COMMISSIONER OF INCOME TAX Vs. R SETHU

JUDGEMENT

(1.) AT the instance of the Revenue, the Tribunal has stated a case and referred the following question of law arising out of its order ITA No. 435/Mds/1986, dated 12th October, 1977, under s. 256(1) of the IT Act, 1961 (hereinafter referred to as the 'Act') :

(2.) THE brief facts leading to the tax case reference are as under : One R. Sethu, is an assessee. THE assessee with his father M. Ramalingam Pillai, his brother-in-law S. Narayanan and his mother-in-law Smt. Seethalakshmi purchased four lottery tickets sold by the Directorate of Small Savings and State Lotteries, Government of Rajasthan, Jaipur. THE said four persons entered into an agreement on 30th January, 1982, to share the prize money received by them equally. THE ticket purchased bearing No. A-272661 won the first prize of Rs. 10 lakhs at the draw conducted on 29th March, 1982, by the Director of Small Savings and State Lotteries, Government of Rajasthan, and the prize money was disbursed to the assessee and three others by cheque dated 17th September, 1982, issued by the Government of Rajasthan. THE ITO "for the reasons stated by him in the order passed for the asst. yr. 1982-83, was of the view that the assessee's father, brother-in-law and mother-in-law were benamis of the assessee and the entire lottery income of Rs. 10 lakhs should also be assessed as a protective measure in the hands of the assessee for the asst. yr. 1983-84 on the ground that the amount was received in September, 1982 which is the previous year relevant for the asst. yr. 1983-84. He also made a protective assessment on R. Sethu and others in the status of BOI on the same date for the same asst. yr. 1983-84. THE assessee preferred two separate appeals objecting to the assessment on the ground that there was no BOI as the share of the four co-owners were known and for determined and there could not be any assessment on the BOI. He also contested that the other three persons cannot be regarded as benamis and the entire sum of Rs. 10 lakhs cannot be included in the income of the assessee. THE CIT(A) heard both the appeals together and after perusing the records, he came to the conclusion that each co-owner signed an affidavit before the Commissioner of Oaths of this Court affirming that each had a 25 per cent share in the prize money and the Director of Rajasthan State Lotteries deducted 20 per cent out of the prize amount of Rs. 10 lakhs and the balance of Rs. 8 lakhs was paid to each co-owner at the rate of Rs. 2,00,000 each. THE CIT(A), therefore, held that since the cheques were received by the co-owners the prize winner acquired the income only when the Director of State Lotteries issued the cheques and not before that date and, therefore, he came to the conclusion that the correct assessment year in which the assessment should not be made was 1983-84. He also upheld that contention of the assessee that there was no scope for making an assessment as a BOI as there was no skill or industry in making the income and there was only a wagering contract and in this view, directed the ITO to adopt the total income of the BOI consisting of assessee and others as 'nil' for the asst. yr. 1983-84 and allowed the appeal. He also held that the other persons cannot be regarded as benamis and allowed the appeal preferred by the assessee. He also held that the assessee should be assessed only to an extent of rupees two lakhs instead of rupees ten lakhs.

(3.) WE have carefully considered the submissions of the learned counsel for the parties. WE have set out the facts in detail. The fact remains that the assessee along with three others joined together and purchased a lottery ticket with the object of earning income. There was a joint venture and the object of the joint venture was to earn income and since both the conditions are satisfied, we are of the view that the status to be adopted for such association can only be the BOI. In a similar factual situation, this Court in CIT vs. A. U. Chandrasekharan & Ors. (supra) held as under :