1979 (6) TMI 102 - AT - Income Tax

Summary

Issues:
Assessment of income from lottery winnings in the status of an "AOP" for the assessment year 1977-78.

Analysis:
The case involved ten individuals who jointly purchased lottery tickets and won a prize of Rs. one lakh. The Income Tax Officer (ITO) assessed the winnings as income of an "AOP" and issued a notice under section 139(2) of the Income Tax Act, 1961. However, the Appellate Assistant Commissioner (AAC) canceled the assessment, holding that the joint purchase of lottery tickets did not constitute a business activity and the prize money should be assessed individually in the hands of the ten persons. The Department appealed this decision.

The Department argued that all elements of an "AOP" were present as the individuals had entered into an agreement to purchase lottery tickets regularly to earn income, which falls under the definition of income under section 2(24)(ix) of the IT Act. On the other hand, the assessee relied on a Supreme Court ruling to support their position.

The Tribunal examined the agreement among the individuals and concluded that there was joint ownership of the winning ticket, entitling all ten persons to the prize money. The Tribunal highlighted that the mere joint purchase of lottery tickets, resulting in a windfall like winning a prize, did not establish an "AOP" engaging in a commercial activity to produce income. The Tribunal emphasized the lack of common management and activity to produce income among the individuals. The authorization given to collect and distribute the prize money equally among the ten persons further confirmed the absence of an "AOP."

Referring to previous court decisions, the Tribunal emphasized that for an association to be considered an "AOP," the members must join together for the purpose of producing income. In this case, the Tribunal found that the joint purchase of lottery tickets did not amount to an income-producing activity requiring common management or concerted effort. Therefore, the Tribunal upheld the AAC's decision to assess the prize money individually in the hands of the ten persons rather than as an "AOP."

In conclusion, the Tribunal dismissed the Department's appeal, affirming the AAC's decision to assess the prize money individually for each of the ten persons.