9911796707
|
Home
Issues: Taxability of lottery winnings from Sikkim Govt., applicability of Income-tax Act to Sikkim income, interpretation of Article 371F, double taxation issue, inclusion of income for rate purposes.
Analysis: 1. The appeal raised the issue of whether income from winning a lottery run by the Sikkim Govt. would be taxable. The assessee, a minor, won Rs. 63,500 from the lottery, with Rs. 5,438 deducted as income tax by the Sikkim Govt. The assessee claimed credit for the tax deducted, but the ITO disallowed it, stating the tax was not credited to the Govt. of India account. 2. Upon appeal, the AAC agreed that the tax deduction was not eligible for credit. The assessee then claimed that the entire income should not be taxable under the Income-tax Act, which was rejected. The AAC held that while the income was taxable, the tax deduction should be allowed as a deduction as it was an expenditure incurred in earning income. 3. The appeal contended that the Income-tax Act did not apply to Sikkim income due to historical reasons. The judgment detailed the position of Sikkim under the Indian Constitution, highlighting the 36th amendment in 1975 that made Sikkim part of the Indian Union. The Income-tax Act was not applicable to Sikkim until a 1989 Notification. The assessee argued that since the Act did not apply, section 5 should not apply either. 4. The judgment analyzed the situs of the income, clarifying that the income accrued in Sikkim due to the lottery contract being based there. Section 5(1)(c) was deemed inapplicable, but sections 5(1)(a) and 5(1)(b) were considered relevant. The judgment emphasized that section 5 casts a wide net, covering all incomes worldwide for residents. 5. The judgment highlighted that while section 5 applied, existing Sikkim regulations on income tax were also applicable under Article 371F(k). It emphasized the legal principle against double taxation, citing relevant case law. It concluded that only Sikkim regulations on income tax would apply, not the Income-tax Act rates. 6. The issue of including Sikkim income for rate purposes was addressed, determining that section 86 was not applicable in this case. Consequently, the income from Sikkim lotteries was deemed non-taxable, and the appeal was allowed.
|
