It Appears EWS Committee Tries To Justify Rs 8 Lakh Limit Post-Facto : Supreme Court In NEET-PG Counselling Case
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While hearing the cases related to NEET-PG Counselling, the Supreme Court on Thursday orally remarked that the Expert Committee constituted by the Central Governemnt has attempted to provide a post-facto justification to the Rupees 8 lakh gross annual income limit for Economically Weaker Sections(EWS) quota.A bench comprising Justice DY Chandrachud and Justice AS Bopanna was referring to...
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While hearing the cases related to NEET-PG Counselling, the Supreme Court on Thursday orally remarked that the Expert Committee constituted by the Central Governemnt has attempted to provide a post-facto justification to the Rupees 8 lakh gross annual income limit for Economically Weaker Sections(EWS) quota.
A bench comprising Justice DY Chandrachud and Justice AS Bopanna was referring to the report made by the Expert Committee headed by former Finance Secretary Ajay Bhushan Pandey, which recommended the retention of the existing EWS criteria for the ongoing admissions. The Committee was constituted by the Centre to revisit the EWS criteria after the Court expressed doubts regarding its reasonableness.
"It appears what the Committee has sought to do is offer a justification for the 8 lakh criterion. They have tried to justify the 8 lakh cut-off post facto", remarked Justice D. Y. Chandrachud.
Earlier, Senior Advocate Arvind P Datar, appearing for the petitioners, had argued that the EWS criteria were fixed without conducting any proper study and the criteria for OBC-creamy layer was mechanically applied to EWS.
Solicitor General of India Tushar Mehta refuted these arguments and asserted that the criteria as per the Office Memorandum of January 2019 were arrived at after due deliberations.
"There was a study (before the January, 2019 OM), there was application of the mind, there were consultations between the government. It was only because of your lordships' indulgence that the study which this committee undertook was undertaken. Otherwise, it was not an unstudied position. The Office memorandum was after due deliberation in the Ministry of Social Justice and Empowerment and all concerned stakeholders. Even before the OM of 17 January 2019 was in existence, in the context of identification of economically backward classes, the government had set up the SINHO committee in 2007...", he had submitted.
At this, Justice Chandrachud had asked, "The constitutional amendment for EWS came into force on 14 January 2019. You say that the OM issued on 17 January was in consultation with the Ministry of Social Justice and Empowerment? In two days, there was consultation with the Ministry of Social Justice and empowerment?""The SINHO Commission was from 2010...", the SG said.
Justice Chandrachud interjected, "But before the 103rd amendment, there was no question of consulting the Ministry of Social Justice on the issue of reservation in medical colleges. The whole process of consultation was complete in three days and everything was done?"The Solicitor General took the bench through the methodology adopted by the Committee. He highlighted the exercise was not to find out who was "poor" but who belonged to "economically weaker sections".
SG explains the Committee's methodology
It had been the SG's submission that considering the socio-economic structure in which the country lives, even the person who is from the low-income group or EWS may also have some kind of little savings.
"We don't have the concept of social security etc, but even while framing the income tax regulations, the government tries to be inclusive and expects even those categories to be poor who can save something. The current tax exemption limit is 2.5 lakhs. In 2019, the government amends the Finace ACt with the result that everyone having taxable income up to 5 lakhs was exempted from paying income tax. Whatever tax was calculated for income exceeding 2.5 lakhs was given back to the taxpayer by way of rebate, which effectively meant that individuals having taxable income up to 5 lakhs had their entire income tax free. As a result, even persons having larger gross incomes are not required to pay any tax and can make investment in provident fund, insurance, etc. There being Deduction of interest on home loan, interest on educational loan, national pension scheme contributions, medical insurance, medical expenditure on senior citizens etc, persons having higher income do not have to pay tax. In addition, salaried persons get an additional standard deduction of Rs.50,000. Income from capital gain on listed shares is exempt from tax. So effectively, if a person is earning up to 8 lakhs, he will not be required to pay any tax for the financial year 2019-2020 onwards, provided he makes some specified savings etc", he had advanced.
"The committee says that even if you have some room to make savings, you may be EWS. There are some few thousand crores deposited in Jan Dhan accounts etc, with minimum savings of 1500, 700, because we don't have social security like other rich countries. So even persons of economically weaker sections do invest somewhere. They have a minimum kind of insurance, minimum medical insurance etc", he had sought to submit.
Justice Chandrachud then asked : "Is a person who is EWS likely to have capital gains on listed shares of up to 1 lakh? Besides, if you take eight lakhs also, and you get capital gains of 1 lakh on listed shares, you get an exemption. So it becomes 7 lakhs. Then you make an investment in a provident fund, other specific funds, and you further get more deductions".
Justice Chandrachud also indicated that in the second affidavit which the Centre filed in the Supreme Court on October 26, 2021, where it justified the eight lakh criterion, it was said that they adopted it basically on the basis of the OBC creamy layer criteria.
"There you say that the income limit for determining EWS also largely followed the economic criteria for the determination of those persons who would be entitled to OBC reservations, as suggested by SINHO commission. When you first came to the court, you proceeded on the basis that in coming to eight lakhs, for determining EWS, you have largely used the creamy layer criteria- 6 lakh multiplied by 1.36 ("In the year 2016, the upper income limit for determination of creamy layer in respect of OBCs was Rs.6 lakhs per annum. In order to maintain the same, it was adjusted to Rs.8 lakhs on the basis of the consumer price index. As the CPI had increased from 197 in December 2011 to 268 in March 2016, the multiplier was 1.36. Therefore to maintain the same standard of living, the income of Rs.6,00,000 was multiplied with 1.36 to arrive at 8.16 lakhs which was rounded off to Rs.8 lakh", the centre had submitted)...Further, you say that alternatively, the SINHO commission said that the tax exemption limit is the ultimate criteria, that alternatively, the SINHO commission recommended that the people in the general category whose family income from all sources is less than the taxable limit may be categorised as EWS", noted the judge.
"Therefore, SINHO said we could have the criteria for EWS based on the OBC criteria but they said we are not doing it for a valid reason. Because creamy layer criteria takes into account educational and social backwardness and EWS is primarily economic backwardness. So instead of taking the creamy layer from OBC, we are taking the tax limit. Your affidavit says that the income limit for EWS would also largely follow the creamy layer criteria for OBC", continued the judge.
"It seems that for fixing the eight lakhs, you followed the creamy layer criteria of OBC. Then you decided to revisit it. In revisiting, the Pandey committee says that for EWS, the criteria is stricter. First, while for OBC, it is the income for three years that is taken into account, for EWS it is the income of the last year as income may be volatile. Secondly, for OBCs, certain occupations like artisans are excluded, for EWS no such exclusion. Then it says that the definition of family in EWS is broader than the definition for OBC. These are the three reasons why they say that EWS criteria of 8 lakh is stricter than OBC", pointed out Justice Chandrachud.
"Today's income tax exemption limit is 2.5 lakhs, and upto 5 lakhs you don't have to pay taxes because you get a rebate. Even if you had taken 2.5 lakhs, it would have been in conformity with SINHO. Even between 2.5 lakh and 5 may not have been an issue, because upto 5 you have to pay tax but you get rebate. The question now is about this 5 to 8 lakhs. Is this something which the court should defer? Do we say that this is not an atrociously arbitrary view? That it is within the realm of an assessment which is made by the government so the court must leave it there? One way of looking at it is that this is really a possible view that the court is not exercising first appellate power. That is undoubtedly a view that the constitutional court would be within its realm to take. These are the different lines of thought which are in our mind right now", expressed Justice Chandrachud.
In response, the SG said that we are not looking at the definition of 'poor' but the definition of EWS. "A valid point. We are not looking at BPL but economically weaker section", conceded Justice Chandrachud.
Continuing, the SG advanced, "First of all, there is no attempt to justify eight lakhs. Income tax exemption is only one of the routes. Even if we take five lakh, what would be the injustice which would inadvertently result? It was felt that if the EWS limit is kept too low compared to the income tax exemption limit, there will be a large number of people, who are considered vulnerable and not required to pay income tax, who may get excluded from the ambit of EWS. We do not want this to happen. If you keep the EWS limit too high, it may result in those who are not considered vulnerable from the income tax point of view to get benefit from EWS. So a fine balance has to be struck between the two ends. To illustrate, if there are three members of the family earning Rs.3 lakh rupees per year, that income would be nine lakhs, and they would not be entitled to economically weaker sections. But 3 lakh a year means only 25,000 a month. This would be more severe than the five lakh...Also, The income tax limit of five lakh is for an individual. Here the income is considered as family income. Here the family may have four people. That is why instead of five, it is eight".
The Solicitor General also rebutted Senior Advocate Arvind Datar's argument that the Pandey Committee discarded the SINHO committee report without assigning reasons.
"The committee relies upon, examines and tweaks the SINHO report. We may go into all kinds of data, statistics, but what convinces the court ultimately is the common sense argument-whether eight lakh from the common-sense point of view is an irrational criteria. Eight lakhs would mean 70,000 per month. At the outset, please keep one factor in mind that we are not conducting an exercise to find out who is poor. The word used in the Constitution is economically weaker . So he need not be below poverty line, he may be slightly above it. We need to help those students who are meritorious but economically weaker and suffering and lagging behind because of lack of opportunities, Tutions etc...In real life, we understand that it is impossible for some to compete with others. Because it is virtually 70,000 per month. And we know the index. We know how costly the things are."
"All the relevant factors are been taken into account. The conclusions of the Pandey committee are not different from the existing regime. Whenever we undertake such an exercise, it will be possible for any intelligent mind to find an alternative argument. But the exercise which your lordships are undertaking is as to whether relevant material was considered, whether irrelevant material has gone into consideration, whether there is any application of mind, is the view taken so absurd that no person having common sense would ever meet it. Even while appearing for this committee, I can find out two or three issues which according to me they should have gone into...", he had told the bench.
"The report says that even eight lakhs is less. And they justify it. If we do not believe in a utopian world and we believe in the real world, this is justified. The committee says that Merely one year of windfall income earned by the household by way of a mandatory MBBS internship or a good harvest etc. can push him/her over the income threshold. Thus, setting a lower income threshold for EWS can significantly increase the risk by excluding many deserving candidates They show the distinction between creamy layer and eight lakhs. They say eight lakhs is also less but they have to cap it somewhere", the SG submitted.
The bench closed the arguments today. Orders will be pronounced tomorrow.