Case: S.K. Dutta, Income-Tax Officer &amp; Ors Vs. Lawrence Singh Ingty

2. 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 4 (3) (xxi) of the Indian Income Tax Act 1922 as well as Section 10 (26) 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.3. 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 20 of the Sixth Schedule of the Constitution of India. He is a government servant. All these are admitted facts.

Court's reasoning:
There can be no distinction between the income earned by a 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 practicing 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 in other walks of life. Is there any legal basis for this differentiation? Prima facie it appears that government servants have been discriminated against and the discrimination in question is writ large on the face of the provisions incontention 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 a 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 these places were not subject to the income-tax laws in force in British India. The reason for the same is that the Indian legislature had no legislative competence to tax the residents of those areas, but it hail competence to tax the income of the persons in government service though they might be serving outside British India.13.We know of no legislative practice or history treating government servants as a separate class for the purpose of income-tax. The government servants income has tall along been treated in the same manner as the income of other salaried officers. We 30 not know under what circumstances the notifications dated 6-6-1890 and 21-3-1922, referred to earlier, tame to be issued. But they are insufficient to prove a we11-estahtished legislative practice. At the time those notifications were issued) the power of the legislature to grant or withhold an, 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 he considered as a true test then Article 13 (1) would become otiose and most, if not all, of our constitutional guarantees would lose their contents. 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 soexemption, 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 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 leave 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 theare 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 government servants from the exemption in question.