1994 (8) TMI 73 - AT - Income Tax

Accounting Year, Advance Tax, Advertisement Expenditure, Assessing Officer, Assessment Order, Business Income, Business Loss, Interest Payable By Assessee, Late Filing, Sale Proceeds, Winnings From Lottery

Issues Involved:
1. Denial of deduction under Section 80TT of the Income-tax Act.
2. Disallowance under Section 37(3A) of the Income-tax Act.
3. Charge of interest under Sections 139(8) and 217 of the Income-tax Act.
4. Disallowance of embezzlement claim.
5. Deletion of addition under Section 69 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Denial of Deduction under Section 80TT:
The main controversy relates to the denial of deduction under Section 80TT on sums claimed as "winnings from lottery" by the assessee for the assessment years 1984-85 and 1985-86. The assessee was appointed as an agent to organize and conduct lotteries on behalf of the Governments of Nagaland and Manipur. The AO concluded that the amounts claimed did not constitute "winnings from lottery" as there was no winning from lottery tickets held by the assessee but rather a cessation of liability. The CIT(A) upheld this view, noting that the prize money represented a reduction of liability rather than winnings from lottery tickets held as an investment. The Tribunal agreed with the CIT(A) and AO, citing similar cases and judgments, including the decision of the Bombay High Court in the case of Commercial Corpn. of India Ltd. and the Karnataka High Court in the case of Visveswaraiah Lucky Centre, which held that such receipts were business receipts and not winnings from lotteries.

2. Disallowance under Section 37(3A):
For the assessment year 1984-85, the CIT(A) upheld the disallowance of Rs. 12,62,288 under Section 37(3A), which included expenses on car, car depreciation, car insurance, hotel payments, conveyance, and advertisement and publicity. The CIT(A) found that while result publications were mandatory and did not amount to advertisement, scheme announcement expenses were considered advertisement expenses. The Tribunal agreed with the CIT(A), deleting the inclusion of result publication expenses from the purview of Section 37(3A) but upholding the disallowance of other expenses. For the assessment year 1985-86, a similar disallowance of Rs. 9,28,379 was made, which included expenses on publication of results. The Tribunal deleted the disallowance related to result publication expenses but upheld the balance amount.

3. Charge of Interest under Sections 139(8) and 217:
The assessee challenged the charge of interest under Sections 139(8) and 217, arguing that the AO did not issue any direction to charge interest in the assessment order. The CIT(A) rejected this contention, noting that the return was late and there was a short payment of advance tax, making the provisions of Sections 139(8) and 217 applicable. The Tribunal upheld the CIT(A)'s decision, referencing the Tribunal's decision in the case of Thanmal Mohanlal, which considered similar arguments.

4. Disallowance of Embezzlement Claim:
For the assessment year 1985-86, the assessee claimed a loss of Rs. 4,51,490 due to embezzlement by an employee. The AO and CIT(A) disallowed the claim, noting that the embezzlement came to the assessee's notice only in March 1986, making the loss applicable to the next assessment year. The Tribunal confirmed the disallowance, stating that the loss should be claimed in the year it arose.

5. Deletion of Addition under Section 69:
The revenue challenged the deletion of Rs. 11,87,875 added under Section 69, related to the acquisition of a property in Golf Links, New Delhi. The AO added the amount as undisclosed investment based on the IAC (Acquisition)'s assessment of the property's market value. The CIT(A) deleted the addition, noting that the ITAT had set aside the IAC (Acquisition)'s order. The Tribunal confirmed the CIT(A)'s decision, finding no material to show that the assessee made the impugned investment.

Conclusion:
The appeals of the assessee were partly allowed, with specific deletions and disallowances upheld or overturned as detailed above. The appeal of the revenue was dismissed.

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