COMMISSIONER OF INCOME-TAX Vs. CHAMAN LAL

JUDGEMENT

(1.) UNDER Section 256 (1) of the I. T. Act, 1961, (hereinafter referred to as "the Act"), the ITAT (Chandigarh Bench) has referred the following two questions of law for the opinion of this court : " (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee's winnings from lottery in Sikkim (foreign country at the relevant time) did not constitute his income chargeable to income-tax in India under Sections 10 (3)/56 (2) (ib)/2 (24) (ix) of the I. T. Act, 1961, as amended by the Finance Act, 1972? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the provisions of Section 5 (1) (c) were not applicable to the lottery winnings received by the assessee in Gangtok ? "

(2.) CHAMAN Lal (hereinafter called "the assessee") during the year 1972-73, purchased a lottery ticket of Sikkim Government from an Ambala Cantt. agent. At Gangtok, lottery draw was held on September 17, 1972, in which the assessee was declared to be the winner of lottery prize of rupees one lakh. After deducting rupees ten thousand as agent's commission and Rs. 2,500 as seller's commission, besides deducting some bank commission, the assessee was paid a sum of Rs. 87,412. 50 by bank draft No. 10373 dated October 25, 1972, drawn by the State Bank of Sikkim, Gangtok, on the United Commercial Bank. Besides the prize of rupees one lakh, there was an additional prize of an air ticket for a trip to U. S. A. The assessee encashed the air ticket instead of taking a trip to U. S. A. and thus he got Rs. 7,992, after having deducted Rs. 8 as bank charges, by demand draft No. 10401 dated October 30, 1972. The assessee ultimately credited the drafts in his account in the State Bank of India, Ambala Cantt.

(3.) FOR the assessment year 1973-74, the assessee filed a return of income and claimed that the sum of Rs. 95,412 (Rs. 87,412 + Rs. 8,000) was receipt of a casual and non-recurring nature and, therefore, exempt from tax. This contention was not accepted by the ITO on the reasoning that the assessee was a resident of India and under Section 5, the income accruing or arising outside India was also taxable in his hands as the definition of income contained, in Section 2 (24), vide Clause (ix), included winnings from lottery and, therefore, was liable to be taxed under Section 56 as income from other sources. Consequently, the aforesaid amount was included in computing the income and in assessing the tax.