This is appeal preferred by assessee, Shri K.R. Syamkumar, Ernakulam, for assessment year 1993-94, against appellate order dated 31-10-1996. grounds of appeal read as under: '1. orders of Dy. Commissioner of Income-tax (Appeals), Calicut is opposed to law. 2. taxable minimum has been fixed by Finance Act as Rs. 28,000 and Dy. Commissioner ought to have found that since prize amount is less than this minimum and assessee is not having any other income amount could not be adjusted to tax. 3. Dy. Commissioner ought to have found that definition of income given in section 2(24) includes any winnings from lotteries and since according to first schedule under Finance Act, unless income exceeds taxable limit of Rs. 28,000 no tax is leviable, no tax can be levied in appellant's case. 4. Appellate Authority ought to have found that even though special rates have been prescribed for winnings from lotteries for purpose of deduction of tax at source, when winnings from lotteries itself does not exceed taxable limit no tax can be levied. 5. very fact that Assessing Officer has levied surcharge shows that she has treated this as regular income where alone rates prescribed includes surcharge. 6. In case of Capital Gains when Capital Gains is beneath taxable limit no tax is levied. Even though no such clarification is given in case of winnings from lotteries it is clear that policy adopted is that special rates are applicable only if income exceeds taxable minimum. 7. Any other grounds which appellant may be allowed to raise, at time of hearing appeal.' Though there are 7 grounds of appeal, only issue to be considered is whether assessee is eligible for basic exemption in view of fact that assessee had no other source of income during previous year relevant to assessment year 1993-94, except winning from lottery of Rs. 25,000. 2. brief facts of case are that assessee was student in accounting year relevant to assessment year 1993-94. He had no income from any source. During previous year relevant to assessment year 1993-94, he won prize in Kerala State Lotteries of amount of Rs. 25,000. After deducting agent's prize and seller's bonus of Rs. 2,500 and deducting tax under section 194B of amount of Rs. 7,000, assessee received net amount of Rs. 15,500. Since total income of assessee, for year under consideration, was far below taxable income of Rs. 28,000, assessee filed return claiming refund of tax deducted at source of Rs. 7,000. Assessing Officer processed return under section 143(1)(a) and raised further demand of Rs. 3,472, without providing basic exemption and exemption o f Rs. 5,000 under section 10(3) of Income-tax Act, 1961. Subsequently, Assessing Officer rectified intimation, under section 154 and allowed exemption of Rs. 5,000 on 18-12-1995 and calculated tax payable at Rs. 840 including surcharge(after giving credit for Rs. 7,000 being TDS). 2.1 Aggrieved, assessee carried matter in appeal before first appellate authority and disputed entire lottery amount assessed by Assessing Officer. Before Dy. Commissioner of Income-tax (Appeals) it was contended that there was no justification on taxing Rs. 22,500 as same was far below taxable minimum of Rs. 28,000 for assessment year 1993-94. However, Dy. Commissioner of Income-tax (Appeals) after referring to section 115BB of Act, came to conclusion that charging to tax on winnings from lotteries was at flat rate irrespective of income. And only deduction admissible was under section 10(3) of Rs. 5,000. He also observed that non taxable maximum prescribed for assessment year 1993-94 was applicable to income other than winning from lotteries etc. Thus, first appellate authority confirmed order of Assessing Officer. 2.2 Aggrieved, assessee carried matter in second appeal before Tribunal. Tribunal after hearing parties came to conclusion that t h e return filed by assessee was processed return under section 143(1)(a) and so far as rectification of intimation by allowing exemption of R s . 5,000 was concerned, it could not be interfered with. According to Tribunal, though legal aspect of point had to be considered separately as contended by both parties, they were of opinion that no adjustment was allowable under section 143(1)(a) of Income-tax Act, 1961 as was done by Assessing Officer and he was required to accept income returned in toto. Tribunal felt that matter being highly debatable no adjustment could have been made by Assessing Officer and in this matter Tribunal allowed assessee's appeal. 2.3 Aggrieved, by above finding of Tribunal, Commissioner of Income-tax filed reference application under section 256(1) of Income-tax Act, 1961 and Tribunal referred following question for opinion of Hon'ble High Court of Kerala: 'Whether, on facts and in circumstances of case, charging o f tax at flat rate of 40 per cent on Rs. 22,500 under section 115BB of Income-tax Act, 1961, is valid and in accordance with law and making adjustment under section 143(1)(a) is highly debatable?' Hon'ble High Court vide its order dated 3rd September, 2003 in ITR No. 77 of 1999 (sic) arising out of RA No. 305/Coch./97 in ITA No. 698/Coch./96, set aside order of Tribunal and remitted matter back to file of Tribunal for consideration of matter afresh in accordance with law and in light of following observations: '6. As already noted, in original intimation, Assessing Officer had applied provisions of section 115BB of Act and applied flat rate of 40 per cent on entire lottery income. effect of finding of Tribunal that legal issue is debatable one and assessment cannot be rectified is that original intimation which is against assessee stands. We also find that for arriving at conclusion that legal issue is debatable one Tribunal has not cared to consider provisions of section 115BB and CBDT Circular No. 461 dated 9-7-1986 [1986] 161 ITR (Statutes) at page 36 relied on by assessee. Because there were rival contentions on this legal issue Tribunal has held that it is debatable issue. question whether issue is debatable one or not will depend on understanding of section 2, provisions of section 115BB and provisions of Schedule to respective Finance Acts, certainly with reference to circular also. Since Tribunal has not considered above, we are of view that Tribunal committed serious error in holding that assessee is entitled to succeed. We accordingly set aside order of Tribunal and remit matter to Tribunal for consideration of matter afresh in accordance with law and in light of observations made herein above. In circumstances, we decline to answer questions referred to this court for decision.' 3. Consequently case came up for hearing on various dates and finally same was heard on 26-10-2005. At time of hearing, learned counsel of assessee submitted as under: 3.1 definition of income in section 2(24) includes any winnings from lottery by item (ix) of section 2(24). According to First Schedule under Finance Act, rates of income have been prescribed on total income and according to that unless income exceeds taxable limit of Rs. 28,000 no tax was livable. As per definition of 'total income' it includes all income from whatever source derived. Since total income is within non-taxable limit, no tax could be levied. 3.2 Hon'ble Supreme Court in case of Union of India v. A. Sanyasi Rao [1996] 219 ITR 330 have found that basis of charge relating to income- tax is laid down in sections 4 to 9. According to Apex Court, other special sections are only machinery provisions and not charging sections. This would indicate that unless total income from whatever source is above non- taxable limit, no tax could be levied. 3.3 issue whether exemption limit under Finance Act should override section 115BB which prescribed flat rate, has to be decided in light of fact that in other matters like discretionary trusts where tax is charged at maximum rate under section 164, basic exemption is always considered. 3.4 significant instance in support of appellant's claim is that even though special rate of tax has been prescribed under section 112 in respect of long-term capital gains, under proviso it has been clarified that if income from other sources of income is within taxable limit deficiency in minimum taxable limit could be adjusted from long-term capital gains and balance alone need be taxed at special rate of 20 per cent. Unfortunately, since many cases of this type have not arisen no such proviso had been provided under section 115BB and no courts had occasion to clarify this aspect. Certainly it could not had been intention of Legislature to have different standards in respect of different type of income especially since both these sections come under same Chapter in Income-tax Act. 3.5 It is also relevant to state that in case of dividend income, interest income, income earned by Contractors etc. tax is deducted at source at prescribed rates but at time of assessment if income is below taxable limit TDS is refunded. It is illogical to treat one case of income which is within non-taxable limit as tax non-livable and in another case entirely different treatment is meted out. 3.6 Repeatedly, Hon'ble Supreme Court and almost all other High Courts have stated that when two interpretations of Law are possible, one in favour of assessee should be accepted. 3.7 reliance of department in CBDT Circular dated 9-7-1986 [161 ITR (St.) 17] at page 36 to effect that apart from general exemption of R s . 5,000 under section 10(3), no further allowances or deductions are admissible against gross winnings from lottery, is beside point, since it is contrary to basic minimum taxable prescribed in Finance Act and condition stipulated in circular could be made applicable only in case of taxable income. 4. On contrary, learned departmental representative submitted that tax on winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature are included in 115BB of Income-tax Act in Chapter XII for determining tax in certain special cases. relevant section 115BB reads as under: '115BB. Tax on winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever. Where total income of assessee includes any income by way of winnings from any lottery or crossword puzzle or race including horse race (not being income from activity of owning and maintaining race horses) or card games and other game of any sort or from gambling or betting of any form of nature whatsoever, income tax payable shall be aggregate of:- (i) amount of income tax calculated on income by way of winnings from such lottery or crossword puzzle or race including horse race or card game and other games of any sort or from gambling or betting of any form or nature whatsoever, at rate of forty per cent; and (ii) amount of income tax with which assessee would have been chargeable had his total income been reduced by amount of income referred to in clause (i).' It would be seen from above that charging to tax on winnings from lotteries is at flat rate irrespective of income. only deduction admissible is under section 10(3) of Rs. 5,000. non-taxable maximum prescribed for assessment year under consideration is applicable to income other than winning from lotteries etc. deduction under section 10(3) which was omitted to be allowed in original assessment under section 143(1)(a) was subsequently rectified by Assessing Officer. There is no need to disturb order of revenue authorities. 5. We have heard rival submissions and considered facts and materials on record. short point for our consideration in this case is whether in view of provisions of section 115BB of Act basic exemption available under section 2 of First Schedule to Finance Act (Rs. 28,000 prevalent during relevant assessment year) is applicable to assessee or not? For examining this aspect, we should ascertain intention of Legislature while introducing section 115BB of Income-tax Act. Section 115BB was introduced into statute by Finance Bill, 1986 with effect from 1-4-1987. relevant section reads as under: '115BB. Tax on winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever. Where total income of assessee includes income by way of winnings from any lottery or crossword puzzle or race including horse race (not being income from activity or owning and maintaining race horses) or card game and other game of any sort or form gambling or betting of any form or nature whatsoever income-tax payable shall be aggregate of - (i) amount of income tax calculated on income by way of winnings from such lottery or crossword puzzle or race including horse race or card game and other games of any sort or from gambling or betting of any form or nature whatsoever, at rate of forty per cent; and (ii) amount of income tax with which assessee would have been chargeable had his total income been reduced by amount of income referred to in clause (i).' In interpreting section of Act, as held by Hon'ble Supreme Court in case of K.P. Varghese v. ITO [1981] 131 ITR 597, Finance Minister's Budget Speech could be relied upon to throw light on object and purpose of particular provisions introduced in Finance Bill. In case of K.P. Varghese (supra), Apex Court has held as follows: 'The speech made by mover of Bill explaining reason for its introduction can certainly be referred to for purpose of ascertaining mischief sought to be remedied by legislation and object and purpose for which legislation is enacted. This is in accord with recent trend in juristic thought not only in western countries but also in India, that interpretation of statute being exercise in ascertainment of meaning, everything which is logically relevant should be admissible.' Thus intention of Legislature for introducing this section into statute can be ascertained from Budget Speech of Finance Minister. In Budget Speech of Minister of Finance for 1986-87 (on 28-2-1986) at para No. 102, purpose of introducing this section has been mentioned. relevant portion of Budget Speech is reproduced below: 'There is at present tax deduction at source from out of winning derived from races and lotteries. I propose to tax these windfall profits at flat rate of 40 per cent, of gross receipts. exemption from income of casual and non- recurring nature will simultaneously be raised from Rs. 1,000 to Rs. 5,000. Income from any winnings from crossword puzzles, card games, other games of any sort or from gambling or betting of any form or nature whatsoever, races including horse races (other than income earned by owners of race horses by way of stake money) and winnings from lotteries will not be aggregated with other incomes. That is to say, losses, if any, from other business will not be allowed to be set off against winnings from races or lotteries.' [Emphasis supplied] From above Budget Speech intention of Legislature can be ascertained. It is crystal clear from Budget Speech that tax rate of 40 per cent on items mentioned in section 115BB of Income-tax Act, is flat rate on gross receipts. Further Finance Minister has clarified that winnings from lotteries will not be aggregated with other incomes and losses if any from other business will not be allowed to be set off against such winnings from lotteries. simple reading of above speech would go to prove that intention of Legislature was to tax income from lotteries at flat rate of 40 per cent without adjusting any income/losses from any other sources. Also Circular No. 461 dated 9-7-1986 of CBDT reported in 161 ITR (st.) 36 makes it clear that apart from general exemption of Rs. 5,000 under section 10(3) no further allowances or deductions are admissible against gross income of winnings from lotteries, except in cases where there is diversion by overriding title. Thus, combined reading of Budget Speech and Circular of CBDT would clarify position that winnings from lotteries are taxable at flat rate of 40 per cent without giving any deductions except Rs. 5,000 as envisaged in section 10(3) of Income-tax Act. Further, plain reading of section 115BB shows that there are two limbs, namely (i) and (ii) under that section. combined reading of both sub-clauses (i) and (ii) would go to show that income from lotteries is taxable at flat rate of 40 per cent and amount of income-tax with which assessee would have been chargeable had his total income been reduced by amount of income referred to in clause (i) of section 115BB to be aggregated to find out tax payable by person who is in receipt of winnings from lotteries. Thus, in our opinion, basic exemption can only be available while computing tax as per section 115BB(ii) of Act. In case assessee is not in receipt of any other income from whatever source except that of winnings from lotteries, as in present case, in our considered view assessee is not entitled for claiming basic exemption of Rs. 28,000 as he had no other income to fall under sub-clause (ii) of section 115BB so as to claim basic exemption. 6. contention of learned counsel of assessee regarding tax rate prescribed under section 112 in respect of Long- Term Capital Gains and relevant proviso clarifying minimum taxable limit could be adjusted from long-term capital gains and balance alone need be taxed at special rate of 20 per cent is of no help to assessee because no such proviso is provided under section 115BB of Income-tax Act. arguments regarding logic and equity are of no use because this section itself is very clear and also Budget Speech of Finance Minister and Circular of CBDT supports view of Assessing Officer that assessee is not entitled to adjust basic exemption against income from lottery. Moreover it is well known that equity is stranger to Income-tax Act. submission of learned counsel of assessee that when two interpretations are possible, one in favour of assessee should be accepted cannot hold water because there is no question of two interpretations in present case on hand. 7. In view of above, we do not find any infirmity in orders of revenue authorities and as such we are dismissing appeal filed by assessee. 8. In result, appeal of assessee fails and same is hereby dismissed. *** K.R. SYAMKUMAR v. INCOME TAX OFFICER