TMI Blog1986 (2) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner who deleted the addition and accepted the case of the assessee that the winnings from the races accrued to the assessee on February 27, 1972, which fell in the financial year 1971-72 and no separate accounts had been kept or closed in respect of this source of income. The Revenue challenged this order of the Appellate Assistant Commissioner in appeal before the Tribunal. Before the Tribunal, the case of the Revenue was that the assessee in his account books had shown income from his money-lending business and the receipt of Rs. 38,079 was entered in the books of account and shown in the profit and loss account and the trial balance. Thus, according to the Revenue, the assessee had exercised his option with regard to the previous year ending Deepavali, 1972, in respect of that source of income. Reference is also made to the wealth-tax assessment of the assessee where this amount was shown as part of net wealth as on November 5, 1972. The Tribunal held that the receipt of the amount was on February 27, 1972, and it would be taxable only in the assessment year 1972-73. The circumstance relied on by the Tribunal in support of this view was that the assessee had positive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year ending on November 2, 1971. Consequently, notwithstanding the fact that the amount has been received on February 27, 1972, i,e., in the financial year 1971-72, having regard to the previous year in relation to the assessee, the receipt was clearly in the assessment year 1973-74 and was not, therefore, entitled to any exemption. The argument undoubtedly is an ingenious one but it is difficult for us to accept this argument. The definition of " income " in section 2(24) was amended by the Finance Act, 1972, with effect from April 1, 1972. A new sub-clause (ix) was introduced as an additional clause which read: " any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever ". There was a corresponding amendment in section 56 by adding clause (ib) to the category of " income " which would be chargeable to income-tax under the head " Income from other sources ". Section 56(2) as amended in so far as is relevant would read as follows: " 2. In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in favour of the financial year being the previous year. The decision in this reference, therefore, turns only on the limited question as to whether the inference drawn by the Tribunal that the assessee had exercised his option for the previous year which was the financial year 1971-72, is justified or not. Section, 3(1) of the Income-tax Act, 1961, defines " previous year ". We are concerned only with subclauses (a) and (b) of that definition which read as follows : "1. For the purposes of this Act, 'previous year' means- (a) the financial year immediately preceding the assessment year; or (b) if the accounts of the assessee have been made up to a date within the said financial year, then, at the option of the assessee, the twelve months ending on such date ; or " Section 3(3) expressly provides that subject to the other provisions of section 3, an assessee may have different previous years in respect of separate sources of his income. It is, therefore, not in dispute that in respect of the income from horse racing, it is open to the assessee to select any previous year irrespective of the fact that for the purpose of his accounting in respect of business income or incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncing from 1st April, 1972, is exempt. Therefore, even before the Income-tax Officer, the assessee's case was that this amount of Rs. 38,079 was received during the financial year 1971-72 and, therefore, in the previous year corresponding to the assessment year 1972-73. This statement in our view, was enough to indicate that in respect of this income, the assessee had clearly exercised his option and no separate accounts having been maintained, that being the only income from the source of horse racing, nothing prevented the assessee from taking the stand and exercising an option that that income should be treated as income of the financial year 1971-72. The circumstance that in the wealth-tax assessment for the year ending November 5, 1972, the assessee has included this as part of his net wealth would not necessarily indicate that the income was not received in the previous year 1971-72. The return in respect of the year ending November 5, 1972, for wealth-tax has to be with reference to the valuation date under section 2(q) of the Wealth-tax Act. That position cannot, however, be in any way inconsistent with the specific choice given under section 3(2) to the assessee to adopt a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly fell in the calendar year 1961, as also in the financial year 1960-61 but the return having been filed positively on the basis of the balance-sheet as on December 31, 1961, this particular conduct of the assessee was construed as having adopted the calendar year as the previous year. In the instant case, apart from not showing the income from horse racing as for the relevant previous year ending Deepavali, 1972, the assessee had expressly stated that the income had accrued to him in the financial year 1971-72. The other decision relied upon by the learned counsel for the Revenue is of this court in CIT v. Nellai Murasu P. Ltd [1985] 154 ITR 355. That decision is also clearly distinguishable on facts. The previous year which the assessee company had adopted ended each year on 30th of June. The company sold certain lands on July 19, 1967. The profit arising on this sale was taken note of by the assessee in its accounting period ending on June 30, 1968, and in the return filed for the assessment year 1969-70, the assessee disclosed not only its business profits but also the capital gains on the sale of the lands in question. The case of the assessee was that the transfer of lands t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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