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TMI Blog1981 (1) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) of the Income-tax Act, 1961 ("the Act"), did not include winnings from lotteries, it was claimed by him that it would not be income of the assessee assessable for that assessment year. The ITO did not accept this contention for the reason that the assessee had not maintained any accounts for his business and also for the reason that there was no evidence to show that the lottery was drawn on 14-3-1972. He went solely by the credit in the account of the assessee with Canara Bank in April 1972 for this amount. The ITO held that the income has to be assessed only on cash basis and not on mercantile basis. He brought to tax the sum of Rs. 46,000 after allowing a deduction of Rs. 25,000 under section 80TT of the Act. 3. The AAC, however, agreed with the assessee that this sum cannot be subjected to assessment. Before him, the assessee produced evidence to show that he won this amount on Ticket No. B 743549 in the 33rd draw of the Haryana State Lottery that took place on 14-3-1972. This evidence consisted in the publication styled "Prize Winners of Haryana State Lotteries" from the 1st draw to 49th draw published by the Director of Lotteries, Chandigarh. It was urged before the AAC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... soon as the result of the draw was announced. The production of the ticket for approving the claim of the assessee for the draw and the drawings of the amount from the lottery authority would not affect the position that this particular amount accrued to the assessee before 1-4-1972. At the time it accrued it was not income. It is pointed out that in section 2(24) and in section 10(3) as well as in sections 194B and 80TT the words used are "winnings from any lottery", which according to the learned counsel for the assessee would indicate not merely the amount that is won in the lottery, but the process of winning itself by drawing a lottery. If this aspect is taken into account, it is urged, that the amount described as winnings from lottery could only be considered for the purpose of assessment if the process of winning took place after the effective date for this amendment, namely, 1-4-1972. It is urged that the winnings to the assessee arose before 1-4-1972 and, therefore, the prize amount did not amount to winnings from lottery as contemplated in section 2(24)(ix), section 10(3), section 80TT and section 194B. The fact of receipt by itself could not determine the character of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word "received" as appearing in section 5, it has been held by the Supreme Court that the words "accrue" or "arise" are used in contradistinction to the word "received" and indicate a right to receive---CIT v. A. Gajapathy Naidu [1964] 53 ITR 114 (SC), CIT v. Swedeshi Cotton Flour Mills (P.) Ltd. [1964] 53 ITR 134 (SC), CIT v. Ashokbhai Chimanbhai [1965] 56 ITR 42 (SC) and Seth Pushalal Mansinghka (P.) Ltd. v. CIT [1967] 66 ITR 159 (SC). This meaning attributed to the words "accrue" or "arise" clearly shows that before an income can be received, it should have accrued, that is to say, the right to receive it should have preceded the actual receipt. It has been in terms held so by the Supreme Court in CIT v. Ahmedbhai Umarbhai Co. [1950] 18 ITR 472 (SC) and Anglo-French Textile Co. Ltd. v. CIT [1954] 25 ITR 27 (SC). It has been held that the accruing or arising represent a stage anterior to the point of time when the income becomes receivable and cannot be character of the income which is more or less inchoate and which is something less than a receipt. 9. It is, therefore, clear that a receipt in order to have the characteristics of income at the time it is received shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of receipts which are neither income receipts nor capital receipts. It must, therefore, be held that on 14-3-1972, when the 33rd draw of the Haryana State Lottery took place, the prize amount that fell to the assessee did not accrue to the assessee as income. The subsequent receipt would not, therefore, be taxed as the income of the assessee on the receipt basis. The view that we are taking is in accordance with the principles laid down in the decision in Morley v. Tattersall [1939] 7 ITR 316 (CA). It has been held in this decision that the character of a receipt, that is, whether it is an income receipt or otherwise is determined once and for all at the time of the receipt. If it was not income at this first point of time, subsequent events would not change its character into income. The following passage from this decision (which has been quoted in a number of Indian decisions applying this principle) deals with this principle : "Mr. Hills' argument was to the effect that, although they were not trading receipts at the moment of receipt, they had at that moment the potentiality of becoming trading receipts. That proposition involves a view of income-tax law in which I can di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered relevant in that decisions. 13. On the other hand, the position was slightly different in the Indian decisions. In these cases, the right to receive the impugned amounts synchronised in point of time with the actual receipt of the amount. Thus in Bijli Cotton Mills (P.) Ltd., the receipt of the impugned amount was the starting point of the trade transactions of the assessee with the constituent. If there was an accrual of the amount received to the assessee, it was at the same time as the receipt. Similarly, in the case of Motor General Finance Ltd. where the receipts of the deposits and advances were considered by the revenue as trade receipts of businesses, the point of time of accrual coincided with the point of time of receipt. In the case of Sandersons Morgans the item of receipt was client's money and cannot be considered to have accrued earlier to the point of time of receipt. 14. Thus in all these cases the character of the receipts was considered at the time of their receipt because that was also the earliest point of time when the right to receive the amount arose. The principle would not have been different even if the accrual of such amounts had preced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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