2024 (10) TMI 744 - AT - Income Tax

Determination of correct head of income - prize winning from unsold lottery tickets - AO considering the provisions of Sec.2(24)(ix) r.w.s. 56(2)(ib) Sec.58(4) concluded that such winning from lotteries from unsold lottery tickets would be separately chargeable to tax at the rate of 30% in terms of Sec.115BB r.w.s. 58(4) - assessee is not permitted to claim any expenditure against the same. HELD THAT - The order of Mumbai Tribunal in M/s Pooja Marketing 2024 (10) TMI 649 - ITAT CHENNAI we concur that all the aspects / facts of the matter as well as applicable case laws have elaborately been dealt with by the co-ordinate bench in its order. The bench has not only considered the validity of revisionary jurisdiction u/s 263 but also decided the issue on merits. After much deliberation, the impugned issue has ultimately been decided in assessee s favor. The case law in the case of CIT vs. Dr. M.A.M. Ramaswamy 2015 (1) TMI 439 - MADRAS HIGH COURT has elaborately been distinguished by Ld. Sr. Counsel in its written submissions. The same has already been deliberated upon by us in preceding paragraphs. The same found our concurrence. Nothing has been shown to us that the aforesaid decision of Mumbai Tribunal has been reversed by higher judicial authorities in any manner or the same is not applicable to the facts of this year. No distinguishing feature has been shown to us. The issue, on merits, has elaborately been dealt with by the Tribunal in its order. We dismiss the appeal of the revenue.

Summary

Issues:
Determining the head of income for prize winnings from unsold lottery tickets.

Analysis:
The appeal by the revenue for Assessment Year (AY) 2017-18 concerns the head of income under which prize winnings from unsold lottery tickets should be assessable to tax. The primary issue is to ascertain whether such winnings should be classified as business income or separately chargeable under specific provisions. The assessee, a partnership firm engaged in distributing lottery tickets, earned prize money on unsold tickets, treating it as business income after crediting it to the Profit & Loss Account. However, the Ld. Assessing Officer (AO) concluded that the winnings should be separately taxed at a rate of 30% without allowing any expenditure against it, disallowing the cost of unsold tickets and permitting the resulting business loss to be carried forward.

The Ld. Commissioner of Income Tax (Appeals) [CIT(A)], relying on a decision of the Mumbai Tribunal in a related case, directed the AO to treat the prize money as business income and allow the expenditure of unsold lottery tickets. The revenue, aggrieved by this decision, appealed to the Appellate Tribunal. The Tribunal considered similar issues in a previous case involving the assessee's sister concern and found that the prize money realized from unsold tickets should be considered business income, as it was the realization of closing stock of unsold lottery tickets during the course of the distribution business.

The Ld. Sr. Counsel argued that the decision of the Mumbai Tribunal in the related case should apply to the current situation, emphasizing that the winnings were part of the business income. The Tribunal concurred with the findings of the Mumbai Tribunal and dismissed the revenue's appeal, stating that the issue had been elaborately dealt with and decided in favor of the assessee. The Tribunal also noted that the facts for AY 2016-17 were similar, and the decision would apply mutatis-mutandis to that year as well.

In conclusion, the Tribunal confirmed the order of the CIT(A) based on the similar facts and upheld the treatment of prize winnings from unsold lottery tickets as business income. The appeals were dismissed, and the order was pronounced on 9th October 2024.