ivil Appeal No 809 of 1966
Appeal by special leave from the judgment and order dated February 13 1965 of the Assam and Nagaland High Court in Civil Rule No 127 of 1963
Niren De Solicitor General AN Kirpal SP Netyar for RN Sachthey for the appellants
MC Setalvad and DN Mukherjee for the respondent
DM Sen Advocate General for the State of Nagaland AR Barthakur and R Gopalakrishnan for the intervener
The Judgment of the Court was delivered by Hegde J
The only question that arises for decision in this appeal is whether the exclusion of the government servants from the exemption given under section 43xxi of the Indian Income Tax Act 1922 and later on under section 1026 of the Income Tax Act 1961 is violative of article 14 of the Constitution
For our present purpose it may be taken that the said two provisions are similar
The respondent who is a government servant serving in the State of Assam has been assessed to income tax for the assessment years 1959 60 1960 61 1961 62 and 1962 63
He challenged the legality of his assessments in civil rule No 127 of 1963 on the file of the High Court of Judicature of Assam
The Assam High Court accepted his petition and quashed the assessments in question holding that section 43xxi of the Indian Income tax Act
1922 as well as section 1026 of the Income Tax Act 1961 to the extent they excluded government servants from the benefit of the exemption given thereunder are void
The income tax authorities as well as the Union of India have come up to this Court in appeal by special leave
The facts of this case lie within a narrow compass
The respondent belongs to Mikir Scheduled Tribe and is a permanent inhabitant of United Khasi Jaintia Hills District an autonomous District included in Part A  of the Table appended to Paragraph 167 20 of the Sixth Schedule of the Constitution of India
He is a government servant
All these are admitted facts
The respondent in his petition before the High Court averred in para
7 of the petition that in all the autonomous districts under Table Part A of paragraph 26 of the Sixth Schedule of the Constitution of India there are a large number of persons belonging to Scheduled Tribe who derive considerable income from trade commerce and business and other sources and employments and immovable properties
In the return filed by the appellants those allegations were not denied
Adverting to those allegations this is what was stated in the affidavit filed by Shri SK Dutta Income tax Officer the first appellant in the appeal With reference to the statements made in paragraph 7 of the petition I say that the petitioner being a government servant his case stands on a different footing other than the general public of the Scheduled Tribe
 It may be remembered till 15 8 47 Khasi and Jaintia Hills were not parts of British India
They were under native States
They merged with British India only after this country got independence
Till their merger none of the Indian laws applied to those areas
The Finance Act of 1955 incorporated into the Indian Income Tax Act1922 s43 xxi
The relevant portion of section 43 reads thus 43
Any income profits or gains falling within the following classes shall not be included in the total income of the person receiving them 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 PartA or Part B of the table appended to paragraph 20 of the Sixth Schedule to the Constitution provided that such member is not in the service of Government Sec 1026 of the income tax Act of 1961 which corresponds to section 43xxi of the Indian Income Tax Act 1922 reads thus  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 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 who is not in the service of Government
any income which accrues or arises to him a from any source in the area or Union Territories aforesaid or b by way of dividend or interest on securities
 168 Part of the impugned assessments were made under the Indian Income Tax Act 1922 and the rest under the Income Tax Act 1961
If the aforementioned provisions are valid then the assessments in question are beyond challenge
Therefore the only question for decision is whether the legislature had no power to exclude the government servants from the benefit of the exemptions given under the aforementioned ss43 xxi and 1026
It is seen that the income of the members of a scheduled tribe included in cl 25 of article 366 of the Constitution and residing in my area specified in Part A or Part B of the Table appended to paragraph 20 of the Sixth Schedule of the Constitution excepting 1hat of government servants is exempt from income tax
in other words the government servant alone is excluded from the benefit of the exemption given under the provisions quoted above
It is agreed that the respondent is a member of the scheduled tribe included in cl 25 of article 366 of the Constitution residing in an area specified in Part A of the Table appended to para
20 of the Sixth Schedule to the Constitution but yet he had been denied the benefit of the exemption in question on the sole ground that he is in the service of the government
It may be noted that exemption both under section 43xxi of the Indian Income Tax Act 1922 and under s1026 of the Income Tax Act 1961 was given to the members of certain scheduled tribes
For the purpose of the exemption in question the classification was made on the basis of persons being members of a particular tribe
That being so some of the members of that tribe cannot be excluded from the benefit of those provisions unless they can be considered as belonging to a well defined class for the purpose of income tax
The respondent s contention which has been accepted by the High Court is that the government servants cannot be considered as a separate class for the purpose of income tax
On the other hand it is contended on behalf of the Department that the classification made is a reasonable one taking into consideration administrative convenience as well as the past legislative practice and history
It is not in dispute that taxation laws must also pass the test of article 14
That has been laid down by this Court in Moopil Nair vs State of Kerala1
But as observed by this Court in East India Tobacco Co vs State of Andhra Pradesh2 in deciding whether a taxation law is discriminatory or not it is necessary to bear in mind that the State has a wide discretion in selecting persons or objects it will tax and that a statute is not open to attack on the ground that it taxes some persons or objects and not others it is only when within the range of its selection the law operates un 1  2   409 169 equally and that cannot be justified on the basis of any valid classification that it would be violative of article 14
It is well settled that a State does not have to tax everything in order to tax something
It is allowed to pick and choose districts objects persons methods and even rates for taxation if it does so reasonably
The complaint in this case is that within the range of the selection made by the State for the purpose of exemption namely members of certain scheduled tribes residing in specified areas the law operates unequally and the inequality in question cannot be justified on the
basis of any valid classification
There can be no distinction between the income earned by government servant and that earned by a person serving in a company or under a private individual
More or less similar is the case in respect of the income earned by persons practising one or more of the professions
Admittedly the income earned by the members of the scheduled tribes residing in Khasi Jaintia Hills
excepting in the case of government servants is exempt from income tax be it as salaried officers lawyers doctors or persons other walks of life
Is there any legal basis for this differentiation  Prima facie it appears that the government servants have been discriminated against and the discrimination in question is writ large on the face of the provisions in question
The learned Solicitor General contended that the classification in question can be justified on administrative grounds
He urged that a classification based on administrative convenience is a just classification in the matter of levying taxes
According to him it is easy to collect taxes from government servants
Therefore it was permissible for the legislature to deny them the exemption extended to the other members of their tribes
This contention appears to be without merit
It may be that for the purpose of taxation a classification can be made on the basis of administrative convenience
But we fail to see how the case of the government servants stands on a footing different from that of the employees in statutory corporations or even well recognised firms
That apart administrative convenience which can afford just basis for classification must be a real and substantial one
We see no such administrative convenience
The learned Solicitor General next contended that the classification can be justified on the basis of past legislative practice and history
In this connection he invited our attention to the fact that before this country got independence the income of the persons in the service of the government but serving outside British India such as in Baluchistan or native States was subject to tax under the Indian Income Tax laws though other persons residing in those places were not subject to the income tax laws in force in British India
The L10 Sup C167 12 170 reason for the same is that the Indian legislature had No legislative competence to tax the residents of those areas but it had competence to tax the income of the persons in government service though they might be serving outside British India
The learned Solicitor General next invited our attention to a notification issued by the Government of India as long back as 6 6 1890 under which the income earned by members of certain scheduled tribes other than those serving under the government was exempted from income tax
He also invited our attention to Finance department Notification No 788F dated 21 3 1922 under which the income of indigenous hill men other than persons in the service of government residing in certain areas were exempt from tax
On the basis of those notifications he wanted us to spell out a well recognised legislative practice and history under which the government servants as a class were excluded from the benefit of income tax exemption extended to other persons similarly situated
In this connection he placed reliance on the decision of this Court in Narottam Kishore Dev Varma and Ors
vs Union of India and another1
Therein this Court was called upon to consider the validity of section 87B of the Code of Civil Procedure which prescribed that a Ruler of a former Indian State cannot be sued in any court otherwise competent to try the suit except with the consent of the Central Government certified in writing by a Secretary to the Government
The validity of that provision was challenged on the basis of article 14
This Court upheld the
validity of that provision having regard to the legislative and historical background of that provision but at the same time observed that considered in the light of basic principles of equality before law it would be odd to allow the section to continue prospectively for all time to come
After setting out the legislative background of that provision this Court observed The legislative background to which we have referred cannot be divorced from the historical background which is to be found for instance in article 362
This Article provides that in the exercise of the power of Parliament or of any legislature of any State to make laws or in the exercise of the executive power of the Union or of a State due regard shall be had to the guarantee or assurance given under any such covenant or agreement as is referred to in clause 1 of article 291 with respect to the personal rights privileges and dignities of a Ruler of an Indian State
This has reference to the covenants and agreements which had been entered into between the Central Government and the Indian Princes before all the Indian States were politi 1  171 cally completely assimilated with the rest of India
The privilege conferred on the Rulers of former Indian States has its origin in these agreements and covenants
One of the privileges is that of extra territoriality and exemption from civil jurisdiction except with the sanction of the Central Government
It was thought that the privilege which was claimed by foreign Rulers and Rulers of Indian States prior to the independence of the country should be continued even after independence was attained and the States had become part of India and that is how in 1951 the Civil Procedure Code was amended and present sections 86 87 87A and 87B came to be enacted in the present form
 In the background set out above this Court upheld the validity of section 87B of the Code of Civil Procedure
We know of no legislative practice
or history treating the government servants as a separate class for the purpose of income tax
The government servants  income has all along been treated in the same manner as the income of other salaried officers
We not know under what circumstances the notifications dated 5 6 1890 and 21 3 1922 referred to
earlier came to be issue But they are insufficient to prove a well established legislative practice
At the time those notifications were issued the power of the legislature to grant or withhold any exemption from tax was not subject to any constitutional limitation
Hence the validity of the impugned provisions cannot be tested from what our legislatures or governments did or omitted to do before the Constitution came into force
If that should be considered as a true test then article 131 would become otiose and most if not all of our constitutional guarantees would lose their content
Sri Setalvad learned counsel for the respondent is justified in his comment that classification based on past legislative practice and history does not mean that because in the past the legislature was enacting arbitrary laws it could do so now
It was the contention of the learned Solicitor General that exemption from income tax was given to members of certain scheduled tribes due to their economic and social backwardness it is not possible to consider a government servant as socially and economically backward and hence the exemption was justly denied to him
According to the Solicitor General once a tribal becomes a government servant he is lifted out of his social environment and assimilated into the forward sections of the society and therefore he needs No more any crutch to lean on
This argument appears to us to be wholly irrelevant
The exemption in question was not given to individuals either on the basis of their social status or economic resources
It was given to a class
Hence 172 individuals as individuals do not come into
the picture
We fail to see in what manner the social status and economic resources of a government servant can be different from that of another holding a similar position in a corporation or that of a successful medical practitioner
lawyer architect etc
To over paint the picture of a government servant as the embodiment of all power and prestige would sound ironical Today his position in the society to
put it at the highest is no higher than that of others who in other walks of life have the same income
For the purpose of valid classification what is required is not some imaginary difference but a reasonable and substantial distinction having regard to the purpose of the law
It was lastly contended by the learned Solicitor General a contention which was not taken either in the return or before the High Court or in the appeal memo that it is not possible to strike down only a portion of section 43xxi of the Indian Income Tax Act
1922 and section 1026 of the Income Tax Act 1961 namely the words provided that such member is not in the service of government found in section 43xxi of the Indian Income Tax Act 1922 and the words who is not in the1 service of government in section 1026 of the Income Tax Act 1961 as those words are not severable from the rest of the provisions in which they appear
Further according to him it cannot be definitely predicated that the legislature would have granted the exemption incorporated in those provisions without the exception made in the  case of government
servants
Therefore if we hold that those provisions as they stand are violative of  article 14 then we must strike down the aforementioned sections 43xxi and 1026 in their entirety
We are unable to accept the contention that the words mentioned above are not severable from the rest of the provision in which they appear
They are easily severable
Taking into consideration the reasons which persuaded the legislature to grant the exemption in question we have no doubt that it would have granted that exemption even if it was aware of the fact that it was beyond its competence to exclude the government servants from the exemption in question
For the reasons mentioned above this appeal is dismissed with costs
VPS Appeal dismissed


Summary:
Both under section 43xxi of the Income tax Act 1922 and section 1026 of the Income tax Act 1961 income of the members of a scheduled tribe included in article 36625 of the Constitution and residing in any area specified in Part A or Part B of the Table appended to Paragraph 20 of the Sixth Schedule of the Constitution excepting that of government servants  is exempt from income tax
The respondent was a member of such a scheduled tribe residing in such an area but as he was a government servant he was assessed to income tax
He challenged the validity of the assessments and the High Court quashed the assessments holding that the two sections
to the extent they excluded government servants from the benefit of the exemption given thereunder were discriminatory and therefore void
In appeal to this Court
HELD The State has a wide discretion in selecting persons or objects it will tax but within the range of selection made by it for the purpose of exemption namely among members of certain scheduled tribes residing in specified areas the law as stated in the two sections
operates unequally and the inequality cannot be justified on the basis of any valid classification
168H 169B C 1 The classification of trials into government servants and others cannot be justified on the basis of administrative convenience viz that it was easy to collect taxes from government servants because
their case does not stand on a different footing from that of the employees in statutory corporations or well established firms
169F G 2 There is no legislative practice or history treating government servants as a separate class for purposes of income tax
The reason for making in the past persons in the service of the government of British India serving outside British India subject to Indian income tax
is not t hat their income was treated in a manner different from that of other salaried officers in those areas but that the Indian Legislature had no legislative competence to tax residents of those areas but had competence to tax the income of persons in British Indian government service serving in those areas
Further the notification of 6th June 1890 under which the income earned by members of certain scheduled tribes other than those in government service was exempt from income tax and the notification of 21st March 1922
under which income of certain indigenous hill men other than those in government service
was exempt from tax are not sufficient to prove a well established legislative practice
Those notifications were issued at a time when the power of the legislature to grant or withhold any exemption from tax was not subject to any constitutional limitation
Classification based on past legislative 166 practice and history does not mean that because in the past the legislature was enacting arbitrary laws it could do so now
170A 171D F 3 The social status and economic resources of a government servant are not different from that of another holding a similar position in a corporation or that of a successful medical practitioner lawyer architect etc
Therefore merely because a tribal becomes a government servant he is not lifted out of his social environment and assimilated into the forward sections of society
172A B 4 The portions of the two sections struck down are severable from the rest of the provisions in which they appear
172E F