1996 (7) TMI 66 - HC - Income Tax

Summary

Issues Involved:
1. Whether the bonus of Rs. 1,50,000 earned by the assessee on the sale of the prize-winning raffle ticket can be assessed as income from business for the assessment year 1978-79.
2. Whether the bonus receipt of Rs. 1,50,000 partakes of the character of winnings from lottery and is assessable under section 2(24)(ix) with attendant relief under section 80TT.

Issue-wise Detailed Analysis:

Issue 1: Assessment of Bonus as Business Income
The primary question was whether the bonus of Rs. 1,50,000 earned by the assessee on the sale of the prize-winning raffle ticket should be assessed as income from business. The assessee, an accredited agent for selling Tamil Nadu raffle tickets, received a commission and a bonus based on the prize amount of tickets sold. The Income-tax Officer assessed the bonus as business income, rejecting the assessee's contention that it was a windfall. The Officer argued that the bonus was not winnings from a lottery but income from the business of selling raffle tickets. The Commissioner of Income-tax (Appeals) held that the bonus was a windfall receipt but taxable as income under section 2(24)(ix) of the Act. The Tribunal agreed with this view, affirming that the bonus was taxable income under section 2(24)(ix).

Issue 2: Character of Bonus as Lottery Winnings and Relief under Section 80TT
The second issue was whether the bonus receipt of Rs. 1,50,000 should be considered as winnings from a lottery and thus eligible for relief under section 80TT. The Tribunal, agreeing with the Commissioner of Income-tax (Appeals), held that the bonus was inextricably connected with the winning of the lottery and thus assessable under section 2(24)(ix). The Department argued that the agent, not participating in the lottery, should not receive the benefit under section 80TT. However, the Tribunal found that the agent's participation in the lottery was evident through the preservation of the counterfoil of each ticket sold, which entitled him to the bonus if the ticket won. Thus, the Tribunal concluded that the bonus payment was indeed winnings from the lottery, qualifying for relief under section 80TT.

Conclusion:
The Tribunal's judgment was upheld, affirming that the bonus payment received by the assessee was taxable under section 2(24)(ix) and entitled to relief under section 80TT. The court answered the first question in the negative and against the Department, and the second question in the affirmative and against the Department.