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Commissioner of Income-tax Vs. Sardari Lal Mehra - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference No. 6 of 1971
Judge
Reported in[1973]87ITR47(P& H)
ActsIncome Tax Act, 1961 - Sections 10(3)
AppellantCommissioner of Income-tax
RespondentSardari Lal Mehra
Appellant Advocate D.N. Awasthy and; B.S. Gupta, Advs.
Respondent Advocate Bhagirath Dass and; B.K. Jhingan, Advs.
Cases Referred and Raja Bahadur Kamakshya Narain Singh of Ramgarh v. Commissioner of Income
Excerpt:
.....appellant got the money and lotteries which are being encouraged by all the states in the country as well as five year interest free prize bond (1965) scheme of the government of india. in our opinion, the income-tax appellate tribunal was perfectly justified in deleting this amount from the taxable income of the assessee......and collect taxes should not lose sight of the basic principle of jurisprudence that it is the income and income alone which is taxable and all receipts may not be necessarily income. in order that a receipt is assessed as an income that receipt must be income. the learned departmental representative on the other hand has urged that the appellant has received the amount in question in a properly planned predetermined business activity and, as such, it is taxable. we are afraid, we cannot appreciate this argument. the appellant has placed before us the judgment of another appellate assistant commissioner of amritsar which is dated september 15, 1969, in which a different appellant was a member of the lucky scheme started by the same company. in his case, the addition made was deleted.....
Judgment:

1. The Income-tax Appellate Tribunal, Chandigarh Bench, has referred the following question of law for our opinion :

' Whether, on the facts and in the circumstances of the case, the receipt of Rs. 10,900 is exempt under Section 10(3) of the Income-tax Act of 1961 ?'

2. The facts set out in the statement of the case are as follows:

The assessee became a member of two lucky schemes launched by M/s. New Suraj Financiers and Chit Fund Co. Pvt. Ltd., Amritsar, in August, 1967, and in December, 1967. According to the rules pertaining to the two schemes, each member was required to pay a sum of Rs. 100 towards each scheme per month to the company for a period of sixty months. At the end of each month, from the starting of the lucky schemes, a draw was made and the person whose luck favoured as a result of the draw was to be paid Rs. 6,000, and was further entitled to stop contributing his one hundred rupees in future. But, all the members, excepting those in whose favour the draws had gone; were to get back Rs. 6,000 each at the end of sixty months with Rs. 500 in addition as interest. The assessee had contributed only Rs. 400 in the first lot when the draw was declared in his favour in August, 1967, and the received Rs. 6,000. In the second scheme he had contributed only Rs. 700, when the draw was drawn in his favour in December 1967. The Income-tax Officer included the sum of Rs. 10,900 in his income. The assessee contended that the sum of Rs. 10,900 was not his income as it was received on account of lotteries drawn in his favour and was of a casual and non-recurring nature. It was maintained that this amount was merely a fortuitous gain and was not a venture in the nature of trade. The Income-tax Officer came to the conclusion that the monthly contribution made by the applicant was pure and simple investment for definite and expected gains. The Income-tax Officer treated the sum of Rs. 10,900 as income of the assessee and included it in his assessment. On appeal, the Appellate Assistant Commissioner agreed with the Income-tax Officer. The assessee then preferred an appeal to the Appellate Tribunal. The Tribunal allowed the appeal with the following observations : ' We have heard the appellant in person who has strongly urged that as and when he became the member of the two schemes he never visualised that he was so lucky as to get an excess amount of Rs. 10,900 by the twq draws in his favour within such a short time. There appears to be a freak of luck in favour of the appellant. We fail to understand why a person should not be allowed to remain happy in case his luck favours him in a venture of the type in which the appellant has indulged. After all we do not find any difference between the two schemes out of which the appellant got the money and lotteries which are being encouraged by all the States in the country as well as Five Year Interest Free Prize Bond (1965) Scheme of the Government of India. It cannot be taken as the appellant's income merely because the appellant has received an amount over and above his contribution as all amounts received are not necessarily income. The income-tax authorities in their zeal to assess income and collect taxes should not lose sight of the basic principle of jurisprudence that it is the income and income alone which is taxable and all receipts may not be necessarily income. In order that a receipt is assessed as an income that receipt must be income. The learned departmental representative on the other hand has urged that the appellant has received the amount in question in a properly planned predetermined business activity and, as such, it is taxable. We are afraid, we cannot appreciate this argument. The appellant has placed before us the judgment of another Appellate Assistant Commissioner of Amritsar which is dated September 15, 1969, in which a different appellant was a member of the lucky scheme started by the same company. In his case, the addition made was deleted by the Appellate Assistant Commissioner. We feel that similar assessees placed in similar circumstances must be dealt with in the similar manner to lessen multiplicity of proceedings and avoidable litigation. We, therefore, direct the deletion of the sum of Rs. 10,900 from the income of the appellant land accordingly allow the appeal.'

3. The department, being dissatisfied, applied under Section 256(1) of the Income-tax Act, 1961, asking the Income-tax Appellate Tribunal to refer the question of law, set out already, for the opinion of this court.

4. The short contention by the learned counsel for the department is that by becoming a member of such schemes, the assessee was indulging in business.

5. The crux of the matter is whether by making contribution in these schemes, the assessee can be said to be doing business. The expression 'business' has been defined in a number of decisions, but reference need only be made to Commissioner of Income-tax v. Shaw Wallace and Company, [1932] 2 Comp. Cas. 276; A.I.R. 1938 P.C. 138 and Raja Bahadur Kamakshya Narain Singh of Ramgarh v. Commissioner of Income-tax, [1943] 11 I.T.R. 513 (P.C.).

6. After going through these decisions, we are of the view that the present activity cannot in any terms be said to be business. If the scheme is examined to its core, it will be found that the member is contributing Rs. 100 per month for 60 months and in the end he gets his investment plus Rs. 500 as interest. This interest may be chargeable to tax. On that there can be no two opinions. But, what he gets as a fortuitous circumstance fairly and squarely falls within the ambit of Section 10(3) of the Income-tax Act, 1961. There is no escape from this conclusion. In our opinion, the Income-tax Appellate Tribunal was perfectly justified in deleting this amount from the taxable income of the assessee.

7. We, accordingly, answer the question referred to us in the affirmative,that is, against the department. The assessee will have his costs, whichare assessed at Rs. 150.


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