2006 (4) TMI 460 - AT - Income Tax

Summary

Issues:
Taxability of Matiz car received by the assessee under a scratch card scheme related to the purchase of a refrigerator for the assessment year 2002-03.

Analysis:
The appeal was filed against the order of the Commissioner of Income-tax (Appeals) regarding the taxability of a Matiz car received by the assessee from a refrigerator manufacturer under a scratch card scheme. The delay of 9 days in filing the appeal was condoned due to genuine reasons. The assessee, a teacher, purchased a refrigerator and received a scratch card declaring them a winner of a car. The Assessing Officer assessed the car value as winning from a lottery for the assessment year 2002-03. The assessee contended that the car was a gift, not lottery winnings, supported by the absence of tax deduction at source and legal definitions of lottery and gift.

The Departmental Representative argued that the scratch card scheme falls under the lottery definition as per the Explanation to section 2(24)(ix) of the Income-tax Act, 1961. The definition of "lottery" was discussed, emphasizing chance, contribution, and prize distribution. The court referred to legal definitions of lottery from various sources, highlighting the need for participant contribution in a lottery. A precedent case involving cigarette pack promotions was cited to illustrate the concept of payment for a chance to win a prize. The court concluded that the purchase of the refrigerator, enabling the receipt of the scratch card, constituted a contribution towards participating in the scheme, meeting the lottery criteria.

The court analyzed the definition of lottery along with the Explanation to section 2(24)(ix) and concluded that the scratch card scheme, where participants purchase a product to have a chance at winning a prize, falls under the lottery definition. The contention that the car was received as a gift was rejected. The decision of the Revenue authorities to tax the car as lottery winnings was upheld, leading to the dismissal of the assessee's appeal. The order was pronounced on April 25, 2006.