1994 (1) TMI 118 - AT - Income Tax

Accounting Year, Additional Depreciation, Appellate Assistant Commissioner, Appellate Authority, Assessing Officer, Business Expenditure, Excise Duty, Investment Allowance, Mercantile System, Previous Year, Revenue Expenditure

Summary

Issues:
1. Taxability of prize money received as a gift on Premium Savings Bond in India.
2. Validity of the gift transaction and acceptance between the donor and donee.
3. Applicability of section 115BB of the Income Tax Act on the prize money.

Analysis:
1. The case involved determining the taxability of the sum of Rs. 23,67,835 received as a gift, being the convertible value of prize money on a Premium Savings Bond, in the assessment year 1988-89. The question was whether this amount was exigible to tax in India.

2. The facts revealed that the Premium Savings Bond was purchased in the name of the assessee by her cousin in January 1986, with the prize being declared in September 1987. The donor declared the gift of the bond to the donee, and the donee accepted the gift in London in December 1987. The contention was whether the gift transaction was valid and whether the prize money was taxable in India.

3. The legal counsel for the assessee argued that a valid gift requires the consent and vesting of the property in the transferee, which was not fulfilled in this case. The counsel relied on various precedents to support the argument that a unilateral transaction of purchasing a bond in another's name does not constitute a gift. Additionally, the applicability of section 115BB of the Income Tax Act was challenged, stating that the prize money did not fall under the definition of lottery winnings.

4. The Departmental Representative contended that the prize money was rightfully taxed in the hands of the assessee since she was the legal owner of the Premium Savings Bond when the prize was declared. The principle of 'NEMO DEBET QUA NON HABET' was cited to support the argument that one cannot give what they do not possess.

5. The Tribunal analyzed the gift transaction and the nature of the prize money, concluding that the prize element was not an existing property at the time of purchase of the bond. The prize was contingent on future events and was akin to winning from a lottery, falling under the purview of section 115BB of the Income Tax Act. The Tribunal upheld the order of the CIT(A) and dismissed the appeal of the assessee.

6. The judgment emphasized the distinction between the gift of the bond itself and the prize money, ultimately affirming the taxability of the prize money in the hands of the assessee under the provisions of the Income Tax Act.