SC stay on Sikkim tax dues

New Delhi, Feb. 12: The Supreme Court yesterday stayed the recovery of income tax dues from "old settlers of Indian origin" in Sikkim and sought the Union government's response to a petition that challenged the collection of the central tax from them.

Last year, around 400 families in Sikkim refused to file income tax returns and demanded exemption that applies to those who have Sikkim Subject Certificates.

The Chogyals had issued the Sikkim Subject Certificates (SSC) to people living in the state during 1961 under the Sikkim Subject Regulation Act of 1961. The 400 families, also known as "old settlers", came to the state before 1975, when Sikkim merged with India, but they do not possess the certificates. The Centre had exempted SSC holders, about 95 per cent of Sikkim's population, from paying income tax in 2008 after an amendment in the Finance Act by the Parliament based on the state's request. That year, Association of Old Settlers Of Sikkim filed a petition with a Rajya Sabha Committee saying it was discriminatory and violated Article 14 (equality before law) and 15 (prohibition against discrimination) of the Constitution.

Yesterday, senior counsel K.K. Venugopal and counsel Senthil Jagadeesan who appeared for the Association of Old Settlers Of Sikkim submitted that Clause 26 AAA of Section 10 of the Income Tax Act, 1961, was discriminatory and violated Articles 14 and 15 as 95 per cent of the state's population that was exempted from paying tax "includes about 70 per cent people of Nepalese origin, and the entire exemption has come about to appease the electorate." The remaining 5 per cent was to pay the taxes.

It was submitted that the demographic profile of Sikkim, according to the 2004 voters' list, shows that Bhutia-Lepcha (STs) are about 20.64 per cent of the population, Nepalese constitute 69.71 per cent, Sherpas are 4.31 per cent and others make up 5.34 per cent (old settlers: 1.5 per cent and migrants: 3.84 per cent).

The petition said, discussions between Sikkim and the Union of India disclosed that SSC holders and those who became citizens in 1990-91 after the Sikkim Citizenship Amendment Order 1989 should be exempted for political reasons and to maintain ethnic peace in the state and SSC holders who had voted for the merger of Sikkim with India be rewarded by granting exemption.

"This is the reason for the differential classification whereby 95 per cent of the population in Sikkim is exempted from the Income Tax Act, 1961, while 5 per cent of the population including the old settlers of Indian origin are liable to be taxed," a member of the association said.

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