2014 (5) TMI 284 - HC - Income Tax

Nature of income Prize money received on unsold tickets Business income OR income from any winnings from lotteries u/s 2(24)(ix) r. w section 115BB of the Act Held that - The amount of prize received on unsold lottery tickets is an income by way of winning prize from lottery - the prizes awarded to the assessee by draw of lots fall within the ambit of lottery and the amount gained falls within the ambit of income by way of winnings from lotteries - Section 115BB is a special provision under the Act to tax the income by way of winnings from lotteries Decided against Assessee.

Summary

Issues Involved:
Levy of tax on prize money from unsold lottery tickets as business income or casual income under Section 115BB of the Income Tax Act for the assessment year 1992-93.

Analysis:

Issue 1: Interpretation of Income Tax Provisions
The first issue revolves around the interpretation of Section 28 and related provisions in Chapter IV-D of the Income Tax Act. The Tribunal held that the income from prize money on unsold tickets was not assessable as business income but as casual income under Section 115BB. The key contention was whether the income should be considered part of the regular business income of the assessee or as income from winning lotteries. The Tribunal's decision was based on the categorization of the income under different sections of the Act.

Issue 2: Nature of Business Activity
The second issue delves into the nature of the assessee's business activity. It was argued that the assessee's primary business involved dealing in lottery tickets as stock in trade. The income received from such tickets was considered part of the regular business income and the cost of lottery tickets, including unsold ones, was seen as a legitimate outgoing. The contention was that the prize money from unsold tickets should be treated as incremental business income, contrary to being classified as casual income from winning lotteries.

Issue 3: Judicial Review of ITAT Decision
The third issue questions the validity of the ITAT's decision, alleging that it failed to consider the overall scheme of the Income Tax Act, the facts and circumstances of the case, the nature of the assessee's business, and other relevant information on record. The argument was that the ITAT's decision was flawed due to a lack of comprehensive review and consideration of all pertinent aspects, leading to an erroneous conclusion regarding the taxability of the sum in question under Section 115BB.

In conclusion, the High Court dismissed the appeal, stating that the issue at hand was previously addressed in a similar case, M/S J.N.Sharma vs. Asstt. Commissioner Of Income Tax. The Court found all questions raised by the appellant to be interlinked and ruled in favor of the revenue, upholding the Tribunal's decision to levy tax on the sum under Section 115BB.