B.S. Dhillon, J.
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:
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing to the assessee the relief claimed by him on his income from M/s. Rohit Finance and Chit Fund Company Private Ltd., under Section 80TT of the Income-tax Act, 1961 ?'
3. In I.T.R. No. 129 of 1979, the following question of law has been referred to this court for its opinion :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in allowing to the assessee the relief claimed by him on his income from M/s. Rohit Finance and Chit Fund Company Private Ltd., under Section 80TT of the Income-tax Act, 1961, for the assessment year 1974-75 '
4. The provisions of Section 80TT of the Act are as follows : '80TT. Where the gross total income of an assessee, not being a company, includes any income by way of winnings from any lottery (such income being hereafter in this section referred to as winnings), there shall be allowed, in computing the total income of the assessee, a Reduction from the winnings of an amount equal to,--
(a) in a case where the gross total income does not exceed ten thousand rupees or where the winnings do not exceed five thousand rupees, the whole of such winnings ;
(b) in any other case, five thousand rupees as increased by a sum equal to fifty per cent. of the amount by which the winnings exceed five thousand rupees.'
5. It is not disputed that the word 'lottery' is not defined under the Act. In Webster's New International Dictionary, the word 'lottery' has been defined to mean a scheme by which one or more prizes are distributed by chance among persons who have paid or promised a consideration for a chance to win them, usually as determined by the numbers on tickets as drawn from a lottery wheel. In Legal and Commercial Dictionary by S.D. Mitra, the word 'lottery' has been defined as under ;
'A lottery has been compendiously defined as a scheme for the distribution of money by chance. It usually, if not always, takes the form of the creation of a fund by the participants in the lottery, who buy tickets or pay subscriptions in consideration of an offer by the promoters to award them a prize on some contingency the happening whereof depends on chance.
A lottery is a scheme for the distribution of prizes by lot or chance.'
6. In Corpus Juris Secundum, the word 'lottery ' has been defined as follows :
'Pooling the proceeds derived from chances or tickets taken or purchased and then allotting such proceeds or a part of them or their equivalent by chance to one or more such takers or purchasers are indicia of a lottery.'
7. 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.
8. In the present case, it is not disputed that periodically the chits are taken out and whosoever's name comes, is entitled to get the full amount without further making any contribution in the scheme. In our considered opinion, the income of the assessee from M/s. Rohit Finance and Chit Fund Company Private Ltd. was an income from the lottery and, therefore, the assessee is entitled to the deductions as provided under Section 80TT of the Act. A Full Bench of the Madras High Court, in Sesha Ayyar v. Krishna Ayyar, AIR 1936 Mad 225, while interpreting the provisions of Section 294A of the Indian Penal Code in a lengthy judgment, outlined the basic ingredients of lottery. The view which we have taken finds ample support from the said Full Bench authority of the Madras High Court. Shri D. N. Awasthy, on the other hand, has placed reliance on a judgment of the Full Bench of the Madras High Court in Narayana Aiyangar v. K. Vellachami Ambalam, AIR 1927 Mad 583. This authority was overruled by the Madras High Court in a larger Bench decision in Sesha Ayyar's case, AIR 1936 Mad 225. With respect we agree with the conclusions arrived at by the majority judgment of the Full Bench in Sesha Ayyar's case.
9. For the reasons recorded above, the answer to the questions referred to us in both the above references, is returned in the affirmative, i.e., against the revenue and in favour of the assessee with costs. We order accordingly.