TMI Blog1976 (6) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... exigible to income-tax. By the Finance Act, 1972, clause (ix) was added to section 2(24) of the Income-tax Act, 1961, which defines " income ". Now, according to section 2(24)(ix) of the Income-tax Act, income includes 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. In this writ petition Sri S. Dasaratharama Reddi, the learned counsel for the petitioner, questions the vires of clause (ix). According to him, Parliament has no legislative competence to enact that clause. He argues that it is only the State legislature that is competent to levy tax on income from winnings in horse races under entry 62 in List II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and gambling is different from tax on income from betting and gambling. If a person wants to enter the race course enclosure, he should purchase a ticket. If he wants to bet on a horse, he should purchase a ticket. The State legislature can impose a tax on those tickets, because that will be a tax on betting. But, if that person were to win a jackpot, then that will be income from betting and only Parliament could levy tax on that income. Thus, while the State legislature could impose a tax on betting and gambling in view of entry 62 in List II, it is only Parliament that is competent to levy tax on income from betting and gambling in view of entry 82 in List I. It is argued by Sri Dasaratharama Reddy that the word " income " is not defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 2(6C) so as to include capital gains and adding a new head of income in section 6 and inserting the new section 12B relating to capital gains. Under section 100 of the Government of India Act, 1935, the Central Legislature was empowered to make laws with respect to matters enumerated in List I in the Seventh Schedule to that Act. Entry 54 in List I reads as follows : " Taxes on income other than agricultural income. " It was argued on behalf of the appellant therein that entry 54 which deals with taxes on income, does not embrace within its scope tax on capital gains. It was contended that the word " income " does not signify capital gains either according to its natural import or common usage or according to judicial interpret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tance, by the inclusion of " capital gains " in section 6 of the Income-tax Act, 1961, by the Amending Act No. XXII of 1967. Casual gains, like winnings from lotteries, were treated as income in the Income-tax Act, 1922, but were specifically exempt from levy of income-tax under section 4(3)(vii) of the 1922 Act and section 10(3) of the 1961 Act. They again became taxable when the exemption was withdrawn by the Finance Act, 1972. In Bhola Nath Kesari v. Director of State Lotteries [1974] 95 ITR 171 (All), the Allahabad High Court held that clause (ix) added to section 2(24) of the Income-tax Act is intra vires the powers of Parliament. In that case the petitioner won a prize of rupees one lakh in the U.P. State Lotteries held in December, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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