Summary
For assessment year 1986–87, the Supreme Court held that the appellant’s Sikkim lottery winnings, already taxed under the Sikkim law then in force, could not again be taxed under the Income-tax Act, 1961. The decision rested on the historical statutory position preserved by Article 371F(k) and the absence of an express provision imposing the asserted double tax. The alternative question about computing the former section 80TT deduction became academic.
Issues
- Whether the already-taxed Sikkim lottery winnings were again taxable under the Income-tax Act for 1986–87.
- Whether the Court needed to decide the gross-versus-net basis of the former section 80TT deduction.
Provisions considered
- Article 371F(k), Constitution of IndiaPreserved pre-existing Sikkim laws until amendment or repeal by competent authority. The Court applied that special historical framework to the winnings already taxed under Sikkim’s then-operative income-tax rules. (¶¶ 7, 13, 14)
Held
- The disputed assessment preceded extension of the Income-tax Act to Sikkim. The Court addressed a Rajasthan resident’s Sikkim lottery winnings already subjected to deduction under the Sikkim State Income Tax Rules, 1948, rather than a general present-day exemption for lottery receipts. (¶¶ 2, 7, 8, 9, 10)
- Double taxation is not categorically prohibited where legislation expressly authorises it. In the statutory setting before it, the Court found no specific provision imposing the asserted second tax and applied Article 371F(k) and the principle against construing general charging language to impose the same burden twice. (¶¶ 11, 12, 13)
- Once the tax paid at source under the applicable Sikkim law was held to preclude the further assessment in this case, the issue whether section 80TT deduction used gross prize or net winnings was academic and was not decided. (¶¶ 14, 15)
Result
Assessee’s appeal allowed; further taxation of these already-taxed winnings under the Income-tax Act rejected. Gross-versus-net section 80TT issue left academic.