Bombay High Court Denies Interim Relief in Same-Sex 'Spouse' Tax Exemption Challenge

The court refused to shield a same-sex couple from potential tax liabilities while they challenge a provision they argue is unconstitutionally discriminatory. The case highlights the cascading legal and financial consequences of the non-recognition of same-sex marriage in India.

MUMBAI – The Bombay High Court on Thursday declined to grant interim protection to a same-sex couple challenging the constitutional validity of a key provision in the Income Tax (IT) Act, 1961. The couple argues that Section 56(2)(x), which provides a tax exemption for gifts received between spouses, is discriminatory as it excludes non-heterosexual couples from its ambit.

A division bench comprising Justices Burgess Colabawalla and Amit Jamsandekar heard the petition filed by Payio Ashiho and his partner Vivek Divan. They contended that the provision's definition of "relative," which includes a "spouse," results in "indirect discrimination" against homosexual partners, whose unions are not legally recognized in India. While acknowledging the gravity of the constitutional question, the bench concluded that it could not pass an interim order preventing the tax authorities from taking coercive action.

The decision underscores the significant and complex legal battles that continue in the wake of the Supreme Court's 2023 judgment in Supriyo v. Union of India , which stopped short of granting legal recognition to same-sex marriages but affirmed the need to protect queer couples from discrimination. This case serves as a critical test of how fundamental rights jurisprudence will be applied to ancillary statutes, particularly in the realm of fiscal law.

The Heart of the Matter: Section 56(2)(x) and the Definition of 'Spouse'

At the core of the legal challenge is Section 56(2)(x) of the IT Act. This provision classifies any money or property received by an individual without consideration, valued at over ₹50,000, as "income from other sources" and makes it subject to taxation.

However, the fifth proviso to this section carves out a crucial exception for gifts received from a "relative." The statutory definition of a relative is exhaustive and includes the individual's "spouse." This exemption allows heterosexual married couples to transfer assets and provide financial support to each other without incurring any tax liability, recognizing the unique financial and social unit of a marriage.

The petitioners, Ashiho and Divan, argue that this framework, while facially neutral, has a discriminatory impact on them. Because Indian law does not recognize their union, they cannot be considered "spouses" under the IT Act. Consequently, any financial gift or support exceeding ₹50,000 exchanged between them is taxable, a burden not faced by their heterosexual counterparts.

Their counsel argued that the petition focuses not on the 'intention' of the legislature but on the 'impact' of the law, which creates an arbitrary and unjust classification between heterosexual and homosexual couples, violating the principles of equality and non-discrimination enshrined in the Constitution of India.

Justice Colabawalla summarized the petitioners' central claim with an analogy: "Your main argument is that if a law is protecting apples, the same law must protect oranges too, right?" The petitioners' counsel affirmed this, stating that when a law extends protection to one class of citizens, that same protection must be offered to other similarly situated classes under the constitutional mandate of equality.

The Plea for Interim Relief and the Court's Refusal

The urgency for the petitioners stemmed from an impending deadline. Their counsel informed the bench that a decision was needed before December 31, 2025, the last date for complying with the tax provision in their specific case. Given the complexity of the matter, they requested an interim order in the nature of "no coercive action," which would temporarily shield them from tax demands while the court deliberates on the main constitutional question.

The bench, however, was unwilling to grant this relief. Justice Colabawalla remarked on the practical difficulties of reaching a final decision in time. "Not possible for us to pass any judgment before December 31 as we will have to first hear the detailed arguments, then decide the structure of our judgment, apply our mind etc.," he stated.

Addressing the request for interim protection, the court firmly denied it, placing the onus of the alleged discrimination on the state and framing the issue as a matter of financial restitution rather than immediate irreparable harm.

"We cannot pass interim orders... End of the day each one of us have to pay the tax. If you succeed, you will get your money back... but till then we cannot protect you by any order," Justice Colabawalla reasoned. He added, "Also, the alleged discrimination is not by us but by the State."

This stance is common in challenges to fiscal statutes, where courts are often hesitant to interfere with the state's revenue collection mechanisms on an interim basis, preferring to allow the law to operate until it is formally struck down.

Government's Stand: No Marriage, No Spousal Rights

Representing the Union Government and the Income Tax Department, Additional Solicitor General (ASG) Anil Singh opposed the petition, grounding his arguments in the Supreme Court's landmark Supriyo judgment.

ASG Singh submitted that the constitutional bench in that case explicitly held that the right to marry is not a fundamental right and that any recognition of non-heterosexual unions must come through legislative action, not judicial decree. He argued that the courts cannot direct Parliament to enact such a law.

"The Constitution bench of Supreme Court has held that a union between homosexual couples can be allowed only through an enactment and not by the courts," Singh argued. "So, this court will have to consider the fact that such marriages are not recognised by any law."

His submission directly links the tax benefit to the legal institution of marriage. From the government's perspective, since the petitioners are not and cannot be legally married, they do not fall into the category of 'spouses', and therefore, the tax exemption is simply not applicable. This line of reasoning effectively sidesteps the discrimination argument by framing it as a straightforward matter of statutory eligibility.

ASG Singh also emphasized the need for a comprehensive hearing on the matter and requested that the court defer the proceedings, a request the bench granted by adjourning the hearing until the second week of December.

Broader Implications for LGBTQ+ Rights and Legal Practice

This case is a crucial battleground for the future of LGBTQ+ rights in India. While the Supriyo verdict was a disappointment for marriage equality advocates, it left the door open for challenging discriminatory provisions in other laws. This petition is a prime example of that strategy in action, targeting the tangible, everyday financial disadvantages faced by same-sex couples.

The outcome will have significant implications: 1. Scope of 'Indirect Discrimination': A ruling in the petitioners' favor would strengthen the doctrine of indirect discrimination, confirming that facially neutral laws can be unconstitutional if their effects are discriminatory. 2. Judicial 'Reading In': The petitioners have asked the court to "read in" same-sex couples into the proviso of Section 56(2)(x). Success on this front would set a precedent for courts to interpret existing statutes in a more inclusive manner to cure constitutional defects, even without an explicit legislative amendment. 3. Financial Rights of Queer Couples: The case directly impacts the ability of same-sex partners to support each other financially, create joint assets, and engage in estate planning without facing punitive taxation. 4. Post-Supriyo Jurisprudence: The decision will contribute to a growing body of jurisprudence that interprets the rights of queer citizens in a legal landscape where marriage remains a heterosexual institution. It tests the limits of how far courts are willing to go to extend the "bundle of rights" associated with marriage to non-married couples.

For legal practitioners, the Bombay High Court's refusal to grant interim relief serves as a cautionary note. It highlights the high bar for securing pre-emptive protection in constitutional challenges against tax laws. The court's "pay now, get a refund later" approach means that litigants may have to bear the financial burden of a law they claim is unconstitutional throughout a potentially lengthy legal battle.

As the case proceeds to a detailed hearing in December, the legal community will be watching closely. The final judgment will not only determine the tax liabilities of Ashiho and Divan but will also signal the judiciary's evolving role in navigating the complex intersection of constitutional rights, statutory interpretation, and the financial realities of life for India's queer citizens.