COMMISSIONER OF INCOME TAX Vs. A U CHANDRASEKHARAN

JUDGEMENT

(1.) IN compliance with the order of this Court dt. 9th March, 1981, the Tribunal referred the following question, for the opinion of this Court, under s. 256(2) of the IT Act, 1961 :"Whether, on the facts and in the circumstances of the case, the prize money of Rs. 1, 00, 000 could be assessed in the hands of the members as one unit in the status of 'Association of persons' or individually in the hands of the members ?.

(2.) SHRI A. U. Chandrasekaran and others are the employees of India Cements Ltd, Sankari, Salem District. They entered into on agreement on 17th February, 1977 as per which they agreed to jointly purchase lottery tickets of the Tamil Nadu Government for which the prize was declared on 28th February, 1977. They secured a prize of rupees One lakh for one of the tickets thus purchased, viz., ticket No. S. 647180. The abovesaid ten persons authorised SHRI 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 ITO was of the view that the ten persons should be assessed in the status of 'Association of Persons (AOP). Notice under s. 139(2) was issued on 24th October, 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 ITO, all the elements of 'AOP' were present in this case. Therefore, the ITO brought to tax the above receipt from the lottery after giving the statutory deductions.

(3.) TEN persons joined together and under a letter, dt. 18th October, 1977, each of the members has categorically stated as under :" * 1. The joint venture was organized by Mr. A. U. Chandrasekaran in November, 1976 and purchased tickets every month. We have got an oral agreement to the effect that Raffle tickets have to be purchased for the total amount contributed by the members of this group and the ticket numbers' will be typed with a written agreement signed by all the members of this group stating that the proceeds of the winning tickets will be equally divided amongst the members. 2. We are doing the same sort of joint venture every month and the total members will also be 10. But any one or (sic-every month) two members will be excluded and in their place new members will be admitted so as to try our luck in succeeding attempt. All the members in our group are working in the Sales Department of the Indian Cements Ltd., Sankari West and no outsiders will be admitted in our group".It is the case of the assessee that there is no permanency in the formation of the members, because, every month two out of the ten persons would be removed and another two new members would be added in their place. But it remains to be seen that at least to the extent of eight persons they remain constantly. It is the case of the assessee that there is no element of AOP in the present case. According to them, they jointed together only for the purpose of purchasing the ticket and winning the prize depends upon their luck. This submission made by the learned counsel for the assessee cannot be accepted. The joint venture would not stop with the purchase of the ticket, 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 any one of the tickets purchased by them wins a prize, then the point would arise, whether the winning of the lottery could be assessed either in the status of AOP or in the status of individuals, who joined the venture.