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TMI Blog1990 (3) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... ank ofSikkimat Gangtok. The assessee filed his income-tax return in which he showed the receipt of the prize money as income and claimed credit for the tax deducted at source. The ITO did not allow the tax deduction credit on the ground that the tax deducted was not credited to the Govt. of India account. 3. The assessee appealed. The AAC agreed with the ITO that the tax deduction by the Sikkim Govt. could not be considered as eligible for tax credit. The assessee, thereupon, for the first time, claimed before the AAC that the entire income is not taxable under the Income-tax Act, 1961. This claim was rejected by the AAC on the ground that under section 5, income accruing or arising, whether inIndiaor outside, would be taxable. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hinks fit to the State of Sikkim, any enactment which is in force in a State inIndiaat the date of the notification. " 5. We are concerned with the accounting year ending31-3-1982, and, during this time, the Income-tax Act had not been made applicable to the territories ofSikkim. Therefore, the law in force prior to the merger, continued to be applicable. As a matter of fact, the Income-tax Act was made applicable only by a Notification made in 1989 and the first assessment year would be 1990-91. 6. The assessee's case for canvassing is that income accruing or arising inSikkimwould not be taxable inIndia, as per clause (k) of Article 371F. It is submitted that since the law in force prior to merger would continue to apply and since no n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. There is no difficulty in holding that the income accrues or arises inSikkimonly. The Govt. of Sikkim has entered into a contract with the buyers of the lottery tickets, according to which, the Govt. is bound to pay to the winning ticket holder a certain sum of money. The situs of this contract is obviouslySikkim. The tickets are made out atSikkim. The fact that they are sold outsideSikkim, would not make any difference to this position. By agreeing to the terms of the contract for running the lottery, each buyer of the tickets commits himself to a contract made inSikkim. The payment is made inSikkimas per this contract. The presentation of cheque by the assessee's bank inDelhiis to the Sikkim Bank and the payment is made inSikkim. So t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70had extended its field to lotteries also by virtue of another notification dated5-2-1974. As per this notification, winning from lottery of Rs. 10,000 and above would be assessed to Income-tax. These notifications are preserved under clause (k) of Art. 371F of the Constitution ofIndia. 9. The result, therefore, is that, while undoubtedly section 5 would be applicable, the existing notifications ofSikkimalso would be applicable. Thus, on the same income, it would appear that Income-tax would be payable, under the notification of the Govt. of Sikkim as well as under Income-tax Act, 1961. But such a position would not be acceptable in law. SinceSikkimis part ofIndiafor the accounting year, there would appear to be, on the same income, two ..... X X X X Extracts X X X X X X X X Extracts X X X X
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