Association of Old Settlers of Sikkim & Ors. vs Union of India & Anr.
Background
Sikkim merged with India on 26 April 1975. In 2008 Parliament inserted Section 10(26AAA) into the Income Tax Act, exempting "Sikkimese" individuals from income tax on income arising in Sikkim, but defined "Sikkimese" by reference to the Register of Sikkim Subjects maintained under the Sikkim Subjects Regulation, 1961 (or descent from someone on that register). This left out "old Indian settlers": people of Indian origin who had lived in Sikkim from before the merger but never registered as Sikkim Subjects, largely because doing so would have meant surrendering Indian citizenship; they are about 1% of Sikkim's population, while roughly 95% enjoy the exemption. A proviso also stripped the exemption from any Sikkimese woman who married a non-Sikkimese after 1 April 2008, with no equivalent rule for Sikkimese men. The petitioners challenged both the exclusion and the proviso under Article 32.
Decision Breakdown
Both writ petitions were allowed. Justice Shah held that the object of Section 10(26AAA) is to benefit residents of Sikkim, so all Indians who permanently settled there before 26 April 1975 form one class with the registered Sikkim Subjects; excluding them merely because their names (or their forefathers' names) were not on the 1961 register has no rational nexus with that object and is arbitrary and violative of Article 14. He struck down the exclusion and held that all old Indian settlers who settled in Sikkim before the merger are entitled to the exemption, whether registered or not. Justice Nagarathna, in her separate opinion, would not strike the Explanation down (as that could withdraw the benefit from those currently eligible) but reached the same practical result under Article 142: she directed the Union to amend the Explanation to cover all Indian citizens domiciled in Sikkim on or before 26 April 1975, and held that until then such persons shall get the exemption. Both judges agreed that the proviso excluding a Sikkimese woman who marries a non-Sikkimese after 1 April 2008 is discrimination based purely on gender, "a woman is not a chattel and has an identity of her own", and struck it down as violating Articles 14, 15 and 21.
Lesson Learnt
A tax benefit cannot be denied to people who are in exactly the same position as those who receive it, on a basis unconnected to the law's purpose, and a woman cannot lose a legal benefit simply because of whom she marries when a man in her position would not. Equal protection under Article 14 and the bar on sex discrimination under Article 15 apply to tax exemptions as much as to any other law.