COMMISSIONER OF INCOME TAX Vs. KARTHIKEYAN G R

JUDGEMENT

(1.) THE Appellate Tribunal has referred the following question at the instance of the Commissioner under Section 256(1) of the I.T. Act, 1961:

(2.) THE assessee, an individual, is a director of Karthikeyan Spinning and Weaving Mills P. Ltd. He derives income by way of salary from the said mills, from house property, from a business in the name of Ramaswamy and Co. and from interest and dividends. In the present reference, we are concerned with the assessment year 1973-74. He participated in an All India Highway Motor Rally, an event jointly sponsored by the Automobile Association of Eastern India and the Indian Oil Corporation, and supported also by other regional automobile associations as well as the Federation of Indian Motor Sports Clubs and the Federation of Indian Automobile Associations. THE event was restricted to private motor cars. THE length of the rally route was approximately 6,956 kilometers. THE race was divided into four legs, (1) Northern Leg, Calcutta to Delhi; (2) Western Leg, Delhi to Bombay; (3) Southern Leg, Bombay to Madras; and (4) Eastern leg, Madras to Calcutta. According to Rule (2) of the regulations, the emphasis was on endurance driving and it was designed as a reliability test for automobiles. THE race was to be run having due regard to the traffic regulations at the different places, as well as to the regulations laid down by the Rally Committee. THE start could be from one of the four points, namely, Calcutta, Delhi, Bombay or Madras and the finishing was in the anti-clockwise direction, that is, the person starting from Calcutta was to complete the rally at Calcutta in the anti-clockwise direction and he would have to return to the starting point. THE prizes were to be awarded on the basis of the success among all the participants. THE first prize was Rs. 20,000. It was to be ascertained by adopting a system of penalty points for various violations of any traffic rule or regulation. THE competitor with the least penalty points was adjudged as successful among the participants. For instance, vehicles up to 1,000 cc were assigned 5 marks, between 1,001 cc and 1,500 cc 15 marks, between 1,501 cc to 2,000 cc 20 marks and over 2,000 cc 25 marks. Using reverse gear at any point before time control or finishing control was assigned 200 marks. For the horn riot working or missing, the point allotted was 30 marks. THEre are other similar marks assigned for other defects. THE assessee had the least of the penalty marks, and he was, therefore, awarded the first prize of Rs. 20,000 by the Indian Oil Corporation and he got another sum of Rs. 2,000 in respect of the same performance from the All India Highway Motor Rally. THE result was, he received a total sum of Rs. 22,000.

(3.) SECTION 11 of the Finance Act, 1972, introduced SECTION 74A into the Act, and the said provision runs as follows :