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TMI Blog1976 (2) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... Civil Appeal No. 579 of 1975) belongs to Jaintia Scheduled Tribe and is a permanent resident of United Khasi-Jaintia Hills Autonomous District under the Sixth Schedule of the Constitution within the State of Meghalaya. He joined service under the Government of Assam in 1941. In the previous year relevant to the assessment year 1970-71, he was posted at Shillong as Secretary to the Government of Assam. The Assam Secretariat building and office, which constitute his place of work was within that quarter of the town which is included in Shillong Municipality and is not a part of the area described in para. 20 of the Sixth Schedule. The Income-tax Officer took the view that the assessee's income from salary in the relevant year arose in the non-scheduled area and, as such, is not covered by the exemption provided under section 10(26)(a) of the Act. The assessee claimed that his income from salary had accrued or arisen within the specified area and, as such, he was entitled to the exemption. In the alternative, he contended that this was not a valid condition for denying him the benefit of the exemption under section 10(26). The Income-tax Officer overruled these contentions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not contain any provision specifically exempting members of the Scheduled Tribes from the levy of income-tax. It was the Finance Act, 1955, that first incorporated in the Indian Income-tax Act, 1922, provisions for exemption of the tribal people of the eastern region from payment of the tax. These provisions relating to such exemptions were further amended and recast by section 3 of the Finance Act, 1958, as follows : " Section 4(3)(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 or in the Union Territories of Manipur and Tripura, provided that such member is not in the service of Government. " The 1961 Act then re-enacted this clause as under : " 10(26). In the case 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 I or Part II 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 Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o paragraph 20 of the Sixth Schedule to the Constitution ; or the State or Union Territories mentioned in this provision ; (iii) The income in respect of which exemption is claimed must be an income which accrues or arises to him-- (a) from any source in the area, State or Union territories mentioned in the provision, or (b) by way of dividend or interest on securities. Article 366 (25) of the Constitution provides : " 'Scheduled Tribes' means such tribes or tribal communities or parts of or groups within such tribes or tribal communities as are deemed under article 342 to be Scheduled Tribes for the purposes of this Constitution. " Article 342 empowers the President with respect to any State or Union Territory, and where it is a State after consultation with the Governor thereof, by public notification, to specify Tribes or Tribal communities or parts of or groups within tribes or tribal communities which shall for the purpose of this Constitution be deemed to be Scheduled Tribes, as the case may be. Clause (2) of this article empowers Parliament to exercise the same power by enacting a law. The respondent belongs, to the Jaintia Scheduled Tribe which is one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontroversy was not even obliquely in issue before this court in Lawrence Singh Ingty's case Therein, the only question for decision was whether the exclusion of the Government servants from the exemptions given in section 4(3)(xxi) of the Indian Income-tax Act, 1922, and later on in section 10(26) of the Income-tax Act, 1961, was violative of article 14 of the Constitution. Although sub-clause (a) was very much there, its validity was not, even indirectly questioned. The contention of the revenue, there, was that the exemption from income-tax was given to members of certain Scheduled Tribes, due to their economic and social backwardness ; that it was not possible to consider Government servants as socially and economically backward and hence the exemption was justly denied to the assessee, who was a Government servant having income from salary. It was further urged by the revenue that once a tribal becomes a Government servant, he is lifted out of his social environment and assimilated into forward sections of society and, therefore, he needs no more any crutch to lean on. These arguments were found to be irrelevant and unsustainable. In that context, the court observed : " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le it is true that a taxation law cannot claim immunity from the equality clause in article 14 of the Constitution, and has to pass, like any other law, the equality test of that article, it must be remembered that the State has, in view of the instrinsic complexity of fiscal adjustments of diverse elements, a considerably wide discretion in the matter of classification for taxation purposes. Given legislative competence, the legislature has ample freedom to select and classify persons, districts, goods, properties incomes and objects which it would tax, and which it would not tax. So long as the classification made within this wide and flexible range by a taxing statute does not transgress the fundamental principles underlying the doctrine of equality, it is not vulnerable on the ground of discrimination merely because it taxes or exempts from tax some incomes or objects and not others. Nor the mere fact that a tax falls more heavily on some in the same category, is by itself a ground to render the law invalid. It is only when within the range of its selection, the law operates unequally and cannot be justified on the basis of a valid classification, that there would be a violatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. Again interest realised from scheduled banks on deposits up to a certain limit is exempt, while interest realised from non-banking concerns is assessable. Sections 80A to 80U further provide exemptions from tax to incomes derived from certain sources. A business man's income is assessable, but if it is from a newly established industrial undertaking or priority industry, to that extent, the same is exempted. Section 80H provides for deductions in cases of new industrial undertakings employing displaced persons, etc. It is not necessary to multiply such instances. Suffice it to say that classification of sources of income is integral to the basic scheme of the 1961 Act. It is nobody's case that the entire scheme of the Act is irrational and violative of article 14 of the Constitution. Such an extravagant contention has not been canvassed before us. Thus, the classification made, by the aforesaid sub-clause (a) for purposes of exemption is not unreal or unknown. It conforms to a well-recognised pattern. It is based on intelligible differentia. The object of this differentiation between income accruing or received from a source in the specified areas and the income accruing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situations the members of a particular Scheduled Tribe residing in a particular Tribal area should be afforded the protection and benefit in the matter of promotion of their educational and economic interests. In view of what has been said above, we are of opinion that the learned judges of the High Court were in error in holding that the classification contemplated by sub-clause (a) of clause (26) of section 10 of the 1961 Act is artificial, and is not based on any intelligible differentia. We would, therefore, reverse the judgment of the High Court and hold that the aforesaid sub-clause (a) is constitutionally valid. Before we part with this judgment, we may note that Mr. Lahiri made a detailed survey of the history of the Tribal areas of Assam and Scheduled Tribes residing in those "autonomus" areas. Counsel also argued that virtually the source of the salary received by the assessee lay in the Tribal areas forming the State of Meghalaya, notwithstanding the fact that on account of the exigencies of service, the office of the assessee was located in those wards of Shillong which are not a part of the tribal areas. In our opinion, it is not necessary to go into this questi ..... 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