MAHAVEER KUMAR JAIN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference is made under Section 256 of the IT Act, 1961, by the Tribunal, Jaipur. It relates to asst. yr. 1986 -87. The following questions have been referred to this Court for its decision :

(2.) THE facts found by the Tribunal ate that the assessee is a resident Indian citizen earning income from business and property, at Jaipur, Rajasthan. He won the first prize of Rs. 20 lakhs in the 287th bumper draw of the Sikkim State Lottery, held on 20th Feb., 1986 at Gangtok by the Director, State Lotteries, Government of Sikkim, Gangtok, After having deducted a sum of Rs. 2 lakhs on account of payment of agent/seller's commission, etc. and another sum of Rs. 1,79,088 on account of income -tax, as per Sikkim State IT Laws, the Director of Lotteries paid the balance of Rs. 16,20,912 to the assessee through two demand drafts which were encashed at Jaipur. The assessee declared the net income of Rs. 8,21,375 claiming deduction under Section 80TT of the IT Act, 1961 on Rs. 20,00,000 i.e., the gross amount of the prize money. The ITO, however, allowed the deduction under Section 80TT on Rs. 18 lakhs only.

(3.) BEFORE the Tribunal, an additional ground was raised by the assessee which was permitted by the Tribunal that authorities below have grossly erred in law in treating lottery income of Sikkim Government as taxable income under the IT Act, 1961. This contention had two aspects of the matter. Firstly, that the Sikkim was not originally a part of India when IT Act, 1961, was enacted. Leaving aside the historical background, which does not have much bearing on the present controversy, by 36th Constitutional Amendment Act, Sikkim was admitted into Union of India as a State and special provisions were made under Article 371F relating to administration of territorial constituency of Sikkim.