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TMI Blog2004 (4) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... LODHA J. - The petitioner is a citizen of India and is a resident of Mumbai. In the month of August, 1987, she won a lottery of the Government of Sikkim having a prize money of Rs. 6,30,000. The Government of Sikkim deducted Income-tax in the sum of Rs. 62,088 as per Sikkim tax laws from the prize money of Rs. 6,30,000 and the balance amount of Rs. 5,67,912 was paid. The petitioner filed a return of income on June 30,1988, declaring total income of Rs. 55,630. She declared the prize money of the lottery received from the office of the Director of State Lotteries, Sikkim. After deducting a sum of Rs. 5,000 therefrom under section 10(3) of the Income-tax Act, 1961, she showed the prize money of Rs. 6,25,000 from the lottery. The petitioner in her return claimed deduction of Rs. 62,088 on the ground that the said sum was deducted as Income-tax at source while making the payment of Rs. 5,67,912. The Assessing Officer, however, did not give credit for the said sum of Rs. 62,088 as the tax deducted from the prize money of the lottery by the Sikkim State Government was not paid to the Indian treasury and tax was not deducted as per section 199 of the Income-tax Act, 1961. The petitioner a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furthering its relationship with India. The Sikkim Assembly next, by virtue of its powers under the Government of Sikkim Act, passed a resolution-expressing its desire to be associated with the political and economic institutions of India and for seeking representation for the people of Sikkim in India's Parliamentary system. The Constitution (35th Amendment) Act, 1974, was promptly passed to give effect to this resolution. The main provisions of this Amendment Act included- (i) Sikkim would not be a part of the territory of India, but an 'associate State', which was brought within the framework of the Indian Constitution by inserting article 2A and the 10th Schedule in the Constitution. (ii) Sikkim would be entitled to send two representatives to the two Houses, whose rights and privileges would be the same as those of other members of Parliament, except that the representatives of Sikkim would not be entitled to vote at the election of the President or Vice-President of India. There is little doubt that the 35th Amendment Act, 1974, introduced innovations into the original scheme of the Constitution of India. There was no room for any 'associate State' under the Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant. "371F. Notwithstanding anything in this Constitution. -.... (k) all laws in force immediately before the appointed day in the territories comprised in the State of Sikkim or any part thereof shall continue to be in force therein until amended or repealed by a competent Legislature or other competent authority ; (l) for the purpose of facilitating the application of any such law as is referred to in clause (k) in relation to the administration of the State of Sikkim and for the purpose of bringing the provisions of any such law into accord with the provisions of this Constitution, the President may, within two years from the- appointed day, by order, make such adaptations and modifications of the law, whether by way of repeal or amendment, as may be necessary or expedient, and thereupon, every such law shall have effect subject to the adaptations and modifications so made, and any such adaptation or modification shall not be questioned in any court of law . . ." In State of Sikkim v. Surendera Prasad Sharma, AIR 1994 SC 2342, the special provisions relating to the State of Sikkim as provided in article 371F came up for consideration before the Supreme Court. The Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said expression must receive its ordinary, natural and grammatical meaning. The latter part of the clause-'until amended or repealed by a competent Legislature or other competent authority'-is indicative of the fact that the said expression was not intended to be confined to only legislative enactments but also laws which could be altered or amended or repealed by 'other competent authority', i.e., other than the Legislature itself. This supplies a clear indication that the said expression is wide enough to include subordinate legislations, e.g., rules, regulations, orders, etc. The expression 'existing law' is defined by article 366(10) to include any rule, regulation, bye-law, etc., and we think the expression 'all laws in force' means all existing laws. But quite apart from the definition in article 366(10), on a plain reading of clause (k) in which this expression occurs, it seems clear to us that the said expression is wide enough to include the Establishment Rules of 1974. If any authority is needed reference could be made to the decision of this court in Edward Mills Co. Ltd., Beawar v. State of Ajmer, AIR 1955 SC 25 at pages 30-31; [1955] 1 SCR 735 wherein a similar exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sense in which they were defined in the Sikkim Subjects Regulations, 1961. Regulation 3 defines Sikkim subjects and regulation 7 explains who shall not be Sikkim subject. Therefore, if the expressions 'Sikkimese nationals' and 'non-Sikkimese nationals' used in the proviso to rule 4(4) are read and understood in the context of the provisions of the aforesaid regulations, the difficulty expressed by the learned judge in the High Court would appear to be imaginary. 20. From what we have said earlier it is crystal clear that certain political developments of considerable significance to the people of Sikkim had preceded its merger into the Union of India. This merger was based on certain solemn assurances given to the people of India. The constitutional provisions cannot be read as torn from the historical developments which preceded the merger. The laws which were in force immediately 1 before merger were enacted at a time when Sikkim was under the Chogyal's rule and could not, therefore, be in accord with the constitutional mandates of the free democratic republic. Therefore, to give effect to the political commitments and assurances given to the people of Sikkim, special provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise of this special power does not have the effect of the law ceasing to be a law in force within the meaning of clause (k) of article 371F. Therefore, on the plain language of the said provision it is difficult to hold that the effect of adaptation or modification is to take the law out of the purview of 'laws in force'." It would be, thus, seen that existing laws or laws in force in the State of Sikkim came to be protected by clause (k) added to article 371F until amended or repealed to ensure smooth transition from the Chogyal's rule to the democratic rule under the Constitution. In so far as clause (1) is concerned, the inherent underlying idea behind the said provision is the assumption that many of such existing laws may be inconsistent with the Constitution and, therefore, the President of India came to be conferred with the power to make adaptation and modification with a view to making such law consistent with the Constitution of India. The adaptation or modification made by the President in exercise of the special power as provided in clause (1) does not have the effect that the existing laws cease to be the law in force within the meaning of clause (k) of article 371 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds Sikkim Income-tax from the prize money of Rs. 6,30,000 and paid the remaining amount of prize money to the petitioner. It is advantageous to refer to the Income-tax deduction certificate dated August 31, 1987, issued by the Director of State Lotteries, Government of Sikkim, to the petitioner. The copy of the said certificate (marked x for identification purpose) was handed in by learned counsel for the petitioner during the course of arguments. The said certificate reads thus: "Office of the Director of State Lotteries, Government of Sikkim, Gangtok (Sikkim). Income-tax Deduction Certificate No. 52/FIN/LOT. Certificated that a sum of Rs. 62,088 (rupees sixty two hundred eighty eight) has been deducted towards Sikkim income-tax from the prize money of Rs. 6,30,000 (rupees six lakhs thirty thousand) payable to Smt. Nirmala Labh Shanker Mehta, Bombay-26, as first prize in ticket No. N-503303 in seventh draw of Snow Lion Weekly Lotteries. The prize money less Income-tax has been remitted to the said Smt. Nirmala Labh Shanker Mehta by demand draft No. 035569 dated August 28, 1987. (Sd.).............. Director of Lotteries, Government of Sikkim". It would be, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the tax now impugned has been imposed by the local authority from March 12, 1935, and that the first occasion when its validity was attacked was in only 1957, though if the petitioners are right in their submissions their acquiescence might not itself be a ground for denying them relief. Before however we set out the points urged by the learned Attorney-General in support of the petition, it would be convenient if we narrate briefly the history of the levy of this tax." The Supreme Court, thus, held that acquiescence to an illegal tax for a long time is not a ground for denying the party the relief that he is entitled to. In the instant case, therefore, it may be held that merely because the petitioner offered the prize money won in the lottery of the Sikkim Government, to tax under the Income-tax Act, 1961, that shall not take away her right in contending that the said prize money was not chargeable and assessable to tax under the Income-tax Act in the revisional jurisdiction. The said prize money was chargeable to Income-tax under the Sikkim Tax Manual that held the field at the relevant time and the Income-tax from the prize money as per the then existing Sikkim Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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