TMI Blog1974 (4) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... discrimination. In the result the petition fails - - - - - Dated:- 22-4-1974 - Judge(s) : R. L. GULATI., M. P. MEHROTRA. JUDGMENT The judgment of the court was delivered by GULATI J.-This and the connected petitions raise a common question and hence are being disposed of by a common judgment. The petitioner won a prize of Rs. 1,00,000 in the twentieth draw of the U.P. State Lotteries held on 8th December, 1972. Under the rules one-tenth of the prize money goes to the person who sells the ticket. The petitioner was thus entitled to Rs. 90,000. Out of this sum, a sum of Rs. 31,050 was deducted on account of income-tax and the petitioner was paid the balance of Rs. 58,950, A certificate of deduction of income-tax was duly sent to the petitioner by the Director of State Lotteries, the second respondent. The petitioner has challenged the deduction of income-tax and has impleaded as respondents besides the State of Uttar Pradesh, the Director of State Lotteries, the Commissioner of Income-tax, Lucknow, the Union of India and the Income-tax Officer, Lucknow. Prior to 1972 winnings from lotteries used to be exempt from income-tax as being receipts of casual and non-recurring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Act have been challenged in this writ petition under article 226 of the Constitution. The first ground of attack is that the levy of tax on lotteries is ultra vires the powers of Parliament. It is urged that the new tax does not fall either under entry 82 or entry 97 of List I of the Seventh Schedule of the Constitution (hereinafter referred to as the Union List) which are the only two entries defining the field of legislation of Parliament with regard to levy of taxes. It is urged that the new tax would fall, if at all, under entry 62 of List II of the Seventh Schedule (hereinafter referred to as the State List). In other words, the argument is that Parliament has no power to enact a law levying tax on lotteries and it is only the State Legislature which can do so, if at all. Entry 82 of the Union List provides for taxes on income other than agricultural income, while entry 97 of the same list is a residuary entry and provides for any other matter not enumerated in List II or List III including any tax not mentioned in either of those two lists. The argument of the learned counsel is that, according to the popular meaning and the accepted connotation, the word "inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry 54 in List I of the Seventh Schedule to the Government of India Act, 1935, which is equivalent to entry 82 of the Union List of our present Constitution. The Supreme Court in Navinchandra Mafatlal v. Commissioner of Income-tax, upheld the validity of the amendment by holding that the word "income" in entry 54 in List I of the Seventh Schedule to the Government of India Act, 1935, should be given its widest connotation in view of the fact that it occurs in a legislative head conferring legislative power and it included a capital gain and it will be wrong to interpret the word in the light of any supposed English legislative practice. The Supreme Court further observed that the Income-tax and Excess Profits Tax (Amendment) Act (XXII of 1947) which amended the Indian Income-tax Act by enlarging the definition of the term "income" in section 2(6C) so as to include capital gain and adding a new head of income in section 6 and inserting the new section 12B relating to capital gains was intra vires the Central Legislature acting under entry 54 in List I of the Seventh Schedule of the Government of India Act, 1935. Clearly a gain of a capital nature before the amendment of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97 and not by entry 82 of the Union List, there is nothing wrong in levying tax on such winning by amendment of the Income-tax Act rather than enacting a separate legislation. In Hari Krishna Bhargav v. Union of India a question arose as to whether the scheme of collecting annuity deposits from income-tax payers could be included in the Income-tax Act or was it necessary to have a separate legislation in that regard under entry 97 of the Union List. The Supreme Court held that assuming that the scheme of Chapter XXII-A introduced in the Income-tax Act, 1961 by the Finance Act, 1964, is governed by entry 97 of the Union List, there is no prohibition against Parliament enacting in a single statute, matters which call for the exercise of power under two or more entries in the Union List. Entry 62 of the State List upon which reliance has been placed by the learned counsel provides for "taxes on luxuries including taxes on entertainments, amusement, betting and gambling ". It is said that lottery is a sort of gambling or betting and the State legislature alone is competent to levy tax on it. The learned counsel has cited a large number of authorities in support of his contention. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in been affirmed by the Supreme Court in R.M.D.C. (Mysore) Private Ltd. v. State of Mysore. This means that the State legislature cannot levy tax on betting and gambling under entry 34 of the State List. It can levy tax under List 62 of the State List which, we have already pointed out above, restricts the tax on the organisation or participants in entertainments like betting and gambling. Similarly entry 40 of List I which deals with lotteries organised by the Centre or the Government of a State also does not confer power on Parliament to levy tax on lotteries. It can pass other laws in respect of lotteries organised by the Centre or the State, but cannot levy a tax. The power to levy tax is to be found in entries 82 and 97 of the Union List. Winnings from lotteries cannot be equated with gifts, as contended for by the learned counsel for the petitioner. A gift is a transfer of property without consideration, whereas in a lottery every person who participates in it does so for a consideration, even though the consideration is much smaller as compared to the prize he might win. Even assuming that winning in a lottery is a gift, tax on a gift would be covered by entry 97 of the Un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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