# ASSOCIATION OF OLD SETTLERS OF SIKKIM AND ORS v. UNION OF INDIA AND ANR

- **Citation:** 2023 INSC 29
- **Court:** Supreme Court of India
- **Decided:** 2023-01-13
- **Bench:** M. R. Shah, B. V. Nagarathna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/association-of-old-settlers-of-sikkim-and-ors-v-union-of-india-and-anr-36589
- **Pages:** 79

## Headnote

Income Tax Act, 1961 - s.10(26AAA) - Sikkim Subjects
Regulations, 1961 - rr.3 and 4 - Right to Equality - Prohibition of
discrimination - Clause 26AAA to s.10 of the Income Tax Act, 1961
granted exemption to "Sikkimese" people - Explanation to Clause
26AAA defined the term "Sikkimese" - Definition of "Sikkimese"
in Explanation to s.10(26AAA) to the extent it excludes the Indians,
who have settled in Sikkim prior to the merger of Sikkim with India
on 26.04.1975; and proviso to s.10(26AAA) insofar as it excludes
from the exempted category "a Sikkimese woman, who marries a
non-Sikkimese after 01.04.2008" - Challenge to - Held (per M.R.
Shah, J.): Total 95% of the population of Sikkim are getting the
benefit of s. 10(26AAA) of the Income Tax Act and only 5% are left
out and out of which only 1% are the persons like the Old Indian
Settlers, but their names could not be registered as "Sikkim Subjects"
like the petitioner - Purpose of s.10(26AAA) is to grant exemption
to the residents of Sikkim from payment of income tax - All such
Indians/citizens, who have settled in Sikkim prior to the merger of
Sikkim with India on 26.04.1975 are to be treated at par - They
form the same group/class and are entitled to the exemption u/
s.10(26AAA) - There is no difference and/or distinction between
those "Sikkim Subjects", whose names are recorded in the register
maintained under the Regulations, 1961 and those Indians, who
have settled in Sikkim prior to the merger of Sikkim, but whose
names were not recorded as "Sikkim Subjects" in the register -
Merely because at the relevant time and when the Regulations, 1961
was enacted, the Indians settled in Sikkim did not surrender their
Indian citizenship or their fathers/forefathers' names were not entered
into the register maintained under the Regulations, 1961, by itself,
it cannot be said that they cease to be the "Sikkimese" - Exclusion
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[2023] 10 S.C.R. 289 : 2023 INSC 29
*Ed. Note: Subsequent order dated February 8, 2023 reported in [2023] 10 S.C.R. 368 to be
read as part and parcel of the present judgements dated January 13,2023.
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of old Indian settlers, who have settled in Sikkim prior to the merger
of Sikkim with India on 26.04.1975 from the definition of
"Sikkimese" in s.10(26AAA) is arbitrary, discriminatory and
violative of Art. 14 - The exclusion has no nexus with the object
and purpose of enacting s. 10(26AAA) of to be achieved - No
reasonable intelligible differentia has been shown and therefore,
the same can be termed as arbitrary - Hence, petitioners and
similarly situated persons who are old Indian settlers who have settled
in Sikkim prior to the merger of Sikkim with India on 26th April,
1975 shall also be entitled to the exemption under s.10 (26AAA) of
the I.T. Act, 1961 - Further, there is no justification shown and/or
demonstrated to exclude "a Sikkimese woman, who marries a nonSikkimese after 01.04.2008" from the exempted category - The
discrimination is based on gender which is wholly violative of Arts.
14, 15 and 21 of the Constitution - To deny the benefit of exemption
u/s. 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 Art. 14 - Therefore the Proviso to
s.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 - Held (per B.V. Nagarathna, J.): Under the
1961 Regulation, for women marriage has been the basis of
acquiring the status of having a domicile in Sikkim and being a
Sikkim Subject or losing domicile or status as a Sikkim Subject -
Marriage of a Sikkimese woman is also the basis for discrimination
against her whereas there is no such discrimination vis-à-vis a
Sikkimese man marrying a Sikkimese or a non-Sikkimese woman
on or after 1st April, 2008 - When the Explanation to s.10(26AAA)
refers to an "individual", it include

## Text

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ASSOCIATION OF OLD SETTLERS OF SIKKIM AND ORS.
v.
UNION OF INDIA AND ANR.
(Writ Petition (C) No. 59 of 2013)
JANUARY 13, 2023*
[M. R. SHAH AND B. V. NAGARATHNA, JJ.]
Income Tax Act, 1961 - s.10(26AAA) - Sikkim Subjects
Regulations, 1961 - rr.3 and 4 - Right to Equality - Prohibition of
discrimination - Clause 26AAA to s.10 of the Income Tax Act, 1961
granted exemption to "Sikkimese" people - Explanation to Clause
26AAA defined the term "Sikkimese" - Definition of "Sikkimese"
in Explanation to s.10(26AAA) to the extent it excludes the Indians,
who have settled in Sikkim prior to the merger of Sikkim with India
on 26.04.1975; and proviso to s.10(26AAA) insofar as it excludes
from the exempted category "a Sikkimese woman, who marries a
non-Sikkimese after 01.04.2008" - Challenge to - Held (per M.R.
Shah, J.): Total 95% of the population of Sikkim are getting the
benefit of s. 10(26AAA) of the Income Tax Act and only 5% are left
out and out of which only 1% are the persons like the Old Indian
Settlers, but their names could not be registered as "Sikkim Subjects"
like the petitioner - Purpose of s.10(26AAA) is to grant exemption
to the residents of Sikkim from payment of income tax - All such
Indians/citizens, who have settled in Sikkim prior to the merger of
Sikkim with India on 26.04.1975 are to be treated at par - They
form the same group/class and are entitled to the exemption u/
s.10(26AAA) - There is no difference and/or distinction between
those "Sikkim Subjects", whose names are recorded in the register
maintained under the Regulations, 1961 and those Indians, who
have settled in Sikkim prior to the merger of Sikkim, but whose
names were not recorded as "Sikkim Subjects" in the register -
Merely because at the relevant time and when the Regulations, 1961
was enacted, the Indians settled in Sikkim did not surrender their
Indian citizenship or their fathers/forefathers' names were not entered
into the register maintained under the Regulations, 1961, by itself,
it cannot be said that they cease to be the "Sikkimese" - Exclusion
289
[2023] 10 S.C.R. 289 : 2023 INSC 29
*Ed. Note: Subsequent order dated February 8, 2023 reported in [2023] 10 S.C.R. 368 to be
read as part and parcel of the present judgements dated January 13,2023.
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of old Indian settlers, who have settled in Sikkim prior to the merger
of Sikkim with India on 26.04.1975 from the definition of
"Sikkimese" in s.10(26AAA) is arbitrary, discriminatory and
violative of Art. 14 - The exclusion has no nexus with the object
and purpose of enacting s. 10(26AAA) of to be achieved - No
reasonable intelligible differentia has been shown and therefore,
the same can be termed as arbitrary - Hence, petitioners and
similarly situated persons who are old Indian settlers who have settled
in Sikkim prior to the merger of Sikkim with India on 26th April,
1975 shall also be entitled to the exemption under s.10 (26AAA) of
the I.T. Act, 1961 - Further, there is no justification shown and/or
demonstrated to exclude "a Sikkimese woman, who marries a nonSikkimese after 01.04.2008" from the exempted category - The
discrimination is based on gender which is wholly violative of Arts.
14, 15 and 21 of the Constitution - To deny the benefit of exemption
u/s. 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 Art. 14 - Therefore the Proviso to
s.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 - Held (per B.V. Nagarathna, J.): Under the
1961 Regulation, for women marriage has been the basis of
acquiring the status of having a domicile in Sikkim and being a
Sikkim Subject or losing domicile or status as a Sikkim Subject -
Marriage of a Sikkimese woman is also the basis for discrimination
against her whereas there is no such discrimination vis-à-vis a
Sikkimese man marrying a Sikkimese or a non-Sikkimese woman
on or after 1st April, 2008 - When the Explanation to s.10(26AAA)
refers to an "individual", it includes both Sikkimese men and women,
in fact, all genders - Therefore, it cannot have a restrictive or myopic
reference to only Sikkimese men and exclude those Sikkimese women
- In the instant case, the proviso is overriding the provision as well
as the Explanation in respect of those categories of married
Sikkimese women - The proviso is inherently arbitrary and
discriminatory against a particular category of Sikkimese women -
Hence, all Sikkimese women are entitled to the benefit of
s.10(26AAA) as per the Explanation thereto irrespective of whether
they marry a Sikkimese or a non-Sikkimese - The proviso to
Clause(26AAA) of s. 10 of the I.T. Act, 1961 is struck down as being
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in violation of Arts. 14 and 15 - The object and purpose of the
exemption is only to exempt the settlers in Sikkim or persons
domiciled in Sikkim in terms of the 1961 Regulation or the
Government Orders - All individuals domiciled in Sikkim till 26th
April, 1975 and who have since become citizens of India are entitled
to exemption from payment of income tax - Only such individuals
are entitled to the exemption who fall within the three clauses of the
Explanation - All other citizens of India who do not fall within the
ambit of the Explanation and who have been domiciled in Sikkim
State subsequent to 26th April, 1975 would not have the benefit of
exemption - This would be discriminatory insofar as those settlers
in Sikkim are concerned who have been domiciled in Sikkim
subsequent to promulgation of 1961 Regulation and till 26th April,
1975 - Such individuals are old settlers who have become citizens
of India from 26th April, 1975 but who were domiciled in Sikkim
prior to the said date - These old settlers are also entitled to the
exemption under s.10 (26AAA) - Hence, directions in that regard
have to be issued to fill the Legislative vacuum and amendment to
the Explanation is necessary - Directions issued to eliminate the
discrimination and to save the Explanation from being rendered
unconstitutional - Constitution of India - Arts. 14, 15, 21 and 142.
Interpretation of Statutes - Internal Aid - Proviso - Function
of - Held: The normal function of a proviso is to except something
out of the provision or to qualify something enacted therein which,
but for the proviso, would be within the purview of the provision -
A proviso is added to an enactment to qualify or create an exception
to what is in the enactment - A proviso cannot be construed as
nullifying the provision or as taking away completely a right
conferred by the enactment - If it does so and is discriminatory
then it falls foul of the equality clauses of the Constitution of India.
Disposing of the writ petitions, the Court
HELD:
per M.R. Shah, J.
1. The purpose of Section 10(26AAA) of the Income Tax
Act, 1961 is to grant exemption to the residents of Sikkim from
payment of income tax under the Income Tax Act. Therefore, all
such Indians/citizens, who have settled in Sikkim prior to the
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merger of Sikkim with India on 26.04.1975 are to be treated at
par and they form the same group/class and are entitled to the
exemption under Section 10(26AAA) of the Income Tax Act. As
such, there is no difference and/or distinction between those
"Sikkim Subjects", whose names are recorded in the register
maintained under the Sikkim Subjects Regulations, 1961 and
those Indians, who have settled in Sikkim prior to the merger of
Sikkim, but whose names were not recorded as "Sikkim
Subjects" in the register maintained under the Sikkim Subjects
Regulations, 1961. All are "Sikkimese". Merely because at the
relevant time and when the Sikkim Subjects Regulations, 1961
was enacted, the Indians settled in Sikkim did not surrender their
Indian citizenship or their fathers/forefathers' names were not
entered into the register maintained under the Sikkim Subjects
Regulations, 1961, by itself, it cannot be said that they cease to
be the "Sikkimese". All of them are similarly situated with those
"Sikkimese" / "Sikkim Subjects", who all have settled in Sikkim
prior to the merger of Sikkim with India on 26.04.1975. The object
and purpose of Section 10(26AAA) is to grant benefit of
exemption from payment of income tax under the Income Tax
Act to the residents of Sikkim. Therefore, there is no nexus
sought to be achieved in excluding the Indians, who have settled
in Sikkim prior to the merger of Sikkim with India on 26.04.1975
but their names are not recorded as "Sikkim Subjects". The Union
of India has failed to satisfy any reasonable classification and/or
nexus to exclude such class of Indians, who, in fact, have settled
in Sikkim prior to 26.04.1975. Therefore, exclusion of old Indian
settlers, who have settled in Sikkim prior to the merger of Sikkim
with India on 26.04.1975 from the definition of "Sikkimese" in
Section 10(26AAA) is arbitrary, discriminatory and violative of
Article 14 of the Constitution of India.[Para 13.1][312-D-H; 313A-B]
2. In the present case, the exclusion has no nexus with the
object and purpose of enacting Section 10(26AAA) of the Income
Tax Act to be achieved. No reasonable intelligible differentia has
been shown and therefore, the same can be termed as arbitrary.
This Court is of the firm opinion that Section 10(26AAA) to the
extent it excludes the Old Indian settlers, who have settled in
Sikkim prior to the merger of Sikkim with India on 26.04.1975,
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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. 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. Therefore, the
"Sikkimese" like the petitioners, who are old Indian settlers and
who have settled in Sikkim prior to the merger of Sikkim with
India on 26.04.1975 shall also be entitled to the exemption under
Section 10(26AAA) of the Income Tax Act, 1961. [Paras 13.4
and 14][313-G; 314-B-D]
3. So far as the challenge to 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" is concerned, there is no justification shown and/or
demonstrated to exclude "a Sikkimese woman, who marries a
non-Sikkimese after 01.04.2008" from the exempted category.
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. There is no disqualification for a Sikkim
man, who marries a non-Sikkimese after 01.04.2008. 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. [Para
15][314-D-G]
4. There is no justification shown to exclude "a Sikkimese
woman, who marries a non-Sikkimese after 01.04.2008". A
Sikkimese woman, who has married a non-Sikkimese prior to
01.04.2008 is entitled to the benefit of exemption provided under
Section 10(26AAA). There is no justification shown to fix the cut
off date of 01.04.2008. There is no rational nexus to the object
sought to be achieved by excluding "a Sikkimese woman, who
marries a non-Sikkimese 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
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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. Therefore, Proviso to Section
10(26AAA) inasmuch as it excludes from the provision of
exemption a Sikkimese woman merely because she marries a
non-Sikkimese after 01.04.2008 is totally discriminatory and
violative of Articles 14, 15 and 21 of the Constitution of India,
which requires to be struck down. [Paras 15.1 and 16][315-A-D]
D. S. Nakara v. Union of India (1983) 1 SCC 305 :
[1983] 2 SCR 165 ; State of Rajasthan v. Manohar
Singhji II [1954] SCR 996 and Shayara Bano v.Union
of India (2017) 9 SCC 1 : [2017] 9 SCR 797 - followed.
G. Sekar v. Geetha & Ors. (2009) 6 SCC 99 : [2009] 5
SCR 1005- relied on.
Vishundas Hundumal v. State of M.P. (1981) 2 SCC 410:
[1981] 3 SCR 234 and Anuj Garg & Ors. v. Hotel
Association of India & Ors. (2008) 3 SCC 1: [2007] 12
SCR 991- referred to.
per B. V. Nagarathna, J.
1. Under the Sikkim Subjects Regulations, 1961, as far as
women are concerned, marriage has been the basis of acquiring
the status of having a domicile in Sikkim and being a Sikkim
Subject or losing domicile or status as a Sikkim Subject. Marriage
of a Sikkimese woman is also the basis for discrimination against
her whereas there is no such discrimination vis-à-vis a Sikkimese
man marrying a Sikkimese or a non-Sikkimese woman on or after
1st April, 2008. When the Explanation to Clause 26AAA to Section
10 of the Income Tax Act, 1961 refers to an "individual", it
includes both Sikkimese men and women, in fact, all genders; it
cannot have a restrictive or myopic reference to only Sikkimese
men and exclude those Sikkimese women covered under the
proviso. A proviso cannot over arch a provision. But in the instant
case, the proviso to Section 10(26AAA) of the Act, 1961 is
overriding the provision as well as the Explanation in respect of
those categories of married Sikkimese women referred to in the
proviso which is impermissible. Thus, the proviso is inherently
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arbitrary and discriminatory against a particular category of
Sikkimese women. In other words, the Explanation to Section
10(26AAA) of the I.T. Act, 1961 includes both Sikkimese men
as well as women. Such being the interpretation, the proviso is
antithetical to the Explanation and the Section as well. The
expression "an individual" in the Explanation to Section 10
(26AAA) of the I.T. Act, 1961, must include all genders including
Sikkimese women. There cannot be a discrimination only on the
ground of sex and race. Hence, all Sikkimese women are entitled
to the benefit of Section 10 (26AAA) of the I.T. Act, 1961, as per
the Explanation thereto irrespective of whether they marry a
Sikkimese or a non-Sikkimese. [Paras 50,51, 53 and 55][340-C,
D; 341-E-G; 342-C-D]
2. Pursuant to the merger of Sikkim with India by virtue of
which, Sikkim has become one of the States of India and all Sikkim
Subjects and all Sikkimese domiciled in the territory of Sikkim
have become Indian citizens, there cannot be a discrimination
vis-à-vis Sikkimese women marrying a non-Sikkimese individual,
whether an Indian citizen or a foreigner, that too, on or after 1st
April, 2008. Such discrimination, is therefore, in violation of the
guarantee of equality provided under Articles 14 and 15 of the
Constitution of India as it is on the basis of sex and race. Hence,
the proviso to clause (26AAA) of Section 10 of the I.T. Act, 1961,
is a stark example of an unconstitutional sex-based discrimination
and is liable to be struck down. [Para 56][342-D-F]
3. The proviso runs counter to the Explanation and is thus
manifestly arbitrary. This is because the Explanation intends to
give the benefit of Section 10 (26AAA) of the I.T. Act, 1961 to all
Sikkimese who are defined under the said Explanation as those
'individuals' whose names have been recorded and registered in
the Register of Sikkim Subjects immediately before 26th April,
1975 or included pursuant to the Government of India Order No.
26030/36/90/I.C.I. dated 7th August, 1990 and Order of even
number dated 8th April, 1991, or those persons whose names do
not appear in the Register of Sikkim Subjects but it has been
established that the name of such individual's father or husband
or paternal grandfather or brother from the same father had been
recorded in that Register. Hence, the benefit of the Explanation
must be extended to all Sikkimese women, irrespective of whether
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they have married a Sikkimese or a non-Sikkimese after the 1st
April, 2008. Thus the proviso to Clause (26AAA) of Section 10
of the I.T. Act, 1961 is struck down as being in violation of Articles
14 and 15 of the Constitution of India. [Paras 64 and 65][352-H;
353-A-C]
4. The Explanation restricts the exemption only to those
Sikkimese individuals who fall within the three clauses of the
Explanation, as the object and purpose of the exemption is only
to exempt the settlers in Sikkim or persons domiciled in Sikkim
in terms of the 1961 Regulation or the Government Orders
referred to above. Even though the 1961 Regulation has been
repealed, nevertheless, the Register of Sikkim Subjects which
is maintained under the said Regulation, which had acquired a
sanctity, has been the basis for grant of an exemption and
particularly in the form of clause (iii) of the Explanation to Section
10(26AAA) of the I.T. Act, 1961. This would imply that all those
individuals who fall outside the scope and ambit of the Explanation
would not be granted the exemption. Then, the questions of
discrimination against persons such as the petitioners and others
similarly situated would arise. Individuals having become citizens
of India and were domiciled in Sikkim as on 26th April, 1975 are
also entitled to the benefit of registration and exemption. Thus
all individuals domiciled in Sikkim till 26th April, 1975 and who
have since become citizens of India are entitled to exemption
from payment of income tax as per Section 10 (26AAA) of the
I.T. Act, 1961. [Paras 73 and 74][364-D-G]
5. Only such individuals are entitled to the exemption who
fall within the three clauses of the Explanation. Hence, the
Explanation must be construed strictly as it is in the nature of a
definition of the expression "Sikkimese" for the purpose of
granting an exemption from payment of income tax under the
I.T. Act, 1961. However, the exemption must be extended to
incorporate all such individuals who have been domiciled in
Sikkim as on 26th April, 1975 and who have since then become
citizens of India. This would mean that all other citizens of India
who do not fall within the ambit of the Explanation as interpreted
above and who have been domiciled in Sikkim State subsequent
to 26th April, 1975 would not have the benefit of exemption under
Section 10 (26AAA) of the I.T. Act, 1961. Thus, any individual
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not falling within the said clause would not be entitled to the said
exemption. This would however be discriminatory insofar as those
settlers in Sikkim are concerned who have been domiciled in
Sikkim subsequent to promulgation of 1961 Regulation and till
26th April, 1975 when Sikkim merged with India. Such individuals
are old settlers who have become citizens of India from 26th April,
1975 but who were domiciled in Sikkim prior to the said date.
They are also entitled to the exemption under Section 10
(26AAA). Hence, directions in that regard have to be issued to
fill the Legislative vacuum and amendment to the Explanation is
necessary. However, those individuals who have been domiciled
in Sikkim subsequent to 26th April, 1975 shall not be entitled to
the benefit of exemption from payment of income tax. [Paras 75
and 76][364-H; 365-A-B; D-F]
6. This Court has on previous occasions, sought to enforce
rights of citizens even in areas of legislative vacuum. To this end,
Article 142 of the Constitution of India has been invoked and the
law so declared in order to fill the vacuum has been treated as
law declared by this Court under Article 141 until a proper
legislation is made. [Para 77; 365-G]
7.1 The Union of India shall make an amendment to
Explanation to Section 10 (26AAA) of I.T. 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 26th April, 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.[Para 79; 367-B]
7.2 Till such amendment is made by the Parliament to the
Explanation to Section 10 (26AAA) of I.T. 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. This direction is being issued in exercise
of powers under Article 142 of the Constitution so as to eliminate
discrimination and disparity in respect of the aforesaid category
of Sikkimese, who subsequently have become citizens of India
w.e.f. 26th April, 1975 and to save the Explanation from being
rendered unconstitutional vis-à-vis such individuals who form a
small percentage of Sikkimese. [Para 79; 367-C-E]
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7.3 Proviso to Section 10 (26AAA), insofar as it excludes
from the exempted category, "a Sikkimese woman who marries a
non-Sikkimese man after 1st April, 2008" is hereby struck down as
being ultra vires Articles 14, 15 and 21 of the Constitution of India."
[Para 79; 367-E-F]
Vishaka and Ors. v. State of Rajasthan, A.I.R. 1997
SC 3011 : [1997] 3 Suppl. SCR 404 - followed.
S.K. Dutta v. Lawrence Singh Ingty, A.I.R. 1968 SC
658 : [1968] 2 SCR 165; Southern Electricity Supply
Co. of Orissa Ltd. v. Sri Seetaram Rice Mill (2012) 2
SCC 108 : [2011] 15 SCR 211; Aphali Pharmaceuticals
Ltd. v. State of Maharashtra (1989) 4 SCC 378 : [1989]
1 Suppl. SCR 129; Anuj Garg and Ors. v. Hotel
Association of India and Ors. (2008) 3 SCC 1 : [2007]
12 SCR 991; G. Sekar v. Geetha (2009) 6 SCC 99 :
[2009] 5 SCR 1005; Air India v. Nergesh Meerza AIR
1981 SC 1829 : [1982] 1 SCR 438; Air India Cabin
Crew Assn. v. Yeshaswinee Merchant and others AIR
2004 SC 187 : [2003] 1 Suppl. SCR 455; C.B.
Muthamma v. Union of India AIR 1979 SC 1868 : [1980]
1 SCR 668; Mackinnon Mackenzie and Co. Ltd. v.
Audrey D'costa and Another AIR 1987 SC 1281 : [1987]
2 SCR 659; Githa Hariharan v. Reserve Bank of India
(1999) 2 SCC 228 : [1999] 1 SCR 669; Anuj Garg &
Ors. v. Hotel Association of India & Ors. (2008) 3 SCC
1 : [2007] 12 SCR 991; G. Sekar v. Geetha & Ors. (2009)
6 SCC 99 : [2009] 5 SCR 1005; State of Maharashtra
v. Indian Hotel and Restaurants Association (2013) 8
SCC 519 : [2013] 7 SCR 654 and Secretary, Ministry
of Defence v. Babita Puniya and others (2020) 7 SCC
469 : [2020] 3 SCR 833- referred to.
Bhe and Ors. v. The Magistrate, Khayelisha and Ors.
(2004) 18 BHRC 52 : (2005) 1 BCLR 1 (CC); Reed v.
Reed 404 U.S. 71, 92 S. Ct. 251 (1971); Weinberger
vs. Wiesenfeld 420 U.S. 636, 95 S. Ct. 1225 (1975);
Duren vs. Missouri 439 U.S. 357, 99 S. Ct. 664 (1979);
Hishon vs. King & Spalding 467 U.S. 69, 104 S. Ct.
2229 (1984); United States v. Virginia 518 U.S. 515
(1996)- referred to.
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Case Law Reference
In the judgment of M. R. Shah, J.
[1983] 2 SCR 165
followed
Para 7 (x)
[1954] SCR 996
followed
Para 7 (x)
[1981] 3 SCR 234
referred to
Para7.1
[2007] 12 SCR 991
referred to
Para 8.1
[2009] 5 SCR 1005
relied on
Para 8.1
[2017] 9 SCR 797
followed
Para 13.4
In the judgment of B. V. Nagarathna, J.
[1968] 2 SCR 165
referred to
Para 27
[2011] 15 SCR 211
referred to
Para 28
[1989] 1 Suppl. SCR 129
referred to
Para 29
[2007] 12 SCR 991
referred to
Para 29
[2009] 5 SCR 1005
referred to
Para 32
[1982] 1 SCR 438
referred to
Para 57(a)
[2003] 1 Suppl. SCR 455
referred to
Para 57(b)
[1980] 1 SCR 668
referred to
Para 59(i)
[1987] 2 SCR 659
referred to
Para 59(ii)
[1999] 1 SCR 669
referred to
Para 59(iii)
[2007] 12 SCR 991
referred to
Para 59(iv)
[2009] 5 SCR 1005
referred to
Para 59(v)
[2013] 7 SCR 654
referred to
Para 59(vi)
[2020] 3 SCR 833
referred to
Para 59(vii)
[1997] 3 Suppl. SCR 404
followed
Para 77
CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No.59
of 2013.
(Under Article 32 of The Constitution of India)
With
Writ Petition (C) No.1283 of 2021.
ASSOCIATION OF OLD SETTLERS OF SIKKIM AND ORS. v.
UNION OF INDIA AND ANR.
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K. V. Viswanathan, Arvind P. Datar, G. Umapathy, Sr. Advs., Ms.
Haripriya Padmanabhan, Senthil Jagadeesan, Ms. Shivani Vij, R.
Venkataraman, Chanakya Dwivedi, Ms. Pooja Dhar, Venkat
Subramanian, Rohit K. Singh, Pritam Bishwas, Ankit Pandey, Aditya
Singh, Suvin Kumaran, Advs. for the Petitioners.
N. Venkataraman, ASG, Vivek Kohli, Adv. Gen., H. R. Rao,
Devashish Bharukha, Sughosh Subramanyam, Rajat Nair, Bhuvan
Kapoor, Pranay Ranjan, Vikrant Yadav, Ms. Gargi Khanna, Raj Bahadur
Yadav, Mrs. Anil Katiyar, Sameer Abhyankar, Abhinav Mishra, Ms. Nishi
Sangtani, Ms. Vani Vandana Chhetri, Ms. Yeshi Ranchhen, Pranav
Sachdeva, Ms. Neha Rathi, M/s. Arputham Aruna and Co., Narendra
Kumar, Advs. for the Respondents.
The Judgments* of the Court were delivered by
M. R. SHAH, J.
1. By way of this writ petition under Article 32 of the Constitution
of India, the respective writ petitioners - Association of Old Settlers of
Sikkim and Others have prayed for an appropriate writ, direction or
order striking down Section 10(26AAA) of the Income Tax Act, 1961
(hereinafter referred to as the "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 26.04.1975. The petitioners have also prayed for an appropriate
writ, order or direction striking down the Proviso to Section 10(26AAA)
of the Act, 1961, insofar as it excludes from the exempted category,
"Sikkimese women" who marries a non-Sikkimese after 01.04.2008.
2. Section 10(26AAA), the vires of which is under challenge reads
as under:-
"[(26AAA) in case of an individual, being a Sikkimese, any income
which accrues or arises to him-
(a) from any source in the State of Sikkim; or
(b) by way of dividend or interest on securities:
Provided that nothing contained in this clause shall apply to
a Sikkimese woman who, on or after the 1st day of April, 2008,
marries an individual who is not a Sikkimese.
*Ed. Note : These were two judgments in the matter-one by Hon'ble Mr. Justice M.R.
Shah and the other by Hon'ble Mrs. Justice B.V. Nagarathna.
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Explanation.- For the purposes of this clause, "Sikkimese" shall
mean-
(i)
an individual, whose name is recorded in the register
maintained under the Sikkim Subjects Regulation, 1961 read
with the Sikkim Subject Rules, 1961 (hereinafter referred
to as the "Register of Sikkim Subjects"), immediately before
the 26th day of April, 1975; or
(ii)
an individual, whose name is included in the Register of
Sikkim Subjects by virtue of the Government of India Order
No.26030/36/90-I.C.I., dated the 7th August, 1990 and
Order of even number dated the 8th April, 1991; or
(iii)
any other individual, whose name does not appear in the
Register of Sikkim Subjects, but it is established beyond
doubt that the name of such individual's father or husband
or paternal grand-father or brother from the same father
has been recorded in that register;"
3. It is the case on behalf of the respective writ petitioners that by
excluding the Indians from the definition of Sikkimese, the exemption
granted under Section 10(26AAA) of the Act 1961, is not available to
the Indian Settlers resulting in discrimination. There is no valid ground
for discriminating against this section of the residents of Sikkim alone.
Therefore, it is the case on behalf of the writ petitioners that exclusion
of Indians who have settled in Sikkim prior to the merger of Sikkim with
India on 26.04.1975 and consequently not granting the exemption granted
under Section 10(26AAA) of the Act, 1961 to the class of Indians, who
have settled in Sikkim prior to the merger of Sikkim with India on
26.04.1975 is arbitrary, discriminatory and the differentia do not have a
rational nexus to the object sought to be achieved by the Statute in question.
It is also the case on behalf of the writ petitioners in Writ Petition No. 59
of 2013 that Proviso to Section 10(26AAA), insofar as it excludes from
the exempted category, "Sikkimese women" who marries a nonSikkimese after 01.04.2008, is discriminatory and violative of Articles
14, 15 and 21 of the Constitution of India as the exclusion is based on
gender.
4. Before dealing with and/or considering the rival submissions,
history of Kingdom of Sikkim and the chronology of dates and events,
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which led to enactment of Section 10(26AAA) of the Act, 1961, is
required to be referred to and considered, which are as under:-
4.1 The Kingdom of Sikkim came into existence in 1642. It was
ruled as an independent Kingdom for 333 years till its merger with the
Union of India in 1975. Originally the Kingdom of Sikkim held a large
territory ranging from parts of present-day Bhutan, Bihar, West Bengal,
Nepal and Bangladesh. In the 18th and 19th Century, a lot of territory
was ceded to the British Empire in various conflicts. The Imperial British
Government took over the control of the erstwhile Kingdom of Sikkim in
the year 1888. However, there were conflicts with China.
4.2 In 1890, a Convention was signed between Great Britain and
China to settle the boundaries of Sikkim and Tibet. The British control
over Sikkim was recognized by China in the year 1890. Following British
taking control of Sikkim, British Indian Subjects were allowed to hold
Government employment in Sikkim.
4.3 In supersession of all earlier treaties, a fresh treaty was entered
into between the British Government and the King of Sikkim in the year
1861. Under this treaty, the territory of Sikkim was restored to the King
of Sikkim under certain conditions. These conditions included Article 8
under which the Government of Sikkim was to abolish all restrictions on
travelers and monopolies in trade between the British territories and
Sikkim. Under the said treaty, British subjects were permitted to trade,
reside and travel through Sikkim. Many Indians came to reside in Sikkim
over the years. Except for the fact that they could not hold lands in rural
areas, the Indians and other foreigners who settled in Sikkim were treated
equally with the original inhabitants of Sikkim.
4.4 The Sikkim Income Tax Manual, 1948 was promulgated by
the Ruler of Sikkim (the Chogyal) in the year 1948. Under the said
Manual, all persons engaged in business were subjected to tax
irrespective of their origin. The India-Sikkim Peace Treaty was entered
into on 05.12.1950 and under this Treaty Sikkim was to be the protectorate
of India as per Article VII of the said treaty. It appears that in order to
check the influx of foreigners into Sikkim, the Ruler of Sikkim (the
Chogyal) promulgated the Sikkim Subject Regulations, 1961 on
03.07.1961. Under the said Regulations: (a) the persons falling under
Clause 3 of the Regulations were to be entered as a "Sikkim Subject" in
the Register; and (b) Persons who were citizens of another country
were not to be registered as a "Sikkim Subject" unless he relinquishes
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the citizenship of the other country. The term 'Sikkim Subject' was defined
as a person who was born in the territory of Sikkim and was resident
therein and similarly situated persons, but however with a caveat that "a
person shall not be a "Sikkim Subject" under this section, unless he makes
a declaration that he is not a citizen of any other country at the time of
inclusion of his name in the register of "Sikkim Subjects". Because of
this caveat, an Indian citizen whose ancestors had settled down in Sikkim
for generations, had to give up his citizenship of India, for the purpose of
converting himself into a "Sikkim Subject".
4.5 It appears that some of the families/persons like the members
of the petitioners' Association, even though their forefather and they
were residents of Sikkim for years together, did not surrender their
citizenship of India and, therefore, their names were not registered as
"Sikkim Subject" in the register maintained under the Sikkim Subjects
Regulations, 1961.
4.6 By way of the Constitution 36th Amendment Act 1975, Sikkim
was made a full-fledged State of India and was included in Entry 22 of
Schedule I to the Constitution of India. Article 371-F was also inserted
in the Constitution under which it was, inter alia, open to the President or
the Parliament to extend any law to the State of Sikkim, or repeal any
existing law of Sikkim.
4.7 On 21.06.1975, the Home Department issued a notification
stating that "all Sikkim Subjects (under the Sikkim Subjects Regulations,
1961) before 26.04.1975 were to be deemed Indian citizens". Therefore,
this effaced the distinction between the persons of Indian origin residing
in Sikkim (without giving up Indian Citizenship) and others who had taken
up Sikkimese Citizenship.
4.8 Since a large number of eligible persons had been left out of
the Sikkim Subject Register and were consequently denied Indian
citizenship, Government of Sikkim issued a Memorandum that for the
purposes of seeking employment, those claiming to be "Locals" should
be able to show whether their parents' names are maintained on or
before 15.05.1975 in the relevant Government Register. In the year 1980,
notification was issued that domicile/ residential certificate issued by
sources, other than District Collector, shall not be accepted as valid.
4.9 In the year 1988, a petition was moved in the Lok Sabha by a
few MLAs of Sikkim stating that at the time of merger of Sikkim with
ASSOCIATION OF OLD SETTLERS OF SIKKIM AND ORS. v.
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India, only those people whose names were registered in the Sikkim
Subject Register in 1961 were made Indian Citizens, but there were
many other stateless persons who were present in Sikkim between the
period 1946 and 1975 who were otherwise by the reason of their
residence, domicile and allegiance, "Sikkimese", and they should also be
made Indians. The Government of India conceded to this demand and
an exercise was carried out to grant Indian Citizenship to those so-called
stateless people who were deemed to have been genuinely omitted.
4.10 In the year 1989, the Sikkim Citizenship (Amendment) Order
1989 was notified wherein a proviso was created to deem such cases of
genuine omission as citizens of India. It appears that the principal
beneficiaries of the said Amendment were those who had migrated to
Sikkim post 1946 and were therefore not even eligible for being on the
Sikkim Subject Register.
4.11 That thereafter the Government of India formed a Committee
consisting of its officers and officers of the Sikkim Government and
certain guidelines were made to decide who the persons were, who
were omitted by mistake from being entered into the "Sikkim Subjects
Register". However, these guidelines, did not apply to persons of Indian
origin as they were already Indian citizens, but only to those "nonSikkimese Subjects" who were to be made Indian citizens.
4.12 Subsequently, vide Government of India's Order dated
07.08.1990 and 08.04.1991, a total of 73,431 were granted Indian
Citizenship on the basis that it was found that these persons were eligible
to have been included in the "Sikkim Subjects Register".
4.13 That in the year 1989 and w.e.f. 26.07.1989, the Indian
Income Tax Act, 1961 was extended to Sikkim by the Finance Act,
1989. Under the said amendment, any law corresponding to the Income
Tax Act, 1961, which was in force in the State of Sikkim stood repealed.
4.14 That the State of Sikkim filed a Suit before this Court
challenging the extension of the Income Tax Act, 1961 to the State of
Sikkim, however, the same came to be withdrawn subsequently.
4.15 In the year 1985, the Government of India, vide an
amendment to the Income Tax Act, 1961 in the Finance Act, 1994,
proposed an exemption from Income Tax to the Schedule Tribes in Sikkim
as was being done in regard to other states. The same was opposed by
the lone M.P. of Sikkim.
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4.16 Thereafter, the Government of India and the Government of
Sikkim formed a joint committee consisting of the members from the
Central Government and Government of Sikkim to resolve the differences
for implementation of the Income Tax Act, 1961 in Sikkim. It appears
that while discussing the matters relating to implementation of the Income
Tax Act, 1961 to the State of Sikkim, the committee representing the
State Government of Sikkim insisted on exemption for persons holding
the Sikkim Subjects Certificate and their descendants and were made
Indian Citizens vide the Sikkim Citizenship Amendment Order, 1989. It
appears that these two categories essentially consisted of the Bhutia
Lepchas, Sherpas and the Nepalis who constituted together about 94.6%
of the total population. Discussions were held for four long years to
secure exemptions to Sikkim Subjects Certificate holders and the people
made citizens of India vide the Government of India orders dated
07.08.1990 and 08.04.1991 and their descendants.
4.17 That in the year 2008, the Government of India, gave in to
the demands of the State of Sikkim, and passed an amendment to the
Income Tax Act, by the Finance Act, 2008, wherein Clause 26AAA
was introduced in Section 10 of the Income Tax Act, and the persons of
Indian origin in Sikkim were treated differently from the Sikkim subjects
and persons who had become citizens of India by the Sikkim Citizenship
Amendment Order 1989. Clause 26AAA to Section 10 of the Income
Tax Act, 1961 granted an exemption to "Sikkimese" people. However,
the Explanation to Clause 26AAA defined the term "Sikkimese" as follows:
"For the purposes of this Clause, "Sikkimese" shall mean:-
(i)
an individual, whose name is recorded in the register
maintained under the Sikkim Subjects Regulations, 1961 read
with the Sikkim Subject Rules, 1961 (hereinafter referred
to as the "Register of Sikkim Subjects", immediately before
the 26th day of April, 1975; or
(ii)
an individual, whose name is included in the Register of
Sikkim Subjects by virtue of the Government of India Order
No. 26030/36/90 - I.C.I. dated the 7th August, 1990 and
Order of even number dated the 8th April, 1991; or
(iii)
any other individual, whose name does not appear in the
Register of Sikkim Subjects, but it is established beyond
doubt that the name of such individual's father or husband
ASSOCIATION OF OLD SETTLERS OF SIKKIM AND ORS. v.
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or paternal grandfather or brother from the same father
has been recorded in that register;"
4.18 It appears that in view of Section 10(26AAA) of the Income
Tax Act, 1961, effectively 94% of the residents of Sikkim are exempted
from payment of Income Tax under the Income Tax Act, 1961.