Benefit of Sec. 10(26) Available Only if Income Accrued in Areas Specified in Said Provision | HC

Case Details: Union of India vs. Capital Hardware Enterprises - [2025] 172 taxmann.com 308 (Gauhati)

Judiciary and Counsel Details

• Devashis Baruah, J.
• B. Sarmah, Standing Counsel for the Petitioner.
• S. Chetia, SC Income Tax for the Respondent.

Facts of the Case

Assessee was a member of a Scheduled Tribe as defined in Article 366(25) of the Constitution. He was a resident of Arunachal Pradesh. During the relevant assessment year, the assessee received interest on compensation from the Railway for the delay in delivering the consignment. The consignment was booked from Jharkhand to North Lakhimpur. On such interest income, the assessee claimed exemption from tax under section 10(26).

The benefit of exemption was denied to the assessee. The matter reached the Gauhati High Court.

High Court Held

The Court held that section 10(26) exempts income arising to a member of a Scheduled Tribe from sources located in certain specified areas. The benefit of exemption is granted to those Scheduled Tribes who are listed as Scheduled Tribes in terms of the Constitution (Scheduled Tribes) Order, 1950.

In the instant case, the consignment was booked from Jharkhand to North Lakhimpur. The entitlement of the interest on the compensation has to be taken as income accrued at North Lakhimpur. The said area, i.e. North Lakhimpur, does not fall within the ambit of Paragraph 20 of the Sixth Schedule insofar as the State of Assam is concerned.

Considering the above, as the benefit under section 10(26) can only be permissible to a Schedule Tribe when the income had accrued in the areas as specified in section 10(26), it is opined that the Railway Tribunal erred in law and committed an error in exercising its jurisdiction while granting exemption only on the ground that the claimant was a tribal of Arunachal Pradesh.