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TMI Blog1974 (4) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Officer, Lucknow. Prior to 1972 winnings from lotteries used to be exempt from income-tax as being receipts of casual and non-recurring nature. By the Finance Act, 1972, certain amendments were made to the Income-tax Act, 1961, as a result of which the winnings from lotteries and gains from certain other pastimes like races, card games, gambling and betting also became taxable. The following amendments were made in the Income-tax Act, 1961. In section 2(24), which defines "income", a new clause (ix) was added reading as under: " 2(24)(ix). Any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever." Section 10(3) which provided that in computing the total income of any person, any receipts which are of a casual and non-recurring nature, shall not be included, was replaced by the following: "10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included-....... (3) any receipts which are of a casual and non-recurring nature, not being winnings from lotteries, to the extent su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. The argument of the learned counsel is that, according to the popular meaning and the accepted connotation, the word "income" does not include capital, nor does it include a receipt which is not derived from a definite source, but is in the nature of windfall. Reliance was placed upon a decision of a Full Bench of this court in Rani Amrit Kunwar v. Commissioner of Income-tax. That was a case where a wife who was a resident in British India, received some remittances from her husband, who was the ruler of a native State and as such a non-resident. The remittances received by her were held to be income liable to tax under section 4(2) of the Income-tax Act, 1922. In the course of judgment the learned judges made an observation that no doubt in order to be income it must be something which comes periodically as a return with some sort of regularity and from a definite source. This and similar other cases where an attempt has been made to evolve a definition of the word "income" are not helpful at all in the case before us, because we are not concerned with the word "income" as occurring in the Income-tax Act, but are dealing with the word "income" as occurring in entry 82 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Seventh Schedule of the Government of India Act, 1935. Clearly a gain of a capital nature before the amendment of the Income-tax Act was foreign to the Income-tax Act. There was a clear distinction between a receipt of income nature and a receipt of capital nature. No one had ever said that a capital gain could also be regarded as income and subjected to income-tax under the Income-tax Act, as it stood prior to the amendment. But the Supreme Court had no difficulty in holding that a capital gain, even though not income under the Income-tax Act, was nevertheless income for purposes of entry 54 in List I of the Seventh Schedule to the Government of India Act. It is clear, therefore, that the word "income" in the Constitution cannot be restricted to the meaning of its term in a fiscal statute like the Income-tax Act which seeks to tax some kinds of income leaving out others. Precisely similar thing has happened in the instant case. The legislature has once again enlarged the definition of the word "income" in the Income-tax Act so as to include winnings from lotteries and gains from gamblings and bettings of all kinds. Prior to the impugned amendment income derived from winning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competent to levy tax on it. The learned counsel has cited a large number of authorities in support of his contention. It is not necessary to notice those authorities because we are prepared to assume that lottery is a sort of gambling or betting. But the fallacy lies elsewhere. Under entry 62 of the State List, the State Legislature is competent to levy tax on entertainments like gambling and betting as such, but not on the gains or income arising from such entertainments. In other words, the State Legislature can levy tax on a person organising such amusement or on the person who participates in them irrespective of the gain or income derived from such entertainments. The income earned by the organiser of the entertainment or by the person who participates in it is outside the purview of this entry. Such incomes or gains are covered by entry 82 of the Union List and Parliament can alone levy tax on them. To illustrate this point an analogy may be taken from tax on sales. The State legislature is competent to levy tax on sales, but not on income arising from such sales. Reliance was then placed on entry 34 of the State List which relates to "betting and gambling". This entry als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... might win. Even assuming that winning in a lottery is a gift, tax on a gift would be covered by entry 97 of the Union List and Parliament alone would be competent to enact a law in respect thereof. It was so held by the Supreme Court in the Second Gift tax Officer, Mangalore v. D. H. Nazareth. The next contention raised by the learned counsel is that tax on lotteries is discriminatory and is hit by article 14 of the Constitution. The argument is that the tax is levied only on cash prizes in a lottery while lotteries of other kinds have been left out. According to the learned counsel, there are other kinds of lotteries also such as lotteries for allotment of houses. This argument has no merit. A lottery for the allotment of houses does not partake of the nature of gambling or betting. There a person who is allotted a houses by drawing lots pays full price for the house. Drawing of the lots is only a method of selecting buyers when the buyers are more than the houses to be sold. The type of lottery that we are dealing with forms a class separate from the type of lottery where houses or other things are allotted to a purchaser by drawing lots. There is thus no question of discrimina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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