Income Tax Act, 1961:
s.5 – Taxability under – Of income from lottery – When such income was already taxed under Sikkim State Income Tax Rules, 1948 – Held: A taxing statute should not be interpreted in such a manner that its effect will be to cast a burden twice over for payment of tax unless language of statute is so compelling that court has no alternative than to accept it – In case of reasonable doubt, construction most beneficial to the tax payer is to be adopted – As such there is no prohibition on double taxation unless the legislature contains a special provision in that regard – In the present case since the IT Act does not provide for including income from lottery, the assessee cannot be subjected to double taxation – Since Sikkim is part of India for the relevant accounting year, once the assessee has paid income tax as per the law applicable at the relevant time in Sikkim, the same income was not taxable under IT Act – In view of clause (k) of Art. 371F of Constitution also, only the Sikkim regulations on income-tax would be applicable – Sikkim State Income Tax Rules, 1948 – Constitution of India – Art. 371F (k) – Interpretation of Statutes.
Allowing the appeal, the Court
HELD: 1. In the present case, 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. Therefore, while Section 5 of the Income Tax Act would not be applicable, the existing Sikkim State Income Tax Rules, 1948 would be applicable. 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. [Para 9, 10][882-C-E]
2. There is no prohibition as such on double taxation, provided that the legislature contains a special provision in this regard. There is no provision in the IT Act wherein a specific provision has been made by the legislature for including such an income by an assessee from lottery ticket. In the absence of any such provision, the assessee in the present case cannot be subjected to double taxation. [Para 13][883-A-C] Jain Brothers and Others v. Union of India and Others (1970) 77 ITR 107 (SC) – relied on.
Laxmipat Singhania v. Commissioner of Income Tax, U.P. (1969) 72 ITR 291 – referred to.
3. A taxing Statute should not be interpreted in such a manner that its effect will be to cast a burden twice over for the payment of tax on the taxpayer unless the language of the Statute is so compelling that the court has no alternative than to accept it. In a case of reasonable doubt, the construction most beneficial to the taxpayer is to be adopted. Therefore, the income in the present case is taxable only under one law. [Para 13][883-C]
4. By virtue of clause (k) to Article 371F of the Constitution which starts with a non-obstante clause, it would be clear that only the Sikkim Regulations on Income-tax would be applicable in the present case. Therefore, the income cannot be brought to tax any further by applying the rates of the IT Act. [Para 13][883-D]
5. Once the assessee has paid the income tax at source in the State of Sikkim as per the law applicable at the relevant time in Sikkim, the same income was not taxable under the IT Act, 1961. [Para 14][883-E]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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