Landmark Judgment – Prize money won in lucky draw wouldn’t amount to lottery income: ITAT

 

Tripura State Electricity Corporation Ltd [TS-661-ITAT-2019(GAU)]

An another ladlnmark Judgment is delivered by Cochin Tribunal in the following case :

Rajmohan V.V., Kumbalappalli v. ITO – [2019] 110 taxmann.com 169 (Cochin – Trib.)

Case in Brief :

The assessee had made purchases of cloth from a shop. The purchase was above the specified monetary limit and due to this, he received certain number of price coupons. He did not pay any consideration for the price coupons. He won 1 Kg. gold in lucky draw, out of which he was issued 600 grams of gold coins and balance was deducted as TDS under section 194B.

During the scrutiny proceedings, the Assessing Officer (AO) held that the said prize was nothing but winning from lottery which was chargeable to tax as per the rates provided in the section 115BB. Thus, he concluded that the TDS had been rightly deducted. The order of AO was also confirmed by the CIT (A).

On Appeal, the ITAT held that before a scheme can be regarded as a lottery, there must be an element of distribution of prizes which should be by chance or lot and such distribution should be among those who had paid a price for participating in the scheme

Mere gratuitous distribution without any price having been paid by the participants for acquiring the chance and receiving a price that is ultimately distributed, would not amount to a lottery. The essential ingredients of ‘lottery’ are absent in the facts and circumstances of the case and same can’t be taxed as a ‘lottery’.