TMI Blog1996 (9) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... 80. The abovesaid ten persons authorised Sri Chandrasekaran to collect the prize amount through the Punjab National Bank. The said bank, after realising the prize amount, credited the net amount thus drawn, i.e., Rs. 67,000 (Rs. 1,00,000 minus Rs. 33,000 deducted by the Director of Raffles) to the respective bank accounts of the ten persons. Each one of the ten persons thus got a sum of Rs. 6,700. The Income-tax Officer was of the view that the ten persons should be assessed in the status of an " association of persons ". Notice under section 139(2) was issued on October 24, 1977. A " nil " return was filed. However, in Part III of the return, it was mentioned that the sum of Rs. 1,00,000 was obtained as the first prize jointly by the ten persons and that the same was exempt. Later, it was pointed out that the sum of Rs. 1,00,000 was divided among them and individual returns were filed admitting their shares of the prize money. According to the Income-tax Officer, all the elements of an " association of persons " were present in this case. Therefore, the Income-tax Officer brought to tax the above receipt from the lottery after giving the statutory deductions. Aggrieved, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tating that the joint venture ends with the purchasing of the tickets and it could not be extended further. According to learned senior standing counsel, the joint venture is for the purpose of earning income and does not stop with the purchase of the tickets. For these reasons, learned senior standing counsel appearing for the Department, submitted that the Tribunal was not correct in holding that the assessee should be assessed not in the status of an association of persons, but in the status of individuals. However, learned counsel appearing for the assessee submitted that in view of the decisions of the Supreme Court cited supra, there is no joint venture. Lottery tickets were purchased with the fond hope of getting a prize from the winning ticket. This would not amount to a joint venture for the purpose of earning income. The winning of a prize depends upon luck, and, therefore, it cannot be said that any income is earned from the winning of the lottery ticket. According to learned counsel, even though there is a written agreement, but by an oral understanding the ten persons agreed to purchase the tickets for the purpose of dividing the income if any ticket wins the prize. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tickets and winning the prize depends upon their luck. This submission made by learned counsel for the assessee cannot be accepted. The joint venture would not stop with the purchase of the tickets, but it would extend till the winning of the prize for the tickets which they have purchased. If there is no winning of the prize by any of the tickets, then the matter ends there. But, when any one of the tickets purchased by them wins a prize, then the point would arise, whether the winnings from the lottery could be assessed either in the status of an association of persons or in the status of individuals, who joined the venture. Even according to the assessee, as per their written agreement, they are entering into a joint venture for the purpose of purchasing the tickets. The object of purchasing the tickets was for earning income. The definition of the expression " income " in clause (24) of section 2 of the Act has been amended by the Finance Act, 1972, with effect from April 1, 1972. Sub-clause (ix) has been added to the definition. After this amendment, the expression " income " includes any winnings from lotteries, crossword puzzles, races including horse races, card games ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of S's firm, and at the end of each year the balance in the account of " M and Brothers " was transferred in equal proportions to the separate and individual accounts of M, K, R and V, in the books of the firm. The Department assessed the appellants in the status of an " association of persons ". On a reference, the High Court held that in view of section 9(3) of the Indian Income-tax Act, 1922, the appellants had to be assessed only as individuals in relation to the income from house property, but that they were to be assessed in the status of an " association of persons " in relation to dividends. On appeal, the Supreme Court held that the appellants could not be assessed in the status of an " association of persons " in regard to the realisation of dividends since if the members of an association chose to realise their dividends as individuals, there was an end of the association and the appellants' assertion that they realised the dividends in their individual capacity remained unrebutted and none of the facts could be said to be inconsistent with their claim. Thus, it can be seen in the abovesaid decision also there is no joint venture by the brothers, who inherited the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed course of activity to earn income from betting, and, therefore, according to the Department they were assessable in the status of an " association of persons ". On these facts, a question arose whether the said five persons constituted an association of persons or body of individuals. While answering this question, the Andhra Pradesh High Court held as under : " If we examine the facts of this case in the light of the above tests and principles, it would be clear beyond any doubt that the five persons came together and entered into a joint venture with a view to invest moneys and engage themselves in betting and gambling and thus earn income. The joint venture agreement clearly says that they had entered into a joint venture regarding the placing of bets, investing in jackpot and treble and tanala events in the horse-racing season of 1972 at Hyderabad. Each of them contributed Rs. 200 initially and agreed to supply further amounts required in equal proportions. The moneys so contributed were to be invested in placing of bets and in jackpot, treble and tanala events. It was also provided that if any ' dividends ' are realised from the said investment, the same shall be divided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sources ". Therefore, purchase of the lottery tickets is for earning an income. The two conditions for assessing the income under the status of an association of persons are (1) there must be a joint venture, and (2) that the object of the joint venture is to earn income. Both the conditions are satisfied in the present case. Hence, the Tribunal was not correct in confirming the order passed by the first appellate authority, who directed to assess the income earned from lottery money in the status of individuals. As already pointed out, the abovesaid two decisions of the Supreme Court would not come to the aid of the assessees in order to support their case, because the facts are different in those decisions, So also, the decision of the Calcutta High Court in Rama Devi Agarwalla v. CIT [1979] 117 ITR 256, would not come to the aid of the assessee, since there was no joint venture in purchasing the land by the five ladies and selling the same. A plain reading of the facts arising in the present case would go to show that the decision of the Andhra Pradesh High Court in CIT v. Friends Enterprises [1988] 171 ITR 269, would apply to the facts arising in this case on all fours. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
