• Notification Date: 06-02-2023
• Notification No: N/A

Supreme Court: Income- tax order on Sikkim, and the Protests it has triggered

A review petition has been filed in the Supreme Court for rectification of the court’s observation on Sikkimese Nepalis, Sikkim’s Chief Minister Prem Singh Tamang announced on Twitter on Thursday. 

Political parties in Sikkim, including the ruling Sikkim Krantikari Morcha (SKM), have been protesting against the court’s observation that Sikkimese Nepalis were immigrants while allowing exemption from income tax to all old settlers cutting across ethnic lines. 

In its judgment delivered on January 13, the apex court said that under the Sikkim Income Tax Manual, 1948, “all persons engaged in business were subjected to tax irrespective of their origin. Therefore, there was no difference made out between the original inhabitants of Sikkim, namely, the Bhutia-Lepchas, and the persons of foreign origin settled in Sikkim like the Nepalis or persons of Indian origin who had settled down in Sikkim generations back.” 

The judgment also recorded the petitioner’s contention that migrants from other countries or erstwhile kingdoms like “Nepalese migrants”, who “migrated to and settled in Sikkim at the same time or even after migrants/settlers of Indian origin”, were benefiting from Section 10(26AAA) of the IT Act, 1961, “while arbitrarily excluding settlers of Indian origin such as the petitioners herein”. 

On February 2, state Health Minister Mani Kumar Sharma resigned in protest against the government’s failure to respond to the court’s observation, PTI reported. A day previously, Additional Advocate General Sudesh Joshi had resigned in the face of allegations, which Joshi denied — that he had not briefed the court adequately about the distinction between the Sikkimese Nepali population and other old settlers, which had led to the observation. 

On January 13, the Supreme Court held that the benefit of tax exemption provided in Section 10 (26AAA) shall be extended to all Sikkimese people. (Association of Old Settlers of Sikkim vs Union of India) 

Before this judgment, the tax exemption excluded “old Indian settlers”, who had permanently settled in Sikkim before the merger of the state into the Indian union on April 26, 1975, even if their names were recorded in the register maintained under the Sikkim Subjects Regulations, 1961, read with the Sikkim Subject Rules, 1961 (also referred to as the “Register of Sikkim Subjects”). 

A Bench of Justices M R Shah and B V Nagarathna directed the state to amend the Explanation to Section 10 (26AAA) to 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 court struck down the proviso (an article or clause that introduces a condition) to Section 10 (26AAA), which excluded Sikkimese women who had married non-Sikkimese men after April 1, 2008, from the benefit of tax exemption, as violative of Articles 14, 15, and 21 of the Constitution. 

“This direction is being issued…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,” the court said.