2013 (3) TMI 14 - HC - Income Tax

Income earned by way of winning of Sikkim State lottery - whether was liable for taxation under the Income Tax Act 1961? - Held that - Assessee in the present case is resident of India and has won the lottery prize at Kanpur and accordingly as per provisions of Section 5 of the Income Tax Act 1961 the total income received by the assessee is liable to be taxed as per the provisions of Income Tax Act 1961. ITAT has relied upon its own earlier decision while passing the order under appeal and the said decision has been approved in Mahaveer Kumar Jain v. CIT (2004 (9) TMI 72 - RAJASTHAN HIGH COURT) that the assessee is liable to pay income tax on the prize money as she is resident of India and received the prize money in India - in favour of department and against the assessee.

Summary

Issues:
1. Taxability of income earned from winning the Sikkim State lottery under the Income Tax Act, 1961.

Analysis:
The High Court of Allahabad was presented with the issue of whether the income earned by the assessee through winning the Sikkim State lottery was subject to taxation under the Income Tax Act, 1961. The case pertained to the Assessment Year 1984-85, where the assessee received a prize of Rs. 2,50,000 from the Directorate of Sikkim State Lottery after purchasing the winning ticket in New Delhi. The primary contention raised by the assessee was that the income tax authorities were not legally justified in levying income tax on the prize money won from the Sikkim State lottery. The Tribunal held that since the lottery ticket was purchased by the assessee using her own funds and the prize money was received in India, income tax was applicable.

The counsel for the assessee argued that the Tribunal erred in deeming the prize money as taxable under the Income Tax Act, 1961. He relied on a judgment of the Bombay High Court to support his contention. On the other hand, the department's counsel contended that since the lottery ticket was bought in New Delhi and the prize money was received in India, the income accrued in India, justifying the imposition of income tax. The Court considered the arguments from both sides and examined the relevant legal provisions and precedents.

The Court referred to a previous judgment in Commissioner of Income Tax, Allahabad Vs. Smt. Susheela Devi Agrawal, where it was held that income received in India is subject to taxation regardless of where it accrued or arose. The Court emphasized that the place of receipt determines the tax liability, citing various case laws to support this principle. Another Division Bench decision further reinforced this stance, disagreeing with the Bombay High Court's interpretation and affirming that income received by a resident of India, such as in this case, is taxable under Section 5 of the Income Tax Act, 1961. The Court, therefore, concluded that the assessee was liable to pay income tax on the prize money received from winning the lottery, as she was a resident of India and received the prize money within the country.

In the final judgment, the Court answered the question referred to it in the affirmative, ruling in favor of the department and against the assessee. The decision was based on the established principles regarding the taxation of income received in India, irrespective of where it accrued, as per the provisions of the Income Tax Act, 1961.