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TMI Blog2018 (4) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant herein received Rs. 16,20,912/- through two Demand Drafts for Rs. 8,10,000/- and Rs. 8,10,912/- each, after deduction of Rs. 2 lacs being agent's/seller's commission and Rs. 1,79,088/- being Income Tax under the Sikkim State Income Tax Rules, 1948. b) The appellant herein filed Income Tax Return for the Assessment Year (AY) 1986-87 disclosing the income from lottery at Rs. 20 lakhs and deducting the agent/seller commission of Rs. 2 lakhs out of the same. He claimed deduction under Sec. 80 TT of the IT Act on Rs. 20,00,000/- i.e the gross amount of the prize money won in the lottery in accordance with the provisions of the charging Section. c) On scrutiny, the Assessing Officer (AO), vide order dated 08.01.1988, allowed the deduction under Section 80TT of the IT Act on Rs. 18 lakhs instead of Rs. 20 lakhs while holding that the Government of Sikkim, had deducted the tax at source from the lottery amount of Rs. 18 lakhs as Rs. 2 lakhs have been paid to the agent directly. In other words, under the relevant provisions of Section 80TT of the IT Act, the deduction can be claimed only on net income out of lottery and not on the gross income. The said order was further confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l appearing for the appellant contended that the High Court has grossly erred in holding that the provisions of the IT Act are applicable to the present case as the provisions of the said Act are extended to the State of Sikkim only with effect from 01.04.1989 and, therefore, income accrued in the State of Sikkim prior to this date could not be charged to tax under the IT Act and was taxable under the Sikkim State Income Tax Rules, 1948. Learned counsel further contended that the order in question passed by the High Court is not lawful as the provisions of Article 371F of the Constitution of India, particularly, clauses (k) and (n) thereof, operate in relation to all the laws prevailing in the territories of Sikkim which prevents the application of the IT Act in the State of Sikkim up till 31.03.1989. Learned counsel further contended that the order passed by the High Court is not just and lawful as the levy of taxes on the same income both by the Union of India and the State of Sikkim is contrary to the principle of double taxation. Further, the High Court grossly erred in holding that the deduction under Section 80TT of the IT Act is applicable on the net winning amount received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modifications as he thinks fit to the State of Sikkim, any enactment which is in force in a State in India at the date of the notification." On a plain reading of this provision, it becomes clear that all laws which were in force prior to April 26, 1975, in the territories now falling within the State of Sikkim or any part thereof were intended to continue to be in force until altered or repealed. Therefore, the law in force prior to the merger, continued to be applicable. As a matter of fact, the IT Act was made applicable only by Notification made in 1989 and the first assessment year would be 1990-91 and by the application of this Act, the Sikkim State Income Tax Manual, 1948 stood repealed. However in the present case, we are concerned with the assessment year 1986-87, and, during this time, the IT Act had not been made applicable to the territories of Sikkim. The law corresponding to the IT Act, which immediately was in force in the relevant State was Sikkim State Income Tax Rules, 1948. Hence, there can be two situations, first is that the person was a resident of Sikkim during the time period of 1975-1990 and the income accrues and received by him there only. In such a cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny income accrued or received in India would be included in his total income for taxing purposes under the IT Act. However, in the present case, we find that the amount has been earned by the appellant-assessee in the State of Sikkim and the amount of lottery prize was sent by the Government of Sikkim to Jaipur on the request made by the appellant. 10) The result, therefore, is that, while Section 5 of the IT Act would not be applicable, the existing Sikkim State Income Tax Rules, 1948 would be applicable. Thus, on the income, it would appear that Income-tax would be payable, under Sikkim State Income Tax Rules, 1948 and not under the IT Act. Since Sikkim is a part of India for the accounting year, there would appear to be, on the same income, two types of income-taxes cannot be applied. 11) In the above backdrop, it would be appropriate to refer the decision of this Court in the case of Laxmipat Singhania vs. Commissioner of Income Tax, U.P. (1969) 72 ITR 291 at 294 wherein this Court has observed that "It is a fundamental rule of law of taxation that, unless otherwise expressly provided, income cannot be taxed twice". 12) Further, in a decision of this Court in Jain Brothers a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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