2014 (2) TMI 123 - HC - Income Tax

Violation of provisions of section 192 of the Act Non-deduction of TDS - Held that - The letters are the internal correspondences between the Revenue and the employers of the petitioners and in none of the letters, it is stated that the petitioners are debarred from getting exemption of paying income-tax in view of the provision of section 10(26) of the Act - A person when migrated from his own State, where he belonged to the scheduled tribe or caste, to another State in connection with his employment or any other purposes, he cannot be considered as a scheduled tribe or scheduled caste in the migrated State where his tribe is not in the order notified under clause (25) of article 366 of the Constitution. In clause (26) of section 10 of the Act stipulates that income of a member of scheduled tribe which accrued or arose from whatever source in the area or States referred to in the said sub-section or income received by such scheduled tribe by way of dividend or interest on security shall not be included in his total income in his previous year, meaning thereby, the benefit of clause (26) of section 10 of the Act will be available to the members of the scheduled tribe residing in any areas specified in the said section - members of the scheduled tribe residing in other part of the country other than the one and specified under section 10(26) of the Act are not entitled to the benefit of section 10(26) of the Act the petition is disposed of with a direction to the petitioners to furnish a certificate to the respondent-employer as required under the provisions of the Act Decided against Assessee.

Issues Involved:
1. Validity of the Income-tax Officer's letters dated December 1, 2011, and December 14, 2011.
2. Applicability of Section 10(26) of the Income-tax Act, 1961, to scheduled tribe employees working outside their state of origin.
3. Interpretation of the Gauhati High Court's Full Bench decision in Pradip Kumar Taye v. Union of India.
4. Requirement for scheduled tribe employees to furnish certificates for tax exemption.

Issue-wise Detailed Analysis:

1. Validity of the Income-tax Officer's Letters:
The petitioners, all scheduled tribe employees of ONGC Ltd. working in Tripura, challenged the letters issued by the Income-tax Officer (TDS) dated December 1, 2011, and December 14, 2011. These letters informed the ONGC Asset Manager that tax was not being deducted from the salaries of scheduled tribe employees in violation of Section 192 of the Income-tax Act, 1961. The Income-tax Officer requested a list of these employees and their addresses for further action. The court noted that these letters were internal correspondences and did not explicitly state that the petitioners were debarred from tax exemption under Section 10(26). The petitioners did not approach the Income-tax Officer before filing the writ petition, although a statutory alternative remedy was available.

2. Applicability of Section 10(26) of the Income-tax Act, 1961:
The petitioners argued they were exempt from paying income tax under Section 10(26) of the Act, which exempts income of scheduled tribe members residing in specified areas. The respondents contended that the petitioners, being scheduled tribes from states other than Tripura, were not entitled to this exemption. The court observed that Section 10(26) benefits are available only to scheduled tribe members residing in the specified areas. Therefore, members residing outside these areas are not entitled to the exemption.

3. Interpretation of the Gauhati High Court's Full Bench Decision in Pradip Kumar Taye v. Union of India:
The petitioners relied on the Gauhati High Court's decision in Pradip Kumar Taye, which held that classification of government servants for exemption under Section 10(26) based on their place of posting was violative of Article 14 of the Constitution. The court, however, noted that the facts of Pradip Kumar Taye were different from the present case. In Pradip Kumar Taye, the court dealt with the issue of tax deduction for employees posted outside their place of origin. The court in the present case refrained from expressing an opinion on the applicability of Pradip Kumar Taye, as the facts were not identical.

4. Requirement for Scheduled Tribe Employees to Furnish Certificates for Tax Exemption:
The respondents argued that the petitioners needed to furnish certificates proving their scheduled tribe status to avail the tax exemption. The court directed the petitioners to provide the required certificates to their employer, who would then furnish the information to the Income-tax Officer. The court also instructed the Income-tax Officer not to take any action against the employer until a final decision was made based on the provided information.

Conclusion:
The court disposed of the writ petition, directing the petitioners to furnish the necessary certificates to their employer. The employer was instructed to provide the information to the Income-tax Officer, who would then make a final decision. The court clarified that the Income-tax Officer should not take any action against the employer until the decision was made. The court also noted that the petitioners' apprehensions about tax deduction were premature, as no tax had been deducted from their salaries at the time of the writ petition.

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