1981 (1) TMI 134 - AT - Income Tax

Summary

Issues Involved:
1. Assessability of lottery winnings received after 1-4-1972.
2. Determination of the relevant assessment year for the lottery winnings.
3. Interpretation of the term "income" under section 2(24) of the Income-tax Act, 1961.
4. Application of section 80TT and section 194B of the Income-tax Act, 1961.
5. Retrospective application of the Finance Act, 1972.

Issue-Wise Detailed Analysis:

1. Assessability of Lottery Winnings Received After 1-4-1972:
The primary issue was whether the lottery winnings received after 1-4-1972 are assessable in the assessment year 1973-74. The assessee, a licensed lottery agent, won Rs. 46,000 in the Haryana lottery drawn on 14-3-1972 but received the amount in April 1972. The Income Tax Officer (ITO) assessed the winnings on a cash basis, bringing the amount to tax in the assessment year 1973-74, post the amendment of section 2(24) of the Income-tax Act, 1961, which included lottery winnings in the definition of "income."

2. Determination of the Relevant Assessment Year for the Lottery Winnings:
The assessee argued that since the draw took place on 14-3-1972, the income arose in the assessment year 1972-73, and not in 1973-74. The Appellate Assistant Commissioner (AAC) agreed, noting that the crucial date is the date of the draw, and the income arose when the lottery was drawn, not when the payment was received. The AAC concluded that the winnings could not be taxed as they arose before 1-4-1972.

3. Interpretation of the Term "Income" Under Section 2(24) of the Income-tax Act, 1961:
The ITO's assessment was based on the amended section 2(24), which included lottery winnings as income. However, the AAC pointed out that the amendment was effective from 1-4-1972, and the winnings accrued before this date. The Tribunal concurred, emphasizing that the right to receive the prize money vested in the assessee on 14-3-1972, when the lottery was drawn, and at that time, it was not considered "income."

4. Application of Section 80TT and Section 194B of the Income-tax Act, 1961:
The AAC referred to section 80TT, which provides deductions for lottery winnings, and section 194B, which mandates tax deduction at source for such winnings, both effective from 1-4-1972 and 1-6-1972, respectively. The AAC concluded that these provisions applied only to winnings from lotteries conducted after these dates, reinforcing that the assessee's winnings from the draw on 14-3-1972 could not be taxed under the amended law.

5. Retrospective Application of the Finance Act, 1972:
The Tribunal highlighted that section 59 of the Finance Act, 1972, ruled out any retrospective operation of the provisions regarding the inclusion of lottery winnings in the definition of "income." The Tribunal noted that taxing the winnings received in April 1972 would effectively give the amendment retrospective effect, contrary to the legislative intent. The Tribunal cited multiple Supreme Court decisions, emphasizing that the character of a receipt as income is determined at the time of its accrual, not receipt.

Conclusion:
The Tribunal upheld the AAC's decision, concluding that the amount of Rs. 46,000 could not be included in the total income of the assessee for the assessment year 1973-74. The appeal by the revenue was dismissed, affirming that the winnings accrued before the amendment date and thus were not taxable under the amended provisions of the Income-tax Act.