COMMISSIONER OF INCOME TAX Vs. MANJOO AND CO.

JUDGEMENT

(1.) 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 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 assessment years 2000-01 and 2001-02 certain unsold tickets held by the Respondent Assessee were the prize winning tickets and on production of those tickets the Lottery Directorate paid the prize money to the Respondent after recovery of tax at source treating the payments as "winning from lottery". Even though Respondent Assessee accounted the receipt of income in the profit and loss account as prize won from lottery, in the income-tax returns filed, the Respondent claimed that the prize money received from the Lottery Department represents income not assessable under the special provisions contained in Section 115BB of the Income-tax Act but assessable as business income. The Income-tax Officer however, rejected the claim holding that prize money received in lottery is assessable at the special rate provided under Section 115BB and so much so it cannot be treated as business income. The first appeal filed by the Respondent was allowed and the Tribunal confirmed it on second appeal filed by the department against which these appeals are filed.

(2.) We have heard standing counsel for the Income-tax Department for the Appellants and Advocate George Poonthottam appearing for the Respondent Assessee.

(3.) Appellant's case is that winnings from lottery have to be assessed strictly in terms of special provisions contained in Chapter XXII of the Act which in Section 115BB provides as follows:-