1971 (7) TMI 37 - HC - Income Tax

Whether the receipt of Rs. 10, 900 on account of lucky price is exempt under section 10(3) of the Income-tax Act of 1961 Held yes

Summary

Issues:
1. Whether the receipt of Rs. 10,900 is exempt under section 10(3) of the Income-tax Act of 1961?

Detailed Analysis:
The case involved a question of law referred by the Income-tax Appellate Tribunal regarding the exemption of a receipt of Rs. 10,900 under section 10(3) of the Income-tax Act of 1961. The assessee had become a member of lucky schemes and received the amount through draws in his favor. The Income-tax Officer included the sum in the assessee's income, considering it as an investment for expected gains. The Appellate Assistant Commissioner upheld this decision. However, the Appellate Tribunal allowed the appeal, emphasizing that the receipt was a fortuitous gain and not necessarily income. The Tribunal highlighted that all receipts may not be income and that only income is taxable. It was noted that similar assessees in similar circumstances should be treated alike to avoid unnecessary litigation.

The department, dissatisfied with the Tribunal's decision, applied for a reference to the High Court. The main contention was whether the assessee's participation in the schemes constituted a business activity. The High Court analyzed the concept of "business" as defined in relevant case laws. After reviewing the decisions, the Court concluded that the activity in question did not amount to a business. The scheme involved monthly contributions for a fixed period, resulting in the return of the investment plus interest. The Court determined that the amount received by the assessee through draws fell within the ambit of section 10(3) of the Income-tax Act, exempting it from taxation. Therefore, the High Court upheld the Tribunal's decision to delete the amount from the taxable income of the assessee.

In conclusion, the High Court answered the referred question in the affirmative, ruling against the department. The assessee was awarded costs amounting to Rs. 150 for the case.