Delhi High Court

G.N. Pant vs Commissioner Of Income Tax on 24 October, 2000

Equivalent citations: (2001) 164 CTR Del 326

Author: C Arijit Pasayat

JUDGMENT

Arijit Pasayat, C. J.

On being moved by the assessee under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as `the Act'), following question has been referred for opinion of this court, by the Tribunal, Delhi Bench 'A' :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was not entitled to deduction under section 80TT in respect of winnings from jackpot?"

2. Factual position, in a nutshell is as follows:

Assessee, an individual, filed its return of income for the assessment year 1974-75 corresponding to accounting year ending on 31-3-1974. On 3-2-1974, assessee had won a sum of Rs. 1,26,700 as jackpot and the said amount was paid to the assessee by Delhi Race Club (1940) Ltd. Assessee treated this amount as income and claimed deduction under section 80TT of the Act. Such deduction was claimed on the ground that winning of jackpot was in the nature of winnings from a lottery. The Income Tax Officer, however, did not allow the deduction under section 80TT of the Act, being of the view that such deduction was available only in respect of winnings from any lottery. As the amount was won from horse racing, it was held that section 80TT of the Act had no application. Assessee filed an appeal before the Appellate Assistant Commissioner and submitted that winning in a jackpot was in the nature of winning from a lottery and, therefore, deduction under section 80TT of the Act is to be granted. Appellate Assistant Commissioner upheld the conclusion of the Income Tax Officer. The matter was carried in appeal before the Tribunal by the assessee. Tribunal observed that in view of the definition of the "income" under section 2(24)(ix), the claim as made by the assessee was not acceptable. On being moved for reference, question as set out above has been referred.

3. We have heard learned counsel for the revenue. There is no appearance on behalf of the assessee in spite of notice. It was submitted by learned counsel for the revenue that language used in section 2(24)(ix) made the position clear that winnings from lotteries stand on a different footing from winnings from races including horse races. Undisputed factual position being that the jackpot winning is nothing but winning from horse races, conclusions of the authorities and the Tribunal are irreversible.

4. In order to adjudicate the question that has been referred, reference to view provisions as existed at the relevant point of time would be necessary. Sections 2(24)(ix), 10(3), 74A and section 80TT of the Act read as follows :

"Section 2(24)- "income" includes : ..................

(ix) 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.

Section 10-In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included .. ..........

(3) Any receipts which are of a casual and non-recurring nature, to the extent such receipts do not exceed five thousand rupees in the aggregate :

Provided that where such receipts relate to winnings from races including horse races, the provisions of this clause shall have effect as if for the words "five thousand rupees", the words "two thousand five hundred rupees" had been substituted :

Provided further that this clause shall not apply to :

(i) capital gains chargeable under the provisions of section 45; or

(ii) receipts arising from business or the exercise of a profession or occupation; or

(iii) receipts by way of addition to the remuneration of an employee;

Section 74A : (1) .........

(2) .........................

(3) In the case of an assessee, being the owner of horses maintained by him for running in horse races (such horses being hereafter in this sub-section referred to as race horses), the amount of loss incurred by the assessee in the activity of owning and maintaining race horse in any assessment year shall not be set off against income, if any, from any source other than the activity of owning and maintaining race horses in that year and shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year and :

(a) it shall be set off against the income, if any, from the activity of owning and maintaining race horses assessable for that assessment year :

Provided that the activity of owning and maintaining race horses is carried on by him in the previous year relevant for that assessment year; and

(b) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on; so, however, that no portion of the loss shall be carried forward for more than four assessment years immediately succeeding the assessment year for which the loss was first computed.

Section 80TT. Deduction in respect of winnings from lottery-Where the gross total income of an assessee, not being a company, includes any income by way of winnings from any lottery, (such income being hereafter in this section referred to as winnings), there shall be allowed, in computing the total income of the assessee, a deduction from the winnings of an amount equal to,

(a) in a case where the winnings do not exceed five thousand rupees, the whole of such winnings;

(b) in any other case, five thousand rupees as increased by a sum equal to fifty per cent of the amount by which the winnings exceed five thousand rupees".

5. Section 74A was introduced with effect from 1-4-1972. Sub-section (2) thereof, which was omitted by Finance Act, 1986, reads as follows:

"(2) The sources referred to in sub-section (1) are :

(a) lotteries;

(b) crossword puzzles;

(d) card games;

(e) other games of any sort;

(f) gambling or betting of any form or nature whatsoever not falling under any of the foregoing clauses".

6. A bare reading of the provisions shows that distinction was made in the provisions between (a) lotteries and (c) races including horse races. Section 2(24)(ix), which was amended also with effect from 1-4-1972 makes a difference between winnings from lotteries and races including horse races. It is also to be noted that section 194B and section 194BB deals with winnings from (a) lotteries or crossword puzzles and (b) winnings from horse races, respectively. Though section 194BB was introduced later i.e., with effect from 1-4-1978, it is relevant to note that the clear distinction has been made between winnings from lotteries and winnings from horse races. It is also to be noted that in section 10(3), there is a specific reference to winnings from races including horse races.

7. In CIT v. G.R. Karthikeyan (1980) 124 ITR 85 (Mad), it was held by the Madras High Court that prize money in a motor car rally, depends entirely on the skill in performance of driving of the car and does not come within sweep of the expression "winnings from races". Reversing the decision, Apex Court held that car rally was a contest, if not a race, and the assessee entered the contest to win. What he got was a return for skill and endurance. It was "income" construed in its widest sense, though it was "casual" in nature (See CIT v. G.R. Karthikeyan (1993) 201 ITR 866 (SC).

8. In Corpus Juris Secundum the expression "lottery" has been defined as "pooling the proceeds derived from chances or tickets taken or purchased and then allotting such proceeds or a part of them or their equivalent by chance to one or more such takers or purchasers are indicia of a "lottery". It is necessary that winner must not only be a contributor, to the prize money, but also be a participant. In Webster's Dictionary a lottery is defined to be "A distribution of prizes by lot or chance" and a similar definition is given in Johnson. The word "lottery" embraces the elements of procuring through lot or chance, by the investment of a sum of money or something of value, some greater amount of money or value.

9. The expressions "winnings from lotteries" and "winnings from horse races" have been used in different contexts at different places in the statute. Section 80TT permits deduction in respect of winnings from lotteries. As the winnings from races including horse races have been treated differently under different statutory provisions. The claim of assessee for deduction under section 80TT have been rightly refused. Our answer to the question, therefore, is in the affirmative, in favour of the revenue and against the assessee.