TMI Blog2010 (9) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... r J.- The question raised in the connected appeals filed by the Department is whether the Income-tax Appellate Tribunal was justified in holding that lottery prize money received by the respondent-assessee is assessable as business income and not as income assessable under the special provisions contained in section 115BB of the Income-tax Act, 1961. The respondent-assessee is a wholesale distributor of lotteries organized by the State of Kerala and under the distribution agreement the respondent is entitled to certain discount on the purchase of lottery tickets. If the tickets purchased are not fully sold out by the respondent before the draw date then loss will be to the account of the respondent. For the previous years relevant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever.-Where the total income of an assessee includes any income by way of winnings from any lottery or crossword puzzle or race including horse race (not being income from the activity of owning and maintaining race horses) or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, the income-tax payable shall be the aggregate of- (i) the amount of income-tax calculated on income by way of winnings from such lottery or crossword puzzle or race including horse race or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, at the rate of fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Director of State Lotteries v. Asst. CIT [1999] 238 ITR 1 (Gauhati) and the two decisions of the Karnataka High Court reported in Visveswaraiah Lucky Centre v. CIT [1991] 189 ITR 698 (Karn) and Mysore Sales International Ltd. v. CIT [1979] 117 ITR 64 (Karn) and contended that the income received is business income assessable at the slab rates provided under the Act. The standing counsel on the other hand relied on the decision of the Madras High Court reported in CIT v. G.Krishnan [1997] 228 ITR 557 (Mad) wherein that court had taken the view that even bonus received by the lottery distributor which is 10 per cent. of the prize money received for the ticket sold by him is also winnings from lottery which is subjected to tax at the speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h entitles him for refund of the prize money deposited by him with the Lottery Department irrespective of whether he has any ticket which won the prize or not. On the other hand, in the case before us, admittedly, the respondent has claimed the prize money by producing the prize winning ticket like any other purchaser of lottery ticket who participated in the draw. Therefore, we do not think there is anything wrong in the Gauhati High Court holding that the amount received by the organiser of the lottery in that State which is nothing but refund of the amount deposited by him is in the nature of a business income and not prize money paid for the prize winning ticket. The first question to be considered is whether the winnings from lotte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k-in-trade on the date of draw because after the draw those tickets are unsaleable and have no value except waste paper value that the respondent will get on sale of the same. However, after the date of the draw since the tickets held by the respondent were also included in the draw the respondent becomes entitled to the prize money if any of the tickets held by him gets the prize and if such tickets is produced. This is because after having paid the value for the entire tickets held by him he is entitled to participate in the draw for such of the tickets held by him and when he gets the prize he is entitled to receive the same as a winner of the draw. In other words, at the time of draw the respondent is only a participant in the draw for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re assessable under this special provision irrespective as to under what head winnings from lottery fall. Therefore, assuming for argument's sake the contention of the respondent that winnings from lotteries are received by him in the course of his business and are incidental to the business and as such they are his business income is right, still, we feel in view of the specific provision contained in section 115BB, the special rate of tax is applicable for all winnings from lotteries. What is provided in the said section is that where the total income includes any income by way of winnings from lottery or crossword puzzle, etc, the income-tax payable shall be calculated at the rate of 30 per cent. Total income under section 2(45) read wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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