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2005 DIGILAW 185 (MP)

Pramila Bakore v. Commissioner of Income-tax

2005-02-08

A.M.SAPRE, ASHOK KUMAR TIWARI

body2005
Judgment ( 1. ) THIS is an income-tax reference made at the instance of the assessee by the Tribunal under Section 256 (1) of the Income-tax Act, 1961, in R. A. No. 108/ind/91 which arises out of an appellate order dated May 5, 1991, passed by the Tribunal in I. T. A. No. 701/ind/85 to answer the following question of law : Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that the deduction under Section 80tt is admissible on the net amount of prize money of Rs. 10,80,000 and not on the gross lottery prize of Rs. 12 lakhs as per the provisions of Section 80tt read with Section 80b (5) of the Income-tax Act which were in force in the assessment year 1978-79 ? ( 2. ) THE late M. P. Bakore was the husband of the assessee. He won the first prize of lottery of M. P. State of Rs. 12 lakhs. This amount was then assessed to tax in the hands of the assessees husband and on his death in the hands of the assessee as his legal representative. ( 3. ) IN terms of the Lottery Rules, 10 per cent, commission was paid to the agent amounting to Rs. 1,20,000 and tax was deducted at source at Rs. 3,56,400. In this way, a sum of Rs. 7,23,600 was paid to the assessee, i. e. , to her husband. ( 4. ) THE Assessing Officer then determined the deduction available under Section 80tt of the Act for the year in question, i. e. , 1978-79 (since repealed ). In the opinion of the Assessing Officer, the assessee was entitled to claim deduction under Section 80tt ibid at Rs. 5,37,500 as income from lottery at Rs. 10,80,000 whereas the assessee claimed deduction at Rs. 5,97,500 on the entire amount of Rs. 12,00,000, i. e. , to say before deduction of the agents commission of Rs. 1,20,000. The assessee was successful before the Commissioner of Income-tax (Appeals) who held on the basis of the law laid down by the Supreme Court in the case of Cloth Traders (P.) Ltd. v. Addl. CIT. , AIR1979 SC 1691 , [1979 ]118 ITR243 (SC ), (1979 )3 SCC538 , [1979 ]3 SCR984. ( 5. 1,20,000. The assessee was successful before the Commissioner of Income-tax (Appeals) who held on the basis of the law laid down by the Supreme Court in the case of Cloth Traders (P.) Ltd. v. Addl. CIT. , AIR1979 SC 1691 , [1979 ]118 ITR243 (SC ), (1979 )3 SCC538 , [1979 ]3 SCR984. ( 5. ) IN the opinion of the Commissioner of Income-tax (Appeals), the asses-see was entitled to claim deduction on the gross amount of Rs. 12,00,000 and not on the net income of Rs. 10,80,000. It is against this view of the Commissioner of Income-tax (Appeals) that the Commissioner of Income-tax filed an appeal to the Tribunal. The Tribunal while allowing the appeal, filed by the Commissioner of Income-tax held that the assessee is entitled to claim/calculate deduction under Section 80tt of the Act on the net income of the assessee, i. e. , Rs. 10,80,000 after deducting the commission paid to the agent and not on Rs. 12,00,000. It is against this view of the Tribunal, the assessee prayed for reference to this court under Section 256 (1) of the Act. The Tribunal accepted the prayer so made by the assessee and made the reference on the question so formulated supra to this court for answering the aforementioned question. ( 6. ) NONE appeared for the assessee despite service and SPC having been sent for hearing of this reference. Heard Shri R. L. Jain, learned senior counsel with Ku. v. Mandlik, learned counsel for the Revenue. ( 7. ) HAVING perused the record of the case and having heard the submission of learned counsel for the Revenue, we are of the view that the question referred to this court has to be answered against the assessee and in favour of the Revenue (Commissioner of Income-tax ). ( 8. ) INDEED, in our opinion, the question referred to this court no longer remains res integra and stands answered by the decision of the Supreme Court in the case of Distributors (Baroda) P. Ltd. v. Union of India , AIR1985 SC 1585 , (1985 )2 Complj389 (SC ), [1985 ]155 ITR120 (SC ), 1985 (1 ) SCALE1216 , (1986 )1 SCC43 , [1985 ]supp1 SCR778 , 1986 (1 )UJ86 (SC ) which resulted in overruling the earlier view of the Supreme Court in the same case reported in Cloth Traders (P.) Ltd. v. Addl. CIT. CIT. , AIR1979 SC 1691 , [1979 ]118 ITR243 (SC ), (1979 )3 SCC538 , [1979 ]3 SCR984. It is in this case, i. e. , Distributors (Baroda) P. Ltd. v. Union of India , AIR1985 SC 1585 , (1985 )2 Complj389 (SC ), [1985 ]155 ITR120 (SC ), 1985 (1 )SCALE1216 , (1986 )1 SCC43 , [1985 ]supp1 SCR778 , 1986 (1 )UJ86 (SC ) their Lordships while interpreting the language employed in Section 80m held that deduction has to be computed on the net income of the assessee and not on the gross amount. Indeed, the earlier view that it should be computed on the gross amount came to be overruled in a" subsequent decision, i. e. , in Distributors (Baroda) P. Ltd. v. Union of India. , AIR1985 SC 1585 , (1985 )2 Complj389 (SC ), [1985 ]155 ITR120 (SC ), 1985 (1 )SCALE1216 , (1986 )1 SCC43 , [1985 ]supp1 SCR778 , 1986 (1 )UJ86 (SC ). ( 9. ) THE language employed in Section 80tt and that of the one in Section 80m is similar and also one reads Section 80ab though brought on the statute with effect from April 1, 1981. In other words, reading the interpretation placed by the Supreme Court in the case of Distributors (Baroda) P. Ltd. , AIR1985 SC 1585 , (1985 )2 Complj389 (SC ), [1985 ]155 ITR120 (SC ), 1985 (1 )SCALE1216 , (1986 )1 SCC43 , [1985 ]supp1 SCR778 , 1986 (1 ) UJ86 (SC ) of Section 80m read with the language employed in Section 80ab, we have no hesitation in holding that the assessee is entitled to claim deduction under Section 80tt of the Act on the net income and not on the gross one. In this view of the matter, the net income in the case in hand was worked out to Rs. 10,80,000 after deducting the agents commission from the gross total amount of Rs. 12,00,000. So the calculation of computation has to be made under Section 80tt taking Rs. 10,80,000 to be the net income and accordingly, benefit has to be worked out in favour of the assessee. So, in our opinion, we while concurring with the view taken by the Tribunal hold by answering the question referred that the Tribunal was right in granting benefit under Section 80tt on the net amount of Rs. 10,80,000. 10,80,000 to be the net income and accordingly, benefit has to be worked out in favour of the assessee. So, in our opinion, we while concurring with the view taken by the Tribunal hold by answering the question referred that the Tribunal was right in granting benefit under Section 80tt on the net amount of Rs. 10,80,000. In other words, the reference is thus answered against the assessee and in favour of the Revenue.