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TMI Blog1960 (2) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... tly the assessee showed the details of the monies expended by him and the monies realised by him, either from the stakes for which his horses ran or from his successful bets. In the year of account which ended on 31st March, 1947, which corresponded to the assessment year 1947-48, the excess of receipts over expenditure amounted to ₹ 44,259. In the next year his own books showed the excess of receipts over expenditure as ₹ 11,514. The Income-tax Officer accepted the book results for the assessment year 1947-48. But for the assessment year 1948-49, he added back a sum of ₹ 1,500, which he disallowed from the expenditure incurred by the assessee. The Income-tax Officer computed ₹ 13,014 as income from this source for the assessment year 1948-49. The Income-tax Officer treated these items of ₹ 44,259 and ₹ 13,014 as income of the assessee from his business. That was confirmed by the Assistant Commissioner, to whom the assessee appealed. The further appeal to the Tribunal also failed, and the contention of the assessee that what he made over racing was not assessable to income-tax in either of the assessment years was again rejected. The following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with others. These horses are trained at Madras and Bangalore by trainers appointed by the assessee. The assessee also keeps a sort of race-book showing the profit, losses and expenses with reference to the races in which his horses took part. I find this is a regular line of business for the assessee. In the order of assessment for the next year the Income-tax officer stated: The assessee's auditor contended that racing was a hobby with the assessee but the circumstances of the case showed that the assessee was doing regular business with a view to profit. In the order the Income-tax Officer pointed out: for about eight months every year he (the assessee) attends to races leaving his son in charge of the beedi business at Salem. Thus, as far as the Income-tax Officer was concerned, in both the years he treated the amount in question as income which the assessee derived from his business. That was confirmed by the Assistant Commissioner. With reference to 1947-48, the Assistant Commissioner recorded: Apart from owning horses and running them in various centres of racing, he has from the very beginning been a regular punter, i.e., better on horses. By his o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity of his as a source of profit. Also, on the peculiar facts of the case, it has to be held that the assessee earned profits from horse-racing. That is enough to bring them to tax. The discussion in the appellate judgment which we have extracted above was certainly not elaborate. The Tribunal should certainly have been aware of the difference between the several heads of income listed in section 6 of the Income-tax Act. These heads are mutually exclusive. The Department treated the income as falling under the head business of which the Tribunal was conscious. That was set out in paragraph 2 of its judgment. We are unable to appreciate the view propounded by the Tribunal in paragraph 3 of its judgment, that it was unnecessary to decide whether racing and/or betting--confining the question, of course, to the activities of the assessee--constituted his business, profession or vocation. It is not clear whether the receipts were treated as falling under the residuary head, income from other sources, to which section 12 of the Act would apply. The Tribunal did not also deal with the specific plea of the assessee, that in any event the assessee was entitled to exclude these i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Allahabad High Court who constituted the Full Bench. As far as the facts of this case are concerned, we find ourselves in an even worse position than the learned judges who decided In re Lala Indra Sen(1). As we have already pointed out, the Tribunal did not even decide under which of the several heads listed in section 6 of the Income-tax Act the assessee could have been taxed. Apparently the Tribunal was of the view that the decision on that point was not necessary. If it was income from business, on that ground alone the application of section 4(3)(vii) of the Act would have been ruled out. It is on the scanty material furnished to us in the statement of the case that we have to answer the question that has been referred to this court. We shall examine first whether the two sums in question, ₹ 44,259 and ₹ 13,014, which had been admittedly received by the assessee, constituted income, and if they did constitute income, under which of the mutually exclusive heads enumerated in section 6 of the Act that income fell. Even before we deal with these questions, we have to point out that with reference to the facts and the circumstances of this case, it is not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mined by the Department or whether it was a hobby as claimed by the assessee. We are not to be understood as saying that there is and never can be any distinction between betting and racing. All we say is that in the case of the assessee and in the relevant assessment years he himself made no distinction between the fruits of his betting and those of his racing activities. The question is, did the receipts of the assessee from his betting and racing activities constitute income. As has been repeatedly pointed out, income has not been defined by the Income-tax Act, and the scheme of the Act makes it a concept of the widest import. Even a casual and non-recurring item of receipt is income. Only it is excluded from the computation of assessable income by the provisions of section 4(3)(vii) of the Act. We are referring to this at this stage only to understand what income means. The source of the income is relevant for determining first whether it is assessable or non-assessable, and if it is not exempt from assessment, for deciding next under which of the heads enumerated in section 6 the income has to be assessed. It is really in that light we have to understand what the Privy Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the heads enumerated in section 6 of the Income-tax Act the receipt of that income fell. We have no hesitation in holding that there was no material on record which would justify a conclusion, that it was income from the business of the assessee. That was no doubt the finding of the Department though the Tribunal itself refrained from going into the question and from recording any express finding that it was income from business. In Graham v. Green, Rowlatt, J., said this: What is a bet? A bet is merely an irrational agreement that one person should pay another person something on the happening of an event. A. agrees to pay B. something if C.'s horse runs quicker than D.'s or if a coin comes one side up rather than the other side up. There is no relevance at all between the event and the acquisition of property. The event does not really produce it at all. It rests, as I say, on a mere irrational agreement. We are in respectful agreement with these observations. To these observations we can add: when a person places a bet and loses it, that money is gone; if he wins the bet he gets his own money plus what the other party has lost as his bet; in neither cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to afford the pleasure both of keeping racehorses and of betting. I think that in India, as in England, men of means take a pride in possessing racehorses and in exhibiting their horses, and themselves, on racecourses. And the instinct to gamble is not the perquisite alone of man of business. Prima facie, I think that, where the only facts known are that a well-to-do man owns and runs three horses and bets on them and other horses, he does so for his pleasure, even though that pleasure costs him ₹ 7,000 odd in a year. And none the less is this so by reason of the fact that he makes a note in his books of account of what his pleasure costs him. Many men of method do that. We are in respectful agreement with these observations of Braund, J. To adapt the words of Braund, J., where the only facts known are that a well-to-do man like the assessee owns horses and bets on them and other horses the prima facie view should be that he does so for his pleasure, even though that pleasure brought him substantial sums of money. Obviously it is not the ultimate success or failure from a pecuniary point of view that really decides whether a given set of activities constituted the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no evidence to sustain the finding of the Department that the racing and betting activities of the assessee continued his business. Neither the Department nor the Tribunal considered whether, if these racing activities did not constitute the business of the assessee, they could be viewed in the alternative as constituting his profession or vocation. The learned counsel for the Department urged that the racing activities of the assessee could be brought under either of the heads profession or vocation. Much of what we said in holding that there was no material on record to justify a finding that such activities constituted the business of the assessee, would also apply in considering whether they constituted his profession or vocation. Whether or not betting could be organised on commercial lines by a punter to constitute a business of his, it is virtually impossible to look upon gambling by betting or racing, i.e., entering horse for races, or a combination of both, as constituting a profession or vocation. Vocation may be an expression of much large import than profession. But that makes no difference to what we have stated. No doubt, the expression professional gambler ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion that we can consider whether betting can be a business, profession, vocation, or even occupation. The question will have to be answered in each case with reference to the facts disclosed by evidence in that case. We have therefore refrained from making use of the passages extracted by the learned author, Gunn, to which our attention was drawn. Since we have held that the receipts of the assessee constituted his income, and since it was not income from any business, profession or vocation of the assessee, it could only be brought under the residuary head in section 6 of the Income-tax Act, income from other sources. The next question is, whether that income of the assessee was exempt from taxation, and whether it satisfied the requirements of section 4(3)(vii) of the Income-tax Act, which runs: Any income, profits, or gains falling within the following classes shall not be included in the total income of the person receiving them: (vii) Any receipts not being capital gains chargeable according to the provisions of section 12B and not being receipts arising from business or the exercise of a profession, vocation, or occupation which are of casual and non-recurring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right way to look at this is that the assessee, whenever he felt inclined, from time to time made a bet and not that he made a series of bets on a prescribed plan. He was free to stop whenever he liked. And if each bet is, as I think, an individual transaction, I can myself see nothing of a 'recurring nature' about it. It was not its nature to recur. If it did in fact recur with great frequency it might on that account become a 'business'. It may be true that, in fact, these bets did recur. But that was not the result of the 'nature' of the transaction but of the mere spasmodic volition of the assessee. They were not, to my mind, of a recurring 'nature'....... What section 4(3)(vii) requires is that the receipts should be nonrecurring. Braund, J., was alive to that, as he pointed out at page 221 of the report. In the case of gambling by betting and racing, even as in the case of gambling with dice or cards, the habit of gambling, or the habitual indulgence in gambling is not enough to show that the receipts, when they do materialise are of recurring nature. In the case of such receipts from betting, what suffices to establish that they were casu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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