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TMI Blog2007 (10) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome in the hands of the assessee. The said order was confirmed by the order dated 21-5-1990 by the Commissioner of Income-tax (Appeals), Allahabad in Appeal No. 23/Ward 4/All./89-90. In further appeal, the Tribunal has held that the provisions of the Income-tax Act were not applicable to the income earned at Sikkim. A notification in this regard was issued by the Ministry of Finance, Department of Revenue, New Delhi on 7-11-1988 providing for application of provision of Chapter XVII of the Income-tax Act with immediate effect. The Tribunal held that as per the Press Note, the provisions of the Income-tax Act, under the aforesaid notification, were made effective from the assessment year 1990-91 and as a result, the assessee is not liable to tax for the relevant assessment year (1988-89) on lottery income. 3. Challenging the aforestated order of the Tribunal, the present appeal is at the instance of the revenue. 4. On the following questions of law, the appeal was admitted by the order dated 24-4-2007 : "(1) Whether on the facts and circumstances of the case, was the ITAT's order dated 18-12-1998 legally correct and tenable in view of the fact that none of the notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the Department to obtain clear cut instructions from the Department as to whether in the present case the Department wants to press the appeal, in spite of the fact that the tax involved in the appeal is below the monetary limit. Subsequently, the matter was taken up on 4-10-2007. On that day, the learned Standing Counsel for the Department submitted that he has instructions from the appellant to press the appeal as substantial question of law is involved in the appeal. The Assessing Officer as well as the Joint Commissioner of Income-tax are also of the view to press the appeal on merits, irrespective of the tax involved. The said letter is dated 19-9-2007. The appellant submits that the present case was under clause 3(ii) of the said Circular dated 4-11-1987. Reference was also made to Instruction No. 1903, dated 28-10-1992 wherein the Board, after reconsidering the matter has decided that the monetary limit be enhanced to ₹ 50,000 so far as the reference before the High Court is concerned and the said monetary limit shall apply to the Appeals/References filed after 1-11-1992. For the sake of convenience, the relevant portion of paragraph-3 of the Circulars being Inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter and it has been decided that the monetary limits be enhanced as follows : Monetary limit Rs. (i) Appeal before the ITAT (Income Tax matters) 25,000 (ii) Reference before the High Courts 50,000 (iii) Appeal in the Supreme Court 1,50,000 3. The above monetary limits will apply to appeals/references filed after 1-11-1992." 9. The learned counsel for the assessee could submit only this much that on correct reading of the relevant portions of the Circular, already reproduced above, no question of law is involved in the appeal as the question of taxability of lottery with regard to the State of Sikkim has been decided by the Bombay High Court in Nirmala L. Mehta v. A. Balasubramaniam, CIT [2004] 269 ITR 11. He could not dispute that there is no judgment of this Court on the issue involved in the appeal. However, reference was made to certain decisions of this Court which according to him lay down that the Circulars issued by the Board are binding on the Revenue Authorities. 10. Having considered the respective submissions of the learned counsel for the parties, we are of the opinion that the preliminary objection raised by the learned counsel for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8) 15. In a case under Income-tax Act in CIT v. Hero Cycles (P.) Ltd. [1997] 228 ITR 4631 (SC) it has been held that the circulars can bind the Income-tax Officer but will not bind the Appellate Authority or the Tribunal or the Court or even the assessee. 16. There is another aspect of the case. It has been also held that circulars cannot override the statutory requirements. (See-(1) STO v. Shree Durga Oil Mills AIR 1998 SC 59 (2) State Bank of Travancore v. CIT [1986] 158 ITR 1022 (SC) and (3) Kerala Financial Corpn. v. CIT [1994] 210 ITR 1293 (SC). 17. CCE v. Dhiren Chemicals Industries AIR 2002 SC 453 it has been laid down in para 10 of the report that regardless of the interpretation that has been placed by the Apex Court on certain phrase, if there are Circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the revenue. 18. Recently the Apex Court in Commissioner of Trade Tax v. Kajaria Ceramics Ltd. 2005 (6) JT (SC) 28 repelling the argument of the assessee therein based on the aforesaid judgment of the Supreme Court in the case of Dhiren Chemicals Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Binani Industries Ltd. v. Asstt. CCT AIR 2007 SC (Supp.) 338 reiterated its earlier view taken in the case of Kajaria Ceramics Ltd. (supra) and has held that there are various circulars, some are binding and some are not binding. 23. Keeping the above pronouncements in mind, we are of the opinion that the circulars under consideration are not of binding nature on the Commissioner of Income-tax and they are inter-departmental instructions. These circulars do not confer any corresponding right to the assessee to oppose or challenge the maintainability of any appeal or reference on the ground that filing of such appeal or reference is against the circulars issued by the Board. 24. We have considered the above point as an argument was raised by the learned counsel for the assessee with regard to non-maintainability of appeal in view of the circulars issued by the Board from time to time and the fact that the quantum of disputed amount of tax is below the monetary limit as prescribed in the circulars. 25. The learned counsel for the assessee has placed strong reliance on a judgment of this Court in CIT v. Smt. Prakashwati [1994] 210 ITR 567 with particular emphasis to last but one p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point further for the reason that the stand of the Department is that the present case falls under exception clause as provided for in the circular. The learned Standing Counsel submits that in the present case a question of law is involved, therefore, it will be governed by clause 3(ii) of the circular, dated 4-11-1987 which provides that where a question of law arises for the first time before the High Court concerned, it should be contested irrespective of the revenue involved. 29. Undoubtedly a question of law is involved in the present appeal. Obviously, it falls in the exception clause and the learned Standing Counsel is right in his submission that the Commissioner of Income-tax has a right to press the present appeal irrespective of revenue involved. 30. In contra, the learned counsel for the assessee submits that since the question of taxability of prize money won in the lottery of Sikkim Government to tax under the Income-tax Act, 1961 for the assessment year prior to 1990-91 has been set at rest by the Bombay High Court in Nirmala L. Mehta's case (supra), no question of law arises for the first time before the High Court. The said submission has no force and is lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred by clause (n) of Article 371F of the Constitution, extended to the State of Sikkim, the Income-tax Act, 1961 vide Notification No. S.O. 1028(E), dated 7-11-1988 with effect from 1-4-1989. However, the commencement of the Income-tax Act, 1961 was deferred for one year making it effective from 1-4-1990, applicable from the assessment year 1990-91 and onwards. The Income-tax Act, 1961 was made applicable and came into force in the State of Sikkim from the assessment year 1990-91 (previous year 1989-90) and on coming into force of the Income-tax Act, 1961, the Sikkim Income-tax Manual, 1948 stood repealed. 36. In Nirmala L. Mehta's case (supra), a Division Bench of Bombay High Court has held that the Income-tax Act was made applicable in the State of Sikkim from the assessment year 1990-91. The assessee who had won a lottery of the Government of Sikkim for a period anterior to it is not liable to pay the Income-tax, for the assessment year prior to 1990-91. 37. The assessee is a resident of Allahabad. She purchased the lottery ticket at Allahabad and received the payment of the prize money at Allahabad after deduction of tax at source at Sikkim. On these facts the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by section 56(2)(ib).Therefore, the Tribunal committed a serious error of law in concluding that charges in the statute did not change the nature of winnings from lotteries in a foreign country and they retained their character as receipts of a casual and non-recurring nature. Although reference was made to section 10(3) of the Act, still the Tribunal did not understand its true import. Section 10(3) of the Act was also amended by the Finance Act of 1972 and earlier to the amendment the income from lotteries even if derived in India, was being considered as 'receipts of a casual and non-recurring nature' and was not taxable. By the amendment of section 10(3), winnings from lotteries were specifically taken out from the purview of being considered as receipts of a casual and non-recurring nature. If a resident of India derives income, whether from source from within the country or from outside the country, that has to be considered while evaluating total income within the ambit of section 5(1) and in doing so, under clause (c), the income accruing or arising outside India also has to be taken notice of. Hence, one fails to understand as to how the income drawn from the lotte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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