Context

The Supreme Court ordered removal of certain remarks from a recent judgement wherein it had referred to Sikkimese-Nepalis as people of foreign origin, leading to protests in Sikkim.

What was the issue in front of the Court?

• The SC was hearing a petition filed by the Association of Old Settlers of Sikkim.
• It decided on a rather pesky issue:
  • Whether those Indians who had settled in Sikkim prior to the kingdom joining the Indian Union in 1975 should be exempted from paying income tax, like the rest of the population in the Himalayan state is?
  • Whether Sikkimese women who have married non-Sikkimese persons after 2008 onwards should also be exempted from paying income tax?

How SC added to the boil?

• In its judgment, the apex court said that under the Sikkim Income Tax Manual, 1948, “all persons engaged in business were subjected to tax irrespective of their origin.
• Therefore, there was no difference made out between the original inhabitants of Sikkim, namely, the Bhutia-Lepchas, and the persons of foreign origin settled in Sikkim like the Nepalis or persons of Indian origin who had settled down in Sikkim generations back.”
• The judgment also recorded the petitioner’s contention that migrants from other countries or erstwhile kingdoms like “Nepalese migrants”, who “migrated to and settled in Sikkim at the same time or even after migrants/settlers of Indian origin”, were benefiting from Section 10(26AAA) of the IT Act, 1961, “while arbitrarily excluding settlers of Indian origin such as the petitioners herein”.

What does the Section 10 (26AAA) say?

• The objective behind Section 10 (26AAA)is to reduce the taxpayer’s burden by providing exemptions.
• This section describes the income that does not form a part of the total incomewhile calculating the tax for an individual, also known as “exempted income”.
• The petitioners challenged the proviso (applicable to married Sikkimese women) and Explanation to Section 10 (26AAA), which elaborated on the type of income fallingunder the category, along with a definition of ‘Sikkimese’.
• Under the Explanation to Section 10 (26AAA), the definition of ‘Sikkimese’ is confined to:
  • Individuals whose name is recordedin the register maintained under the Sikkim Subjects Regulation, 1961 read with the Sikkim Subject Rules, 1961, immediately before the 26th day of April 1975;
  • The 73,000-odd individualswhose names were included in the Register of Sikkim Subjects by virtue of Government of India Orders of August 1990 and April 1991; and
  • Any individual whose name does not appear in the Register of Sikkim Subjects, but it is established beyond doubt that the name of such individual’s father or husband or paternal grandfather or brotherfrom the same father has been recorded in that register.

Sikkim and inclusion in India:

• The present erstwhile monarchy in Sikkim started in the year 1642 with the coronation of Phuntsog Namgyal as the Chogyal or king. The king was also a consecrated Buddhist priest.
• The country was frequently attacked by the Gorkha army of Nepal. Initially, the British establishment in India had good relations with Sikkim.
• Relations with the British deteriorated and finally in 1861, the British acquired the regions of Darjeeling and the Terai.
• The Treaty of Tumlongin 1861 made Sikkim a protectorate of the British.
• After India’s independence in 1947, the guarantees of independence that Sikkim had acquired from the British were transferred to the new Indian government.
• Sikkim was finally admitted to the Union of India on 16^thMay 1975 as the country’s 22^nd