THE OLD SETTLERS OF SIKKIM

Editorial

OLD SETTLERS IN SIKKIM

Grant IT Exemption

source: JIGME N KAZI

Now that the Supreme Court has taken a serious note of the demand of old settlers in Sikkim on income tax exemption and has even granted a stay order restraining tax authorities from recovering income tax dues from them it is time for all parties to take the matter seriously and settle it at the earliest. Locally referred to as purano byapari, many of the old settlers in Sikkim trace their origin in the former kingdom to around 1890 when Sikkim became a British Protectorate. A large section of early settlers in Sikkim from the majority Nepalese community also settled in Sikkim during this period. Rightly or wrongly, unlike the Nepalese the old settlers from the business community, many of whom are Marwaris and Biharis, were not given Sikkim Subject Certitificate mainly because they did not apply for it. India had become independent and Sikkim continued to be a protectorate of India even after the British left the subcontinent in 1947.

The Indian origin old settlers in Sikkim preferred to become ‘citizens’ of free Indian then become ‘subjects’ of the Chogyal.

Whatever be their past history it is a fact that the old settlers played a leading role in economic development of Sikkim. During the Chogyal all those who resided in Sikkim, including the purano byaparis, came under the same tax law. Even after the ‘merger’ the same system continued. It is only after the Centre decided to exempt ‘Sikkim subjects’, which include Sikkimese Nepalese, from payment of income tax in 2008 that the demand for income tax exemption for old settlers gained momentum. Chief Minister Pawan Chamling has assured old settlers that the matter would be settled amicably. Other political parties and social organizations in Sikkim also have a sympathetic view on the subject. Now the time has come to positively act on the matter.

DOCUMENT

The Sikkim Chamber of Commerce recently submitted a memorandum to the Income Tax Department on exemption of IT for old settlers in Sikkim. The full text of the memorandum is published herebelow:

The Commissioner of Income Tax,

Income Tax Department,

Government of India,

Gangtok-Sikkim

M E M O R A N D U M

Sir,

The Sikkim Chamber of Commerce welcomes you to the small peaceful and beautiful state of Sikkim. As understood by us the very reason for your visit is to understand the reasons of non compliance of Indian Income tax extended in Sikkim in the year 2008. The Sikkim Chamber of commerce on behalf of all communities in Sikkim submits the under mentioned for your kind information and necessary action please.

History of Old Settlors in Sikkim

The various communities comprising mostly of people who migrated from different parts of India have been settled in Sikkim from centuries when Sikkim was a country under the regime of Chogyal Dynasty. The then erstwhile kingdom treated all the communities equally in all aspects of life. In the year 1961, the Government of Sikkim enacted Sikkim Subject regulations Act 1961 and issued Sikkim Subject certificates to the citizens of Sikkim. The Indian citizens residing in Sikkim until April 26, 1975 chose not to obtain Sikkim Subject Certificates under the provisions of the Sikkim Subjects Regulation, 1961 as they were already citizens of India. Sikkim was a protectorate of India under the Indo-

Sikkim Treaty of 1950 under which all Indian citizens residing in Sikkim were treated at par with the Sikkimese people. There was no discrimination during the regime of the Chogyal and the Sikkim Income Tax Manual, 1948 was applicable equally to all persons residing in Sikkim until 16/06/2008 as per Circular No.2/Fin/Adm. dated 16/06/2008 issued by the Finance Department, Government of Sikkim. On 26th April 1975, Sikkim merged with India as per Article 371 (f) of the Indian constitution. The Sikkim Subject was repealed and Certificate of Identifications were issued to Sikkimese citizens and it was issued by Govt. of Sikkim. There were large number of people who were left out from becoming Indian citizen who were neither Indian nor Sikkimese, the Sikkimese Citizen having Sikkim Subject automatically became citizen of Indian, so the government through the MHA Order No.26030/36/90-IC-I dated 7/8/1990 and April 8, 1991 on the basis of MHA Order No.26030/69/88-IC-I dated 20th March 1989 with Guidelines thereto made them citizen of India and issued them Certificate of Identification. Indians were not required apply for COI as they were already Indians.

Extention of Indian Income Tax Act 1961 in Sikkim

The Indian Union extended the Income tax Act 1961 in Sikkim as per sec 10 of 26 AAA on 16/06/2008 as per Circular No.2/Fin/Adm. dated 16/06/2008 issued by the Finance Department, Govt. of India. The definition of “Sikkimese” as explained by the act deprived us of our identity and is discriminatory towards original Indians residing in Sikkim before its merger with Indian Union. As per the definition of “Sikkimese”, people who were neither Sikkimese nor Indian but made Indian vide MHA Order No.26030/36/90-IC-I dated 7/8/1990 and April 8, 1991 were exempted but at the same time the original Indians were denied of their legitimate rights.

Representations made by the communities so far and the outcomes

The various communities residing in Sikkim since pre merger era i.e. before 26th April 1975 have made several representations to different forums for inclusion of 400 families who are left out from the purview of Income tax exemption, the details are as under :

1. Petition in Rajya Sabha Petition Committee

A petition to seek equal rights and exemption of Income Tax and to safeguard the rights of bonafide Indian National Citizens residing in Sikkim before the merger is filed and accepted by the Rajya Sabha Petition Committee. The Committee was to visit Sikkim and conduct the hearing of affected citizens on 21st September 2011 but because of a massive earthquake in Sikkim on 18th September 2011 their visit was cancelled. The committee again was supposed to visit Sikkim on 16th of September 2012 for final hearing to reach upon conclusion but the visit was again cancelled due to imposition of code of conduct due to panchayat elections. The decision of the committee is still pending which is due any time from now.

2. Representation to Hon’ble Finance Minister, Govt. of India

A representation from the affected citizens were submitted to the then Honb’le Finance Minister vide letter on 14.12.2011 ( Annexure 1 ) and on hearing upon our grievances we were assured by him to look into the matter for consideration of Indian Income Tax exemption to the left out old settlers of Sikkim. The Honb’le Minister made a statement on record and assured in the Parliament on 12/12/2011 that “So far as Sikkim is concerned, I am receiving representations and some representations I have already received. I am looking into it.” ( Annex-2) when the issue was raised by the Shri. S. S. Ahluwalia, Member Rajya Sabha. As informed to us the matter is under active consideration and results awaited.

3. Representation to Hon’ble Chief Minister of Sikkim, Shri Pawan Kumar Chamling

We have submitted a memorandum to the Honb’le Chief Minister of Sikkim to grant exemption of Income tax to bonafide Indian national residing in Sikkim before 26th April 1975. The State Government acting on the memorandum took following actions

a) Acknowledging our genuine demand the state government formed a committee to study the issue and make recommendations to the government. (Please see Annex-3)

b) Passed a private memo in Assembly (Please see Annex-4).

c) Passed resolution in assembly on 26/03/2011 (Please see Annex-5)

d) Made recommendations to Govt. of India and raised the issue with Honorable Prime Minister of India and the then Hon’ble Finance Minister Shri Pranab Mukherjee. (Please see Annex-6)

e) The Chief Secretary wrote a letter on 21.01.2012 to Sri Mukesh C. Joshi, Chairman Central Board of Direct Taxes, Ministry of Finance, and Govt. of India. (Please see Annex-7)

The matter is still under consideration and no parties till date has denied to grant exemption and the deliberation on the issue is at its peak.

4. Representation to Income Tax Department, Sikkim and in Siliguri

There were memorandums submitted to various IT officials but no action or even reply has been received from their end.

5. Situation of Business Communities settled in Sikkim after post merger

The extension of Indian Income Tax has not only created havoc amongst the old Settlors but it has been very difficult for the post merger business communities to adopt the act. The Income tax manual 1948 was followed until 16/06/2008 and the post merger settlers were following it for almost 33 years. The calculations were very simple. The complexity of the taxation rules as per Income Tax Act 1961 has to be well taught to all for successful implementation of same. Moreover large numbers of businessman have already paid their taxes upto the financial year ending March, 2008 under Sikkim Income Tax manual to the Government of Sikkim. Since decades the business communities have been running their businesses in Sikkim as Hindu Undivided Family (HUF), everything is in the name of Head of the family. The assets and income actually belong to all members of the family. No tax planning has been done as it is done in other parts of the country.

Sir, in view of above facts and considering the complexities of the issues involved we request and suggest you that:

a) All matters pertaining to Central Income Tax for pre merger business communities i.e. a person residing in Sikkim prior to 26th April 1975 be kept in abeyance until the matter and demands from the affected citizens to the various

forums as stated above is resolved. The community at large is waiting for its long pending demands made to the concerned authorities and final conclusion from there end is still awaited. It is also submitted that the issue here is not related to Income Tax but is demand for their legitimate rights and to safeguard their identity.

b) For successful implementation and acceptance of Indian Income tax amongst the post merger residents of Sikkim, the Sikkim Chamber of Commerce suggests that the same should be implemented from a prospective date i.e. 01/04/2013. In the meantime proper training and guidance be provided to them by creating a conducive atmosphere and by conducting seminars and camps to educate them.

We heartily appreciate the gesture of your esteemed department for conducting such a meeting with the public to identify their problems and grievances and we expect the same gesture in future as well.

Thanking you,

With warm regards,

(Ashok Sarda)

President

Sikkim Chamber of Commerce