1996 (1) TMI 169 - AT - Income Tax

Summary

Issues:
1. Double Income-tax Relief claim on prize money from Sikkim State Lottery.
2. Validity of assessment under Indian Tax Laws for income taxed under Sikkim Tax Laws.
3. Interpretation of Section 91 of the Income-tax Act regarding foreign country status of Sikkim.
4. Constitutional validity of levy of tax under Sikkim Tax Laws and Indian Income-tax Act.

Issue 1: Double Income-tax Relief claim on prize money from Sikkim State Lottery

The appeal was filed by the assessee against the order of the Dy. Commissioner of Income-tax (Appeals) for the assessment year 1985-86. The assessee received prize money from the Sikkim State Lottery, on which tax was deducted by the Sikkim Government. The first appellate authority allowed deduction for the tax amount deducted by the Sikkim Government. The assessee claimed Double Income-tax Relief, arguing that the income arose in Sikkim and should be eligible for relief under Section 91 of the Income-tax Act. The counsel referred to the decision of the Calcutta High Court in support of the claim. However, the Tribunal rejected the claim, stating that the income accrued in Sikkim cannot be considered as income accruing in a foreign country for the purpose of double income-tax relief.

Issue 2: Validity of assessment under Indian Tax Laws for income taxed under Sikkim Tax Laws

The counsel contended that the assessment was invalid as the income was already taxed under the Sikkim Tax Laws during the period when Indian Tax Laws were not applicable. The counsel argued that the levy of tax under Sikkim Tax Laws had constitutional approval, and therefore, the same income should not be taxed under Indian Tax Laws. However, the Tribunal held that the two assessments were under different tax laws, and the income accrued in Sikkim was rightly included in the total income of the assessee under Indian Tax Laws for the relevant assessment year.

Issue 3: Interpretation of Section 91 of the Income-tax Act regarding foreign country status of Sikkim

Section 91 of the Income-tax Act allows for relief in case of income accrued or arisen outside India. The Tribunal analyzed whether Sikkim should be considered a foreign country for the purpose of double income-tax relief. The Tribunal held that Sikkim, despite its merger with India, cannot be deemed a foreign country before the Indian Tax Laws were made applicable in the state. Therefore, the claim for double income-tax relief was rightly rejected by the first appellate authority.

Issue 4: Constitutional validity of levy of tax under Sikkim Tax Laws and Indian Income-tax Act

The Tribunal addressed the constitutional validity of the levy of tax under Sikkim Tax Laws and the Indian Income-tax Act. The Tribunal emphasized that it was not the forum to adjudicate on a constitutional issue and that challenging the levy of tax under the Income-tax Act as inconsistent with constitutional provisions was not within its jurisdiction. The Tribunal confirmed the order passed by the Dy. Commissioner (Appeals) for the assessment year 1985-86, stating that the appeal filed by the assessee failed.

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