Same-Sex Couples' Exclusion From 'Spouse' Benefits Under Income Tax Act Violates Article 15: Karnataka High Court Told
The Karnataka High Court was told on Friday (October 9) that excluding same-sex couples from the 'spouse' benefit under the Income Tax Act, 1961, amounts to discrimination on the ground of sex and violates Article 15 of the Constitution.Appearing for the petitioners, Dr. Dhruv Janssen-Sanghavi argued before Justice B M Shyam Prasad that the case is fundamentally about equality under Article...
The Karnataka High Court was told on Friday (October 9) that excluding same-sex couples from the 'spouse' benefit under the Income Tax Act, 1961, amounts to discrimination on the ground of sex and violates Article 15 of the Constitution.
Appearing for the petitioners, Dr. Dhruv Janssen-Sanghavi argued before Justice B M Shyam Prasad that the case is fundamentally about equality under Article 15, and not about the right of same-sex couples to marry.
The challenge concerns the interpretation of 'spouse' under the Fifth Proviso to Section 56(2)(x) of the Income Tax Act, which, according to the petitioners, excludes same-sex partners from the tax benefit available to heterosexual spouses.
The case arose from a 22-karat gold bracelet, stated to be a family heirloom, allegedly gifted by one partner to the other on their relationship anniversary. The petitioners contend that the gift would have been exempt from tax had they been a married heterosexual couple.
Dr. Janssen-Sanghavi opened his rebuttal to the submissions of ASG Arvind Kamath by asserting that the petitioners' case is rooted in Article 15 first and foremost, and not Article 14.
“….We are not asking for special treatment. All we are asking is take the shoes off our legs and treat us as equals…”, he submitted. He argued that the sole distinction between the petitioners and a heterosexual couple is the sex of the gift recipient, which is an impermissible classification under the Constitution.
The court was also taken through the nuances of the definition of 'relative' under Section 56 of the Act, which Dr. Sanghavi argued is far more expansive than the definition under Section 2 (41) of the Act [relative means the husband, wife, brother or sister or any lineal ascendant or descendant of that individual].
For context, Solicitor General Tushar Mehta, on the last occasion, had argued that the expression 'spouse' in Section 56(2)(x) is to be understood alongside Section 2(41) of the Income Tax Act, which defines 'relative'. The provision includes husband or wife, apart from specified other relationships, he had argued.
The petitioners pointed out that the Explanation to Section 56(2) (x) includes not just the spouse, but also the brother and sister of the spouse, brother or sister of either of the parents of the individual, lineal ascendant and descendant of the spouse, which are categories not found in Section 2(41).
“….The definition of relative under Section 56 is far more expansive than Section 2(41). It is not a mere enumeration of what is covered in Section 2(41). Therein lies the logical fallacy[of the argument made by SG]”, he argued.
At this juncture, the court enquired as to how this point helped the petitioner's case. The counsel replied:
“…. Till 1998, Gift Tax Act was there and it was abolished. Till 2004, all of them was capital receipts and did not fall under income per se. Only in 2004, this [Section 56(2)] was introduced in the Income Tax Act and the definition was brought in when section 377 IPC was there in the statute…the term [spouse] used is as intended by the parliament…strict interpretation of laws of taxation does not exempt it from judicial review. Though the respondents have argued that the term spouse cannot be interpreted to include same sex couples…Even section 377 which was a penal law was subject to judicial review, the idea that somehow the strict interpretation excluded a taxing statute from judicial review is wrong at the very threshold. Six cases I have provided, all cases where in provisions of taxing statutes including charging provisions stood unconstitutional”.
Addressing the respondents' reliance on the Supreme Court's judgment in Supriyo v. Union of India, which held that there is no fundamental right to marry or to legal recognition of same-sex unions, Dr. Sanghavi contended that the case does not foreclose the present challenge.
“….The instant case does not relitigate the exact case of Supriyo. We only use it to buttress the petitioners' claims”, he said, adding that the judgment must be read as a whole.
He further argued that the presumption of marriage, available to heterosexual couples who cohabit for a long time and display the intention to live as husband and wife indefinitely, should also be available to same-sex couples.
“….The point here is milord, a heterosexual couple to qualify as spouse, they need to do nothing more than what the petitioners have already dons…. The point I am trying to make is a heterosexual couple in exact same circumstance as [the petitioners] …There is no further act that needs to be committed for heterosexual couple to be seen a spouses… The presumption of marriage is established by the test of intention [to live together indefinitely] as it similarly applies to domicile[in another context] …. Supriyo itself has unanimously shot down the the argument that procreation has nothing to do with marriage. It is not a necessary ingredient for marriage, neither the act nor the intention of procreation... there should only be evidence that they intent to live together permanently...”, the counsel added.
“…..What is unconstitutional is not the term 'spouse' in the Act. What is discriminatory is not the use of language per se…but it's the impact or discrimination which is unconstitutional... We are not dealing with an exemption provision, We are dealing with the exclusion of income…we are saying we are not given equal protection of law…If the petitioners were a heterosexual couple, they would be presumed to be in a marriage and would qualify as spouses under the Income Tax Act. The only difference is sex of the individuals”, he further submitted, drawing a direct comparison to establish the alleged discriminatory impact of the taxing provision.
The counsel also added that if the court did not find in favour of petitioners, all same sex couples would run right back to shadows and will live in the indignity of financial opacity.
“…if it were an exemption, everybody would have to report it as income, for example under section 10 or 18.…But a heterosexual couple receiving a gift does not have to report it because it does not fall within the scope of income. A tax officer assesses me and says I am taxable…not from there…soon as I am required to file my tax return and disclose a gift received from my partner, I am discriminated from where I file the ITR”, he explained.
He also rebutted the respondents' argument that allowing the petition would lead to tax evasion, stating that the potential for abuse cannot justify the deprivation of a constitutional right.
“Respondents also said tax avoidance could happen since one man can gift it to another man as a same sex couple…but there is still social stigma to different sexual orientations and same sex relations, I don't think that would be an issue…but that's beside the point….If someone is so hell-bent on abusing the Income Tax Act, they can enter into a marriage, do the tax evasion, and then file a mutual divorce”, Sanghvi pointed out.
ASG Arvind Kamath and SG Tushar Mehta had earlier argued that taxing statutes must be interpreted strictly, and that there cannot be a presumption of marriage with the same sex couple. It was stated that since the petitioners cannot claim the right to marry, they cannot claim the benefits under the 'Income from Other Sources 'provision.