R.K. Agrawal, J. - (1.) The present appeal has been preferred against the final judgment and order dated 10.09.2004 passed by the High Court of Judicature for Rajasthan, Bench at Jaipur in D.B.I.T. Reference No. 40 of 1995 whereby the Division Bench of the High Court answered the questions referred to under Section 256(1) of the Income Tax Act, 1961 (in short 'the I.T. Act') in favour of the Revenue and against the appellant-assessee.
(2.) Before proceeding further, it is pertinent to set out the facts in a summarized way to appreciate properly the issue involved in this instant appeal:- a) The appellant herein, a resident of Jaipur, Rajasthan, having income from business and property, won the first prize of Rs. 20 lakhs in the 287th Bumper Draw of the Sikkim State Lottery held on 20.02.1986 at Gangtok organized by the Director, State Lottery, Government of Sikkim, Gangtok. Out of Rs. 20 lakhs, the 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 confirmed by the Commissioner of Income Tax, (Appeals), Rajasthan-II, Jaipur, vide order dated 31.10.1988 d) Being aggrieved, the present appellant preferred an appeal before the Income Tax Appellate Tribunal (in short 'the Tribunal'), Jaipur Bench challenging the computation by the Assessing Officer (AO) of the deduction under Section 80TT of the IT Act. The appellant herein the assessee raised an additional ground before the Tribunal claiming that the authorities below have grossly erred in law in treating the lottery income of Sikkim Government as income under the IT Act. Though the Tribunal allowed the appeal partly vide order dated 26.02.1993 but it dismissed the objections raised by the appellant herein as to legality of assessment order and held that the lottery amount is taxable under the provisions of IT Act. e) However, at the instance of the appellant herein the assessee, the Tribunal framed certain questions under IT Act and referred the same to the High Court for opinion, considering them the questions of law fit for reference which are as under: "1. Whether on the facts and in the circumstance of the case, the Hon'ble Tribunal was justified in holding that income from Sikkim State Lottery is taxable under the Income Tax Act, 1961? 2. Whether in the facts and circumstances of the case the Tribunal was justified in holding that deduction u/s 80TT is applicable on the net winning amount received by the assessee and not on the gross amount of the winning prize?" f) A Division Bench of the High Court, vide judgment and order dated 10.09.2004, answered the questions raised in affirmative. g) Aggrieved by the judgment and order dated 10.09.2004, the appellant-assessee has preferred this appeal by way of special leave before this court.
(3.) Heard Mr. Sanjay Jhanwar, learned counsel for the appellant-the assessee and Mr. Yashank P. Adhiyaru, learned senior counsel for the respondent and perused the records. Point(s) for consideration;