point in dispute is whether this exemption could be taken away by the proviso to the said clause in view of the petitioner being in Government Service That the petitioner is in Government Service is also not disputed The bone of contention narrows itself, therefore, down to the determination of the question whether the proviso to clause (xxi) is constitutionally valid. In other words, while the petitioner contends that the proviso offends Article 14 of the Constitution and involves a discrimination, which is prohibited by the Constitution, the respondents contend that the proviso is valid, that it involved no discrimination, that even if it did it is based on a reasonable classification satisfying the tests laid down by the decisions of the Supreme Court in interpreting Article 14 of the Constitution, and that there being an understandable nexus between the basis of the classification and the object to be achieved, the impugned provision must be regarded as constitutionally valid and therefore must he given effect to.
(6) A careful investigation into the history of the Scheduled Tribes in Assam, to whom the provisions of the Sixth Schedule to the Constitution are made applicable, would reveal that these Scheduled Tribes never paid any taxes, particularly income-tax. 1'urther, their liability to fresh taxation, if any. is limited to the provisions of the Sixth Schedule, which did not make any provision for the imposition of income lax. Apparently, realising this, the Income-tax Act exempted the income of the members of the Scheduled Tribes from being assessed lo income tax. While doing so, the proviso rendered the Scheduled Tribes assessable to income-Tax, notwithstanding the general exemption given to all I he Scheduled Tribes, in the case of persons who are in Government service. In oilier words, while the Scheduled Tribes in general are exempt from any income-tax. The Scheduled Tribes become liable to income-lax the moment I hey accept Government service. Thus the question is whether this discrimination in The matter of the liability to pay the income-lax between the Scheduled Tribes general and the Scheduled Tribes who happened to be in or seek admission to Government .service, is u discrimination which does not offend Article 14 of the Constitution. This question would have to be examined in the light of The various Supreme Court's decisions, which had dealt with similar cases wherein I heir Lordships had laid down the tests that are lo be applied to determine whether the discrimination offends Article 14 of the Constitution or not (7) One of The earliest decisions that requires to be referred, is The one reported in Bhudhan Choudhry v. State of Hi liar, 1955 SCR 1045 : A IK 195;') SC 191. That decision is a decision of seven Judges The following observations occurring therein are apposite: (at pp 1048 and 1049 of SCU):(at p. 193 of AIR): "The provisions of Article 14 of The Constitution have come up for discussion before this Court in a number <>1 eases, namely Chlranjit Lal Chowdhuri v. Union of India, 1950 SCR 809: (AIR 1951 SC' 41), State of Bombay v. F. N. Halsara 1951 S('K 082 :( AIR 1951 SC 318 ), State of West Bengal v Anwar Ali Sarkar. 1952 SCR 284 :( AIR 1952 SC 75 ), Kathi Raning Kawal \ State of Saurashtrn 1952 SCR 435 :( AIR 1952 SC 123 ).
1952 SCR 284 :( AIR 1952 SC 75 ), Kathi Raning Kawal \ State of Saurashtrn 1952 SCR 435 :( AIR 1952 SC 123 ). Lachmau das Kewalram v. State of Bombay, 1952 SCR 710 :( AIR 1952 SC 235 ), Qasim Razvi v. State of Hyderabad 1953 SCR 589 (AIR 1953 SC SC 156) and Habeeb Mohamad v. State of Hyderabad, 1953 SCR 661 (AIR 1953 SC287) It is, therefore, not necessary to enter upon any lengthy discussion as to the meaning, scope and effect of The article in question It is now well-established that while Article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (ii) that that differentia must have a rational relation to the object sought to be achieved by the statute in question. "The classification may be founded on different bases; namely, geographical, or according to objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration. It is also well-established by the decisions of this Court that Article 14 condemns discrimination not only by a substantive law but also by a la-p of procedure." A similar view was taken, following Budhan Choudhry's case, 1955 SCR 1045 : AIR 1955 SC 191 in Kangshari Haldar v. State of West Bengal, AIR 1960 SC 457 . The following observations therein at p. 464 may be quoted with advantage: "The result of these decisions appeal s to be this In considering the validity of the impugned statute on the ground that It violates Art. 14 it would first be necessary to ascertain the policy underlying the statute am! the object intended to be achieved by it. . In this process the preamble to the Act and its material provisions can and must be considered.
the object intended to be achieved by it. . In this process the preamble to the Act and its material provisions can and must be considered. Having thus ascertained the policy and the object of the Act the court should apply the dual test in examining its validity : Is the classification rational and based on intelligible differentia, and, has the basis of differentiation any rational nexus with its avowed policy and object? If both these tests are satisfied the statute must be held to be valid; and in such a case the consideration as to whether the same result could not have been better achieved by adopting a different classification would be foreign to the scope of the judicial enquiry. If either of the two tests is not satisfied the statute must be struck down as violative of Art. 14." The law as laid down in Budhan Choudhry's case 1955 SCR 1045 :(S) AIR 1955 SC 191 has been reiterated by the Supreme Court in the decision reported in Pandurangarao v. Andhra Pradesh Public Service Commission Hyderabad AIR 1963 SC 268 , wherein similar observations occur at pages 271 and 273 The observations at page 273 throw useful light: "Therefore, in our opinion, the impugned rule has introduced a classification between one class of Advocates and the rest and the said classification must be said to be irrational inasmuch as there is no nexus between the basis of the said classification and the object intended to be achieved by the relevant scheme of rules" In State of Rajasthan v. Mukam Chand, AIR 1964 SC 1633 , section 2(e) of the Rajasthan Jagirdars' Debt Reduction Act, which excluded certain debts due to creditors mentioned in clauses (i) to (vi) therein came to be examined The impugned provision which exempted debts owed to Government or local authority or other bodies mentioned in section 2(e) did not satisfy the test of permissible classification. It also did not satisfy the second lest in that the exclusion of these debts had no rational relationship with the object sought to be achieved by the Act, namely, to reduce the debts secured on jagir lands which had been resumed under the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act. It was further held that no intelligible principle was found to underlie the exempted categories of debts.
It was further held that no intelligible principle was found to underlie the exempted categories of debts. For example, it was therein held that a debt advanced on behalf of a person by the Court of Wards had been clubbed with 'a debt due to a State or a scheduled bank, while a debt due lo a non-scheduled bank was not excluded from the purview of the Act. In that context, the learned Judges of the Supreme Court observed as follows (at p. 1635): "The fact that the debts are owed to a government or local authority or other bodies mentioned in the impugned part of S. 2 (e) has no rational relationship with the object sought lo be achieved by the Act. Further, no intelligible principle underlies the exempted categories of debts. The reason why a debt advanced on behalf of a person by the Court of Wards is clubbed with a debt due to a State or a scheduled Bank and why a debt due to a non-scheduled bank is not excluded from the purview of the Act is not discernible." Accordingly, it was held in that case that there was no justification for making a discrimination between the debts owing to scheduled banks or the State or the Court of Wards and the debts owing to non-scheduled banks and other private creditors, and that, accordingly, the provision which made and recognised that discrimination was held to violate Article 14 of the Constitution. In this context, it would be useful to refer to a decision of this Court in "Senairam Doongarmal Agency (P) Ltd. v. K. E Johnson, AIR 1964 Assam 1 (FB), wherein the entire case law on the subject up to the date of the judgment had been reviewed. (8) We shall now examine the facts of the instant case bearing in mind the tests proposed by the above quoted decisions of the Supreme Court It is taken for granted that all Scheduled Tribes are exempt from income-tax because they belong to Scheduled Tribes in Assam, for whom special provisions had been made in the Constitution itself.
(8) We shall now examine the facts of the instant case bearing in mind the tests proposed by the above quoted decisions of the Supreme Court It is taken for granted that all Scheduled Tribes are exempt from income-tax because they belong to Scheduled Tribes in Assam, for whom special provisions had been made in the Constitution itself. If that is the basis of the exemption, the object of the Act in exempting them is, obviously, lo exclude the category of individuals, who belong lo the Scheduled Tribes in Assam residing in the tribal areas described in Parts A and B of the Table to paragraph 20 of the Sixth Schedule to the Constitution On what rational or intelligible basis can a classification be made among the members of the Scheduled Tribes by differentiating those in Government service from those who are not in Government service cannot be explained. Being in Government service cannot be regarded under law, as a disqualification or a discredit, so as to involve a loss of privilege. Further, once it is granted that the exemption is given because a person is a member of the Scheduled Tribe, coming within the purview of the provision, there would appear to be no rational justification for penalising or putting under disability persons of the Scheduled Tribes who venture or wish to serve the Government in the discharge of their functions. Hence, classifying 1he Scheduled Tribes in Government service as a different category from the Scheduled Tribes who are not in Government service does not bear the scrutiny of a rational analysis. There is thus no intelligible differentia in this classification. Again the basis of the classification must have a reasonable nexus to the policy and object of the statute in question. In the instant case, the statute with which we arc concerned is the Income-tax Act, whose object and policy is to levy and recover income-tax to swell the revenues of the Stale. That being the object of the Act, the classification between the Scheduled Tribes who are in Government service as a separate category from those who are not in Government service has no nexus, whatsoever, with the object of the Statute.
That being the object of the Act, the classification between the Scheduled Tribes who are in Government service as a separate category from those who are not in Government service has no nexus, whatsoever, with the object of the Statute. To give a clear illustration: a member of the Scheduled Tribe who is not in Government service may be earning a large salary in addition to his income from his properties in the tribal areas by employment in a private concern or Company. The salary which he earns swells the income which he derives from his properties and he is exempt from payment of income-lax In the same way, and although may not be to the same extent, a member of the Scheduled Tribe who is in Government service may also, by way of his salary, add to his income, in addition to the income derived from his properties in the tribal areas, that is within the areas of Parts A and B of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution and his income is assessed to income-tax, in order to fulfil the object of The Acl, namely lo recover income-tax to add to the revenues of the Slate. What is the justification, one would ask, to discriminate between a member of the Scheduled Tribe who adds lo his income derived from The proprieties in the Tribal areas by drawing a salary taking up private service and a member of the Scheduled tribe who adds to his income by taking up Government service? The provision, as it stands, clearly leads to This discrimination and This discrimination or differentiation has no reasonable nexus with the policy of the Act. (9) We are. therefore, fully satisfied that the Two tests proposed by The decisions of The Supreme Court in regard lo the determination of the question whether a classification made by statute could be upheld as not involving a discrimination to which the bar under Art. 14 of the Constitution applies, are not fulfilled in this case. We would, accordingly, strike down the proviso to clause (xxi) of sub-section (3) of section 4 of the Old Act as discriminatory and violalive of Article 14 of the Constitution.
We would, accordingly, strike down the proviso to clause (xxi) of sub-section (3) of section 4 of the Old Act as discriminatory and violalive of Article 14 of the Constitution. Hence, The three notices of demand covered by Annexures B-l, B-2 and B-3 must be quashed (10) As regards the demand for the assessment year 1962-68 covered by Annexure B, this was made under section 10, sub-section (26) of the new Act, which reads as follows: "(26) in the case of n member of a Scheduled Tribe as defined in clause (25) of Article 366 of the Constitution, 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 in the Union Territories of Manipur and Tripura, who is not in The service of Government, any income which accrues or arises to him, (ft) from any source in the area or Union territories aforesaid, or (b) by way of dividend or interest on securities." This provision also clearly makes a discrimination in the liability to pay income-tax between the members of the Scheduled Tribes who are in Government service and those who are not in Government service. For the reasons already given, this discrimination contained in the above clause, namely, clause (26) of section 10 of the new Act must be struck down as violative of Article 14 of the Constitution. Accordingly, we hold that this portion of The provision is unconstitutional and invalid and consequentially quash the demand notice issued under Annexure B for the assessment year 1962-63. (11) In the result, we make the rule absolute and allow the petition and quash the four demand notices issued to the petitioner by the 1st respondent, but in the entire circumstances, we make no order as lo costs. II/AKJ/R.G.D. Petition allowed: Rule made absolute