The Supreme Court refused to entertain a PIL seeking a creamy layer principle for income-tax exemption granted to Scheduled Tribes in the North Eastern Region. CJI Surya Kant-led Bench said the issue concerns legislation and allowed petitioner Ashwini Upadhyay to approach the parliamentary committee.
The Supreme Court declined to entertain a public interest litigation (PIL) seeking the application of a “creamy layer” principle to the income-tax exemption available to Scheduled Tribes living in the North Eastern Region. Observing that the question is for the legislature to consider, the bench held that the matter is best addressed by Parliament.
A bench comprising Chief Justice of India Surya Kant and Justice V. Mohana granted the petitioner, Advocate Ashwini Upadhyay, liberty to approach the appropriate parliamentary committee and serve copies of the petition on the respondents.
The PIL, filed through AoR Ashwani Kumar Dubey under Article 32 of the Constitution, challenged the constitutional validity of Section 11 read with Schedule III, Serial No. 19 of the Income-tax Act, 2025. The provision is stated to re-enact Section 10(26) of the Income Tax Act, 1961, and provides exemption from income tax for Scheduled Tribes residing in the North Eastern Region.
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Arguing the case, Upadhyay contended that the socio-economic conditions that originally justified the exemption have changed substantially over the decades. He argued that many beneficiaries today possess significant wealth and extensive commercial interests.
Adding that the issue raised questions relating to Articles 14, 19 and 27 of the Constitution, he argued,
“How can tribals who converted to Christianity and now earn in hundreds of crores, have so many educational institutions and earn Rs 200 crore per year and still be exempted from paying tax?”
The petition further submitted that the blanket nature of the exemption has become arbitrary and overinclusive by treating affluent and economically disadvantaged members of Scheduled Tribes as a single homogeneous class. It also challenged the absence of an income ceiling, asset-based exclusion, the “creamy layer” principle, and any periodic review mechanism, contending that these omissions violate Articles 14, 19(1)(g), 21 and 27 of the Constitution.
The PIL also invoked the doctrine of temporal reasonableness, arguing that a law that may have been constitutionally valid when enacted can become unconstitutional when the factual basis for the classification no longer exists.
However, the bench did not appear persuaded that judicial intervention was warranted.
Chief Justice Surya Kant observed,
“Only because someone has misused a provision does not mean that all have to be doubted,”
The Chief Justice also remarked that elected representatives and lawmakers are aware of such concerns.
The Court said,
“It is a legislative issue. There is a committee in Parliament where every citizen can approach for enactment of law or correction in law. I am sure they will consider it,”
Consequently, the Court disposed of the petition as withdrawn, while granting the petitioner liberty to approach the parliamentary committee and pursue his grievances through legislative channels.
The challenge was filed in the context of reported increased development in the North Eastern Region, with the petition alleging substantial investments in infrastructure and overall economic growth over the past two decades. The petitioner contended that continuing an unrestricted tax exemption despite changed circumstances has created unequal commercial conditions and granted a permanent fiscal advantage to one class of citizens.
Despite these submissions, the Supreme Court refrained from examining the merits of the constitutional challenge, indicating that any reconsideration of the policy framework governing tax exemptions for Scheduled Tribes in the North East primarily falls within Parliament’s domain.
Case Title: Ashwini Kumar Upadhyay v. Union of India