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Issues:
1. Revisionary jurisdiction of the Commissioner under section 263 of the Income-tax Act, 1961. 2. Allowability of deductions under sections 57(iii) and 80TT in computing income from lottery winnings. Analysis: 1. The appeal was against the Commissioner's order under section 263 of the Income-tax Act, 1961, revising the ITO's order for the assessment year 1981-82. The Commissioner found the ITO's order erroneous as he allowed deductions not permitted under section 80TT. The Commissioner directed the ITO to allow deductions only under section 80TT, leading to the appeal by the assessee. 2. The assessee contended that the expenditure incurred was necessary for earning the income from lottery winnings. The counsel argued that under section 57(iii), any expenditure laid out wholly and exclusively for making or earning such income should be allowed. The departmental representative, however, argued against allowing the expenditure under section 57(iii) due to the rigorous test laid down. 3. The Tribunal considered the case in light of relevant legal precedents. It was observed that the income from lottery winnings falls under 'Income from other sources' as per section 56(2)(ib). The Tribunal referred to the conditions laid down by the Supreme Court and the Madras High Court regarding deductions under section 57. It was emphasized that the expenditure must be wholly and exclusively laid out for earning income, without being in the nature of capital expenditure. 4. The Tribunal found that only the cost of lottery tickets had a direct nexus with the winnings and could be considered as laid out for earning such income. However, expenses incurred for court proceedings and encashment did not meet the strict tests of section 57(iii) as they were incurred after earning the income. The Commissioner was correct in disallowing certain expenses but erred in disallowing the cost of tickets directly related to the winnings. The Tribunal partially allowed the appeal, accepting the claim of the assessee in part. 5. The judgment highlighted the distinction between expenses directly related to earning income and those incurred after income is earned. It emphasized the need for expenses to be wholly and exclusively laid out for earning income to be allowed as deductions under section 57(iii). The Tribunal's decision was based on the specific provisions of the Income-tax Act and relevant legal principles established by previous court judgments. 6. Ultimately, the Tribunal's decision clarified the scope of deductions under sections 57(iii) and 80TT in computing income from lottery winnings, ensuring that only expenses directly connected to earning income were allowed as deductions, in line with the legal requirements and precedents cited.
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