'Betting and gambling' and 'lotteries' - Definition / Legal Terminology - Income Tax

Meaning of betting and gambling and lotteries Explanation.(i) - For the purposes of sub-clause (ix) of clause (24) of section 2 of the Income tax Act 1961 ,- Lottery includes- winnings from prizes awarded to any person by draw of lots or by chance or in any other manner whatsoever, under any scheme or arrangement by whatever name called; A. Dictionary meaning : (i) Black s Law Dictionary defines gambling to mean: The act of risking something valuable, especially money for a chance to win a prize. (ii) Similarly, in Advanced Law Lexicon, P. Ramanatha Aiyar (6th Edition) at page 612 betting and gambling has been described as follows: Putting a stake on something of value, particularly money with consciousness of risk and hope of gain on the outcome of a game or a contest, whose result may be determined by chance or accident, or on the likelihood of anything occurring or not occurring. (iii) In Words and Phrases (Permanent Edition) Vol. 25-A at page 439 a lottery has been defined to mean a species of gambling. At page 444, it has been stated as follows: The term lottery as popularly and generally used referring to a gambling scheme in which chances are sold or disposed of for value and the sums thus paid are hazarded in the hope of winning a much larger sum, a scheme for the distribution for the distribution of prizes by chance. (iv) In Advanced Law Lexicon, P. Ramanatha Aiyar (1997 Edition) Lottery has been defined as follows: Scheme for disposal or distribution of property by chance. The term lottery has no technical meaning in the law distinct from its popular signification. (v) Similarly, in Black s Law Dictionary (6th Edn.) at p. 947 the meaning of lottery has been pithily given as under: A chance for a prize for a price. (vi) The Concise Oxford English Dictionary [Oxford University Press, 11 Edn., 2004] at p. 844, defines the term lottery as follows: Lottery a means of raising money by selling numbered tickets and giving prizes to the holders of numbers drawn at random something whose success is governed by chance. (vii) The Webster s New American College Dictionary (1981) defines as: A method of selling numbered tickets and awarding prizes to the holders of certain numbers drawn by lot. From the above Dictionary meanings what emerges is that lottery is one of the many gambling schemes. That gambling is the genus of which a species is lottery . It is evident that lotteries and gambling activities, to be termed as such, must inherently have an element of chance in the manner in which the result thereof is determined. That the species of lottery may be placed in the genus of betting and gambling and more specifically under the ambit of gambling because of the gambling spirit which is a necessary element of lottery . The expression to take a chance is itself synonymous to a gamble. Therefore, it may be concluded that lottery is one such activity which requires a participant to take a chance or to gamble. Any form of contest for a prize that does not fall within the definition of either betting, gaming or a lottery is defined as a prize competition which is also subject to legal control. B. Some Recent Writings : (i) According to the House of Lords Select Committee Report on the Social and Economic Impact of the Gambling Industry (Report of Session 2019-21), gambling is a general expression which can include different types of gambling viz., betting, gaming and lotteries. Betting is defined as making or accepting a bet on: (i) the outcome of a race, competition or other event or process; (ii) the likelihood of anything occurring or not occurring; or (iii) whether anything is or is not true. Gaming is defined as playing a game of chance for a prize . A game of chance includes: (i) A game that involves both an element of chance and an element of skill; (ii) A game that involves an element of chance that can be eliminated by superlative skill; and (iii) A game that is presented as involving an element of chance, but (iv) Does not include a sport. The Report however states that the expression gaming may not include video gaming and social gaming as such but is used in a statutory sense viz., section 6 of Gambling Act, 2005. Lotteries is defined as a type of gambling that has three essential elements : (i) Payment is required to participate; (ii) One or more prizes are awarded; and (iii) Those prizes are awarded by chance. In England, the Gambling Act, 2005 has been enforced as a comprehensive legislation with effect from 1st September, 2007 to include betting, gaming and lotteries. While the Gambling Act, 2005 defines each of the forms of gambling, the underlying concept game and bet are not defined. (ii) Kent R. Grote and Victor A. Matheson (Department of Economics and Business, Lake Forest College and Department of Economics, College of the Holy Cross, Worcester respectively) in their Article The Economics of Lotteries: A Survey of the Literature , published in August, 2011, have stated that- lotteries represent one of the oldest and most common forms of gambling around the world. That lotteries involve the sale by an organising body, typically the government but also occasionally private businesses or charities, of a ticket, giving the possessor, a potential monetary reward. Lotteries differ from casinos in that lottery ticket sales generally do not take place at a location specifically set aside for gambling, and modern lotteries are usually operated by governments instead of private firms. It is further observed that lotteries are of particular interest to scholars for a variety of reasons. First, they represent an important source of government revenue in many States and countries, so they are of interest to public finance economists. Second, lotteries provide researchers interested in micro-economic theory and consumer behavior with a type of experimental lab that allows economists to explore these topics. Whether the subject lotteries organised by the Central Government and the State Governments being carved out of betting and gambling which is dealt with under Entry 34 of List II and being placed in Entry 40 of List I would also exclude the power of taxation on the same in Entry 62 of List II? In the instant case, the tax imposed is on the gambling nature of lotteries, which field is covered in its entirety under Entry 62 of List II and the power to impose tax under this Entry extends in relation to lottery of every kind, with no distinction as to the entity organizing the same. Thus, in the context of lotteries, the Organisation and conduct of a lottery scheme being a pan India activity, when any State Government permits the Government of India or any other State Government to organise the lottery scheme in that State, Entry 62 of List II would enable the Legislature of that State to levy taxes on the same. STATE OF KARNATAKA ANR. ETC. VERSUS STATE OF MEGHALAYA ANR. ETC.- 2022 (3) TMI 1093 - SUPREME COURT