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Informist, Wednesday, Jun. 17, 2026

 

NEW DELHI – The Supreme Court has refused to entertain a petition challenging the income tax exemption given to scheduled tribes residing in specified north-eastern states and certain other notifiable tribal areas. The petitioner Ashwini Kumar Upadhyay, an advocate, had sought a direction to the Centre to implement a creamy layer system in tax exemption for scheduled tribes in those areas to ensure that benefit is given to only poor individuals, not the rich and elite class. The blanket tax exemption, without setting any upper income limit, is manifestly arbitrary, irrational and violates Articles 14, 15, 19(1)(g), 21, and 27 of the Constitution, said the petitioner.

 

The bench led by Chief Justice of India Surya Kant said that the reliefs sought in the petition essentially involve formulation, revision, and amendment of the legislative public policy. This court may not, therefore, be an appropriate platform for the aforesaid purpose at this stage, said the bench, also comprising Justice V. Mohana. 

 

The petitioner, if so advised, may approach the committee on petitions, constituted under Rule 306 of the Rules of Procedure and Conduct of Business in Lok Sabha, by way of a comprehensive petition, said the apex court. Similarly, the petitioner shall be at liberty to send a copy of the writ petition, as a representation, to the Ministry of Finance, north eastern states as well as other concerned authorities, said the top court.

 

The petitioner said that the unlimited tax exemption without incorporating any annual income ceiling, economic classification, or review mechanism, even after the extensive commercial activity, developed urban centres, expanded transport connectivity, and substantial developmental expenditure is manifestly arbitrary and irrational. The continued enforcement of an arbitrary and unequal fiscal exemption gives rise to a recurring and subsisting cause of action, said the petitioner.    

 

The injury caused is the creation of an unequal market where similarly placed traders are treated differently, said Upadhyay. Non-Scheduled Tribe traders and professionals pay full taxes while competing with exempt entities in the same markets, reducing their profits, limiting growth, and in some cases forcing them out of fair competition or into unfair survival arrangements, he said. This results in loss of equal opportunity and fair competition under Articles 14, 15, 19(1)(g), 21 and 27 of the Constitution, he added. 

 

The exemption has created opportunities for misuse through benami arrangements and concealment of taxable income, said the petitioner. Investigations during demonetisation highlighted concerns regarding routing of unaccounted money through exempt accounts in notified tribal areas, thereby raising issues of regulatory oversight and financial accountability, he said.  End 

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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