1990 (1) TMI 123 - AT - Income Tax

Summary

Issues:
1. Whether the CIT (A) erred in sustaining the ITO's order of refusing to give credit for tax deducted at source from lottery winnings.
2. Whether the assessee is entitled to deduction of tax deducted at source from the prize money.

Analysis:
1. The ITO assessed the assessee's income at Rs. 2 lakhs from winning a State lottery ticket and refused to allow credit for tax deducted at source of Rs. 17,088, as it was not credited to the Central Government Account. The CIT (A) upheld this decision, stating that the Income-tax Act had been extended to Sikkim, where the lottery ticket was obtained, and therefore, the tax deducted at source should not be deducted from the prize money.

2. The Appellate Tribunal considered the submissions made by both sides and analyzed the legal aspects. They referred to Section 198 and 199 of the Income-tax Act, which deal with tax deducted at source and the requirement of producing a certificate indicating that the tax has been credited to the Central Government's account. Since no such indication was present in the tax clearance certificate filed by the assessee, the Tribunal held that the tax deducted should be deemed as income received by the assessee.

3. The Tribunal also referred to a previous judgment by the Sikkim High Court regarding the applicability of the Income-tax Act in Sikkim. The High Court had stated that the Income-tax Act was not extended to Sikkim at the relevant time, and the Sikkim State Income-tax Manual was applicable. However, after Sikkim became a component State of India, the Income-tax Act would come into force. Therefore, the Tribunal concluded that only the net amount of the lottery money, excluding the tax deducted at source by Sikkim authorities, should be included in the assessee's taxable income.

4. The Tribunal directed the ITO to allow the appropriate relief to the assessee and include only the net amount of the lottery money in the taxable income. The Tribunal held that the tax deducted at source by Sikkim authorities should not be allowed as a deduction since it was not an expenditure. Consequently, the appeal by the assessee was treated as allowed for statistical purposes.