1984 (2) TMI 163 - AT - Income Tax

Summary

Issues:
- Entitlement to exemption under sub-s. (26) of s. 10 of the IT Act, 1961 for a member of a Scheduled Tribe residing in a specific area.
- Interpretation of the proviso to sub-para (2) of para 20 of the Sixth Schedule of the Constitution of India regarding the exemption.

Analysis:
The judgment revolves around the issue of whether a member of a Scheduled Tribe residing in a particular area is entitled to exemption under sub-s. (26) of s. 10 of the IT Act, 1961. The assessee, a Scheduled Tribe member residing in Shillong, claimed exemption based on this provision. The key contention was the interpretation of the proviso to sub-para (2) of para 20 of the Sixth Schedule of the Constitution of India. The Revenue argued that the proviso excludes the area within the Municipality of Shillong from Khasi Jaintia Hills Districts for certain purposes, including income exemption under the IT Act.

Upon careful examination, the Tribunal found that the proviso to sub-para (2) of para 20 excludes the area within the Municipality of Shillong from Khasi Jaintia Hills Districts for specific purposes only, not including the IT Act. The Tribunal analyzed various clauses of the Sixth Schedule, concluding that the proviso's restrictions did not apply to income taxation under the IT Act. Therefore, the income derived by the assessee from areas within Khasi & Jaintia Hills Districts, as understood before the reorganization, qualified for exemption under sub-s. (26) of s. 10.

The Tribunal upheld the order of the Appellate Authority, dismissing the Department's appeal. It clarified that the Department's interpretation of the proviso was incorrect, and the assessee was indeed entitled to the exemption under the IT Act. The judgment highlights the importance of precise legal interpretation in determining tax exemptions for Scheduled Tribe members residing in specific areas, emphasizing the need to consider the exact scope and application of constitutional provisions in such cases.