“Sikkimese” u/s.10(26AAA) is for Purposes of Income Tax Act Only: Sikkim HC Affirms No Violation of Rights u/ Art. 371(k) [Read Order]

The Sikkim High Court has reaffirmed that the term "Sikkimese" as defined under Section 10(26AAA) of the Income Tax Act, 1961 applies exclusively for the purposes of computing tax and related matters under the Income Tax Act, 1961 and does not violate Article 371F(k) of the Constitution of India.

The decision was given by the Sikkim High Court while hearing a Public Interest Litigation (PIL) filed by designated Senior Advocate, Dr. Doma T. Bhutia, challenging the Explanation (v) to Section 10(26AAA), introduced through the Finance Act, 2023.

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The petitioner contended that this amendment, which expanded the definition of "Sikkimese" to include individuals whose father, husband, paternal grandfather, or brother from the same father was domiciled in Sikkim on or before April 26, 1975, undermined the special status of Sikkim under Article 371F(k) of the Constitution.

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The specific amendment was effectuated following the Supreme Court's ruling in Association of Old Settlers of Sikkim & Others v. Union of India (2023), which found that the exclusion of Indians who had settled in Sikkim before its merger with India in 1975 was unconstitutional. The 2023 Amendment to the Income Tax Act thus expanded the definition of “Sikkimese” for tax exemption purposes.

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The primary contention raised by Advocate Bhutia who appeared petitioner-in-person contended that the State of Sikkim is duty-bound to ensure protection of the old laws including its preservation and protection as provided under Article 371F(k) of the Constitution of India.

Meanwhile, Deputy Solicitor General of India, Sangita Pradhan along with Additional Advocate General, Zangpo Sherpa and S. K. Chettri, appeared for the State, laying reference to a Press Release dated 4th April, 2023 released by the Central Board of Direct Taxes (Tax Policy & Legislation Division), Ministry of Finance which clarified that the term “Sikkimese” as defined under Section 10(26AAA) of the Income Tax Act is for the purposes of the Income Tax Act only and no other purpose.

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A Division Bench of Chief Justice Biswanath Somadder and Justice Meenakshi Madan Rai observed that the clarificatory press release issued by the Ministry of Finance clearly states that the definition of “Sikkimese” within the Income Tax Act is for tax purposes only and has no bearing on the sanctity of rights and privileges reserved for genuine indigenous Sikkimese which are carefully preserved and protected under Article 371F (k) of the Constitution of India.

In light of the observations, the Sikkim High Court proceeded to dismiss the Writ Petition.

To Read the full text of the Order CLICK HERE

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