9911796707
TMI Blog2024 (10) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... horse races. In the present case, the winnings realized on unsold tickets are realization of closing stock of unsold lottery tickets. This prize money so earned by the assessee was business income which was realized during the course of business of distribution of lottery tickets. Regarding revenue s written submissions on stock-in-hand, it has been submitted that this contention has already been dealt with by Mumbai Tribunal in its order. The factual position, in this regard, has already been noted in the order of Mumbai Tribunal. It has been noted that in respect of draws to be held in the next year, there would be no opening and closing stock since the purchase and sale invoices would be raised in the next year only. For the draws that were to be held in the same financial year, the value of unsold tickets would become zero. The assessee, would, therefore, have no stock in its financial statements. Referring to various finding of Mumbai Tribunal, it has finally been submitted that the purchase price paid for lottery tickers was for onwards distribution of tickets to the stockiest. The purchase price could not be bifurcated between those tickets which have been sold to the stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is to determine the head of income under which prize winning from unsold lottery tickets would be assessable to tax. The revenue s grounds of appeal read as under: - 1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2. The Ld.CIT(A) erred in holding that the prize winning from the unsold lottery tickets amounting to Rs. 46,83,67,965/- is part of business income and directing the Assessing officer to allow the assessee to debit the expenditure of Rs. 51,18,57,848/- towards purchase of unsold lottery tickets and credit the prize winnings from the unsold lottery tickets in P L account considering this as business activity. 2.1 The CIT(A) erred in holding that the prize winnings from unsold lottery tickets is a part of business income, though it falls under the head Income from other sources . An item of income coming under an exclusive head cannot in any circumstances be charged under another head. Reliance is placed on the Hon'ble Supreme Court's decision in the case of Bihar State Cooperative Bank Ltd Vs CIT(l 960) 39 ITR l 14(SC) and United Commercial Bank Ltd Vs CIT, 32 ITR 688. 2.2 The CIT(A) erred in fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch it was held that even if the winnings from the unsold lottery tickets is treated as Income from other sources then the set off of losses under the head Business income against the Income under the head Income from other source under section 71 of the Act would be allowed and tax effect thereof will be revenue neutral. The CIT(A) erred in failing to appreciate that both the business income (after excluding the cost of tickets debited and Prize winnings credited) as well as Income from other source (i.e) Prize winning from unsold lottery tickets would be positive for A Y 2015-16 and there would be no question of set off of loss after applying the provisions of Sec.58( 4) in the computation of income under the head Income from other Sources. Hence there would be no revenue neutral for asst. year 2015-16. 3.2 The Ld.CIT(A) erred in failing to appreciate that 'the Assessing officer relied on the decision of the Hon'ble Kerala High Court in the case of CIT Vs Manjoo Co, in which it was held that the income from winning of lotteries from unsold tickets by a whole sale distributor did not involve business activity. The ITAT distinguished the facts of the above case stating that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing tickets From the above it is clear that there is no difference between winning from lotteries sold and tickets remaining unsold with the assessee. Hence, the winning from Lotteries from unsold tickets would not partake the character of business receipts. 4. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored. 2. The Ld. CIT-DR as well as Ld. Sr. DR advanced arguments qua the head under which income from winning from lotteries would be assessable to tax. The revenue assailed the impugned order and filed various written submissions from time to time to support the assessment order. Per Contra, Ld. Sr. Counsel, Shri V. Sridharan, assailed the arguments of revenue and relied on various judicial pronouncements and in particular, the favorable decision of Mumbai Tribunal in assessee s own case in ITA No.2596/Mum/2019 dated 24-05-2021. The copy of the same has been placed on record. The Ld. Sr. Counsel submitted that all the aspects as argued by revenue have duly been considered in the aforesaid decision. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the total income under this Act shall be chargeable to income-tax under the head Income from other sources , if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E . (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head Income from other sources , namely - ( i ) dividends; ( ia ) income referred to in sub-clause ( viii ) of clause ( 24 ) of section 2; ( ib ) income referred to in sub-clause ( ix ) of clause ( 24 ) of section 2 Thus for the purpose of taxation, the legislature included winning from lotteries u/s 56(2)(ib) of the Act and the same, therefore, would fall under residuary head of income as contemplated u/s 56. 3.3 The Ld. AO further noted that the provisions of Sec.57 provide that expenditure could be allowed in earning the income as referred to in Sec.56. However, the provisions of Sec. 58(4) prohibit claim of any such expenditure against the same. The provisions of Sec.58(4) provide that in case the assessee has any such income as chargeable under the head income from other sources, no deduction in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey from unsold tickets lying with the assessee-firm could be said to be winning from lotteries because the assessee-firm had not purchased the said lotteries for winning prize and the assessee firm had not taken part in the lottery draws. The prize money from unsold tickets lying with the assessee firm has reduced the cost of the lottery tickets which were distributed by the assessee. Reliance was placed on various judicial decisions to support the submissions. 3.7 However, not convinced, Ld. AO rejected the submissions of the assessee on the ground that the assessee had entered into Agreement with M/s Future Gaming Solutions India Pvt. Ltd. ( future in short) in respect of lottery tickets of State of Sikkim lottery. Similar agreement was entered with M/s Teesta Distributors for sale of lottery tickets of State of Mizoram. Both the agreements were almost similar / identical. As per the agreement with future , the assessee was the sole purchaser of the tickets of State of Sikkim from future at rates decided by them. The assessee had purchased the tickets at much lower rate than the Maximum Retail Price (MRP) of the tickets. As per the agreement, the Government had sold out entire lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by chance would not take colour of retrieval of the cost of tickets as explained by the assessee. Accordingly, by holding the tickets, the assessee had participated in the draw. The Ld. AO distinguished the case laws being relied upon by the assessee. 3.10 It was finally held by Ld. AO that winning from lotteries from unsold lottery tickets would be chargeable to tax as income from other sources as per Sec.56(2)(ib) r.w.s. 2(24)(ix) which would be subject to tax at rates specified u/s 115BB. The assessee is not permissible to claim any expenditure against the same. The value of unsold tickets constitutes expenditure incurred by the assessee for such winnings. Accordingly, the purchases were reduced to that extent and the assessment was framed. Appellate Proceedings 4. The Ld. CIT(A), upon perusal of case records and assessee s submissions, concurred that the impugned issue stood covered in assessee s favor by the decision of Mumbai Tribunal in assessee s own case for AY 2014-15, ITA No.2596/Mum/2019. The Ld. CIT(A) discussed the ratio of aforesaid decision of Tribunal in impugned order from para 5.2 onwards. The Tribunal held that such prize winnings would be Business Income for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther appeal before us. Our findings and Adjudication 6. The Ld. CIT-DR, in its written submissions has stated that the assessee has not treated the tickets as stock-in-trade since the assessee has not reflected any opening or closing stock in its financial statements. The same would mean that the assessee s intention was not to treat the winning as business receipts but as prize money from tickets which have remained unsold in the relevant lottery scheme. Therefore, such winning would be classified u/s 2(24)(ix) r.w.s. 56(2)(ib). It has also been submitted that Ld. CIT(A) as well as Mumbai Tribunal has not looked into all these aspects / facts. Accordingly, Ld. CIT(A) has prayed for restoring this issue back to the file of Ld. CIT(A). 7. The Ld. Sr. DR, in its written submissions, has stated that the assessee has returned back certain percent of unsold tickets and held back some unsold tickets. The same would show that the assessee intentionally held the tickets with it to participate in the lottery scheme on its own. It is also evident that TDS has been deducted u/s 194B at higher rates of 30%. If the prize money was out of trading stock that remained unsold, then TDS should have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is the fact that, in that case, the assessee did not contend that betting income would be income from owning and maintaining of the horse races. However, in the present case, the winnings realized on unsold tickets are realization of closing stock of unsold lottery tickets. This prize money so earned by the assessee was business income which was realized during the course of business of distribution of lottery tickets. Regarding revenue s written submissions on stock-in-hand, it has been submitted that this contention has already been dealt with by Mumbai Tribunal in its order. The factual position, in this regard, has already been noted in para 4.1.1 and para 4.1.2 in the order of Mumbai Tribunal. It has been noted that in respect of draws to be held in the next year, there would be no opening and closing stock since the purchase and sale invoices would be raised in the next year only. For the draws that were to be held in the same financial year, the value of unsold tickets would become zero. The assessee, would, therefore, have no stock in its financial statements. Referring to various finding of Mumbai Tribunal, it has finally been submitted that the purchase price paid fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
