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TMI Blog2022 (11) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances, purchase price paid by the lottery dealer to the extent of unsold lottery tickets is loss. However, this loss is mitigated by prize money attributed to prize winning lottery tickets out of unsold lottery tickets lying with the trader. We find that in Pooja Marketing [ 2021 (5) TMI 793 - ITAT MUMBAI] dealt with a case, wherein the taxpayer was carrying out business as a Sole State Level Distribution for distributing lottery tickets in the State of Maharashtra and in this process has won prize from unsold lottery tickets, which were not taken back by the main distributor. Thus held such prize money from unsold lottery tickets as income from business of the taxpayer firm. A.R. during the course of hearing placed reliance upon the agreement entered with the Government of Maharashtra, which was filed by way of an application seeking admission of additional evidence. The assessee also placed on record its appointment letter as Stockists , inter alia, for the State of Maharashtra, as part of the compilation of additional evidences. As per the assessee, these documents could not be filed before the lower authorities as the hearing before the learned CIT(A) was conclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness . 4. The brief facts of the case pertaining to the issue, as emanating from the record, are: The assessee is a lottery dealer. For the year under consideration, the assessee filed its return of income on 12/10/2017, declaring total income of Rs.8,62,28,150. The return of income was processed under section 143(1) of the Act, determining the taxable income at Rs.11,42,28,150, after making adjustment of Rs.2,80,00,000, on account of income by way of winning from lottery tickets, etc., under section 115BB of the Act. Thereafter, the assessee filed rectification application under section 154 of the Act against the aforesaid intimation, however, the same was disposed off by the Centralized Processing Centre, Bangaluru, vide order dated 22/08/2019, without granting any relief to the assessee. 5. In appeal against the rectification order passed under section 154 of the Act, the learned CIT(A) dismissed the appeal filed by the assessee and held that there is no evidence to show that the assessee was authorised by any agreement / memorandum of understanding to keep the unsold lottery tickets and receive the prize from the unsold stock of lottery. The relevant findings of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid decision and filed a comparative chart in this regard. 7. On the other hand, the learned Departmental Representative ( learned D.R. ) vehemently relied upon the impugned order passed by the learned CIT(A). 8. We have considered the rival submissions and perused the material available on record. As per the assessee, all the transactions relating to its business has resulted in income from business. The purchases, losses, unsold stock of lottery tickets, expenditure and all the activities are pertaining to business only. Further, the assessee being a seller / trader, all/any income generated from lottery tickets is exclusively in the nature of business income, unlike in case where the person earned income from lottery tickets by winning the prize. As per the assessee, it has not purchased the lottery tickets with a chance to win the prize and the same were purchased in the course of business for the purpose of trading and, therefore, income arising therefrom can be taxed only under the head Income from Business . It has been also submitted that in the course of lottery dealing, every dealer ends up with some quantity of lottery tickets unsold at the end of draw, which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old lottery tickets. Therefore, it would be incorrect to construe the unsold lottery tickets as a separate activity. Obviously, the assessee firm had indeed paid monies for purchasing the tickets and it had indeed made sales to its stockists. If the stockists are not able to ultimately sell the tickets to retailers consumers, as the case may be, and return those unsold tickets to assessee firm and in the event of Government or National Distributor refusing to get back the unsold tickets from the assessee firm, then any prudent assessee would try to mitigate its loss by atleast winning the prize monies on such unsold tickets to the extent of such tickets qualify as winning tickets in the draw held by the Organising State. Admittedly, the value of unsold lottery tickets in the hands of the assessee, but for the prize monies, would be NIL. If an item of closing stock does not have any market or does not remain a marketable commodity, then such item of closing stock would be valued at NIL. Reliance in this regard is placed on the landmark decision of Hon'ble Madras High Court in the case of K Mohammad Khan Sahib vs CIT reported in 56 ITR 360 (Mad) wherein it was held that : I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t years. It is unfortunate that the Tribunal should have indulged in such uncalled for aspersions on the assessee's integrity. . . There seems to the be no quarrelling with the question of fact that there was no market for these skins either locally or abroad. Locally it is certain there was at no time any market, and the observation of the Tribunal that the assessee should have tried to sell them locally is certainly un-under-standable in the context of the evidence. It is for the trader to ascertain what avenues for the sale of the goods are open to him and if he shows that, as far as his contentions establish, there was no prospect of the sale of the goods, for there was no demand, it is not for the income-tax department to order the mode of carrying on the business of the trader. For instance, when the only market for these snake skins was in the United Kingdom and United States all these years, and if that market fell off, the Income-tax Officer cannot ask the assessee why he could not have sold the skins in other foreign countries. That is virtually the stand taken by the Tribunal. As we have also pointed out, it the assessee should gain an initial advantag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the assessee firm with a set purpose to make profit as an ultimate motive under any eventuality. We find that the term 'business' u/s 2(13) of the Act is having widest amplitude and import to cover all incidental activities is also endorsed by the decision of Hon'ble Supreme Court in the case of Mazagaon Dock Ltd vs CIT reported in 34 ITR 358 (SC). Hence even as per the inclusive definition of the word 'business' u/s 2(13) of the Act, the prize winnings from unsold lottery tickets could only have to be treated as income from business of the assessee firm. 10. The learned A.R. during the course of hearing placed reliance upon the agreement entered with the Government of Maharashtra, which was filed by way of an application seeking admission of additional evidence. The assessee also placed on record its appointment letter as Stockists , inter alia, for the State of Maharashtra, as part of the compilation of additional evidences. As per the assessee, these documents could not be filed before the lower authorities as the hearing before the learned CIT(A) was concluded only on the basis of partial submissions filed by the assessee. In view of the above, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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