Shri Utankamoni Chakma v. Income-Tax Officer, C Ward, Tezpur & Ors.

B.L Hansaria, J.:— The petitioner belongs to Chakma tribe of Tripura which is a Scheduled Tribe as defined in clause (25) of Article 366 of the Constitution. He is a permanent resident of village Hajachara in Subroom division of Tripura. He joined the defence service as a Commissioner Officer of the Indian Army in 1946. Thereafter he became a member of the Indian Frontier Administrative Service in 1954 and served at various places in the then North Eastern Frontier Agency (NEFA),. now Arunachal Pradesh. From 1972 he started working as a Security Commissioner of Arunachal Pradesh and at the relevant lime was posted at Tezpur. The occasion to file this writ application under Article 226 of the Constitution arose following the advice of the Income-Tax Officer, Tezpur to the Treasury Officer, Darrang, Tezpur to deduct income-tax from the salary of the petitioner. His assertion is that he is not liable to pay any income-tax in view of what has been stated in section 10(26) of the Income Tax Act, 1961, hereinafter the Act. The stand of the petitioner not having been accepted he has approached this Court to seek a direction not to deduct any income-tax from his said salary.

2. The stand of the department is that the petitioner's case is not covered by the aforesaid section inasmuch as (1) he is not residing in the area mentioned in section 10(26), and (2) the source of his income is not from the area in question.

3. We may note the relevant provision of law. Section 10(26) reads as below:

“10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—

(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 1 or Part II of the-Table appended to Paragraph 20 of the Sixth Schedule to the Constitution or in the States of Nagaland, Manipur and Tripura or in the Union territories of Arunachal Pradesh and Mizoram or in the areas covered by Notification No. TAD/R/35/50/109 dated the 23rd-February, 1951 issued by the Governor of Assam under the proviso to sub-paragraph (3) of the said paragraph 20 (as it stood immediately before the commencement of the North Eastern Areas (Reorganisation) Act, 1971 (18 of 1971), any income which accrues or arises to him,—

(a) from any source in the areas, States or Union territories aforesaid, or

(b) by way of dividend or interest on securities”.

4. This Section had come up for consideration before the Hon'ble Supreme Court in I.T.O v. N.T.R Rymbai, (1976) 1 SCC 916 : AIR 1976 SC 670 when it was pointed out that in order to entitle a person to the exemption under the aforesaid section three conditions must co-exist.

(i) He would be a member of a Scheduled Tribe as defined in clause (25) of Article 366 of the Constitution;.

(ii) He should be residing in any area specified in Par A or Part B of the Table (as these Parts were then described) appended to paragraph 20 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.

5. In so far as the question of residence is concerned, the contention of the department, as appeared from Annexure-B, is that as the petitioner was residing at Tezpur at the relevant time, which town is admittedly not within the area mentioned by the aforesaid section, the income is not exempt from taxation. This stand undoubtedly has some force. The fact that the petitioner is a permanent resident of the State of Tripura may not be of such significance for the purpose at hand when the reason behind the exemption, as explained in Rymbai's case, is borne in mind—the rationale being benefitting economically such areas. We do not however propose to deny exemption to the petitioner on this short ground because the other ground is more weighty and convincing.

6. Before examining the validity of the second reason mentioned above, we may say that clause (a) of sub-section (26) of section 10 of the Act dealing with source of the income had been held violative of Article 14 of the Constitution by a Full Bench of this court in the aforesaid case of Rymbai (Civil Rules 292—293 etc. of 1970 etc. disposed of on 11.10.74), but that decision was set aside on appeal by the Supreme Court in AIR 1967 SC 670. So, to claim exemption, the source of the income must be in the specified area. Shri Barua has accordingly urged that the income in question had accrued or arisen in the Union Territory of NEFA, and not in Tezpur. To satisfy us in this regard it is urged by Sri Barua that to decide the situs of accrual or arising of income, the place where the same is received is not material. In this connection the learned counsel has referred us to Commisioner of Income Tax v. A.T Trust, AIR 1951 Madras 551 where it was held that to decide the place where the income accrues or arises the actual receipt of the income is not material but these words have to be understood as conveying the area of an enforceable right to receive income. In E.D Sassoon v. Commissioner of Income Tax, AIR 1954 SC 470 the place of accrual or arising of income was held to the place where the right to receive the income had arisen. In so far as the present case is concerned it is difficult to say that the right to receive the income had accrued in-Arunachal Pradesh merely because the petitioner is a Government-servant of Arunachal Pradesh. According to us the right to receive income had arisen at Tezpur. To fortify his submission Shri Barua has however referred us to a case law noted at page 179 of the Law and Practice of Income-tax by Kanga and Palkhivala, 7th edn. where the decision rendered in Commissioner of Income Tax v. PP. Salarak, 3 ITC 237 was noted where a Forest Officer of the Siamese Government employed at a fixed remuneration was posted to work in India in whose case it was held that the income had accrued in Siam where the agreement of service was entered into and the remuneration was payable and in fact paid. This case cannot assist the petitioner inasmuch as in the present case the salary had not been paid in Arunachal Pradesh but was paid at Tezpur. The observatione made in Shoorji Vallabhdas & Co. v. Commissioner of Income-tax, AIR 1960 SC 1162 would also support the aforesaid view taken by us because it has been held in this case that the commission payable to the managing agent accrues at the place where the business is actually done i.e where the services of the managing agent are performed. In the present case the services of the petitioner were rendered at Tezpur and it can well be said that the salary had accrued at Tezpur.

7. In his strenuous effort to satisfy us that the income had actually accrued or arisen in Arunachal Pradesh in the persent case, Shri Barua has also referred us to In re Right Re v. C.J.G Sounders, AIR 1932 All 151 and. In the matter of V.G Every, 37 ITR 216 where it was pointed out that the words accruing or arising mean something different from receiving.

8. Even if it is conceded that the concept of accrual or arising is different from receivings there is still another difficulty in the way of the petitioner in claiming exemption under section 10(26) of the Act inasmuch as the income must accrue or arise from any source within the area in question. Now, the meaning of the word ‘source’ as given in Webster's New Twentieth Century Dictionary is “place of origin from which something comes or develops, that which gives rise to anything”. In the present case the place where from the income had originated is Tezpur. By no stretch of imagination it can be said that the source of income of the petitioner is Arunachal Pradesh merely because the petitioner is employee of Arunachal Pradesh Government.

9. Because of what has been stated above, we are not in a position to uphold the contention of the petitioner that his income from salary in question is exempt from being taxed in view of what has been provided in section 10(26) of the Act. The petition is, therefore, dismissed.