COMMISSIONER OF INCOME TAX Vs. SANJIV KUMAR

JUDGEMENT

(1.) THE learned counsel for the parties state that the opinion of this court regarding the question of law in I.T.R. No. 128 of 1979, will govern the decision of the question of law in I.T.R. No. 129 of 1979. Both the references are, therefore, being disposed of by a common judgment.

(2.) SHRI Sanjiv Kumar, assessee in I.T. Ref. No. 128 of 1979, showed an income of Rs. 12,000 from M/s. Rohit Finance & Chit Fund Company Private Ltd. for the assessment year 1974-75. The assessee claimed exemption of Rs. 8,500 thereon under Section 80TT of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The ITO took the view that the provisions of Section 80TT could not be invoked in the matter. However, he allowed exemption of Rs. 1,000 under Section 10(3) of the Act. In his opinion, the income accruing to the assessee was of casual nature. On appeal, the AAC reversed the finding of the ITO and held that the assessee was entitled to exemption under Section 80TT of the Act. The Tribunal dismissed the appeal of the revenue. At the instance of the revenue, the Tribunal has referred the following question of law for the opinion of this court in I.T.R. No. 128 of 1979:

(3.) FROM the definitions of the word "lottery" as given by various authors, reference to which has already been made, it is clear that the element of chance is one of the important relevant factors for considering whether a particular scheme of things falls within the definition of the word "lottery". A lottery and a wagering contract are two distinct things. A scheme may amount to a lottery though none of the competitors is a loser. A scheme would be a lottery even if the prize money came out of the interest earned from the subscribers' contributions. The touchstone is that if the subscribers have purchased a chance of winning a prize, it can make no difference whether the prizes are paid circuitously from the interest earned on the subscribers' contributions or are paid directly from those contributions. The risk of loss is not necessary.