TMI Blog1985 (7) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnings from lottery. In our opinion, the changes in the law by which the winnings from lotteries have been brought to tax are only in respect of lotteries in respect of which the prizes are declared in India. In spite of the changes in the law, the winnings from lotteries in foreign country will constitute receipt of casual and non-recurring nature. On this reasoning, we hold that the income accrued or arose to the assessee outside India during the previous year and, therefore, the sum of Rs. 95,412 is not taxable with reference to the provisions of s. 5(1)(c). " In the alternative, a plea was raised before the Tribunal, on behalf of the Revenue, that the provision of s. 5(1)(a) of the Act was applicable and since the lottery amount was received in India, the same had to be taken notice of as income of the assessee in computing the tax. This argument was rejected because the drafts in question were received by the assessee in Gangtok. Against the aforesaid order, reference under s. 256(1) of the Act was sought in regard to two questions which have been referred to this court by order dated January 15, 1977, which have been reproduced in the opening part of this judgment. In o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be less than three months but which may extend to three years and with fine." Before the Finance Act, 1972, came into force, the income derived from lotteries did not come within the ambit of " income " nor within the ambit of " income from other sources ". Necessary amendments were made by the Finance Act of 1972, with effect from April 1, 1972, which have been reproduced above regarding winnings from lotteries. By virtue of the definition contained in s. 2(24)(ix) of the Act, winnings from lotteries have specifically been included in the definition of income. Section 4 is the charging section and s. 5(1) provides how the total income of a resident has to be evaluated and while doing so all income from whatever source derived by him under clauses (a), (b) and (c) has to be taken notice of. Clause (c) specifically provides that income which accrues or arises to a resident outside India has to be included in calculating the total income. As already noticed, the definition of income includes winnings from lotteries. Section 56(2)(ib) specifically declares that income received from winnings from lotteries shall be chargeable to income-tax under the head "Income from other source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the country, that has to be considered while evaluating total income within the ambit of s. 5(1) and in doing so, under clause (c), the income accruing or arising outside India also has to be taken notice of. Hence, one fails to understand as to how the income drawn from the lotteries outside India did not come within the purview of the aforequoted sections and how it could be considered as income of a casual and non-recurring nature when under s. 10(3) winnings from lotteries are not to be considered as income of a casual and non-recurring nature. We also find serious fault in the reasoning of the Tribunal while appreciating ss. 194B and 276B of the Act. Section 194B enjoins a duty on the person responsible for paying the lottery winnings to deduct income-tax at the rates enforced whenever all lottery winnings exceed Rs. 1,000. Section 198 provides that such deductions shall, for the purpose of computing the income of the assessee, be deemed to be income received. Section 199 provides that when such deductions are paid to the Central Government, the same shall be treated as payment of tax on behalf of the person from whose income the deductions were made and credit sha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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