COMMISSIONER OF INCOME TAX, MADRAS vs. G.R. KARTHIKEYAN, COIMBATORE

CIVIL APPEAL No. 3908/1983Supreme Court[1993] 3 S.C.R. 32822 April 1993Bench: 2 JudgesAuthor: B.P. JEEVAN REDDY, N. VENKATACHALA B9 pages
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What were the facts?

The assessee, G.R. Karthikeyan, participated in an All India Highway Motor Car Rally during the assessment year 1974-75 and received Rs. 22,000 as prize money. The Income Tax Officer included this amount in the assessee's income, citing the definition of 'income' under Section 2(24) of the Income Tax Act. The Appellate Assistant Commissioner held that the prize money was not income as the rally was not a race. The Income Tax Appellate Tribunal, on appeal by the Revenue, agreed that the rally was not a race but a test of skill and endurance, and thus not a 'game' under Section 2(24)(ix). The Tribunal also found the receipt to be casual but not an income receipt, thus outside Section 10(3). The Revenue appealed to the High Court, which upheld the Tribunal's findings, stating that 'winnings' implies money from betting or gambling and that the prize money was not 'winnings'. The High Court also noted the receipt fell outside Section 10(3). The Revenue has appealed this decision.

What did the Supreme Court hold?

The Supreme Court held that the prize money received by the assessee constitutes 'income' as defined in Section 2(24) of the Income Tax Act. The Court found that the High Court erred in reading the sub-clauses of Section 2(24) as exhaustive, when the definition is explicitly inclusive. The word 'income' has the widest amplitude and should be given its natural and grammatical meaning. The Court reasoned that if monies not earned in the true sense constitute income, then monies earned by skill and toil should also constitute income. The rally was a contest, and the prize money was a reward for the assessee's skill and endurance. The Court also noted that even casual income is 'income' as evidenced by Section 10(3), and the Tribunal erred in holding that the prize money fell outside Section 10(3) despite acknowledging its casual nature. The appeal was allowed, and the question referred to the High Court was answered in favor of the Revenue.

What were the issues?

1. Whether the prize money of Rs. 22,000 received by the assessee from participating in the All India Highway Motor Rally constitutes 'income' as defined under Section 2(24) of the Income Tax Act, 1961. Assessee's contentions (as per lower authorities and High Court): The rally was not a race or a game, and the prize money was not 'winnings' in the sense of gambling or betting. The receipt was casual and fell outside the purview of Section 10(3). Revenue's contentions (as per lower authorities and High Court): The prize money is income under Section 2(24). The High Court erred in interpreting 'winnings' narrowly and in treating the sub-clauses of Section 2(24) as exhaustive rather than inclusive. The Tribunal erred in holding that a casual receipt, even if casual, was not an income receipt and fell outside Section 10(3).

Which sections of the Income-tax Act were involved?

Section 2(24),Section 10(3),Section 256(1)

AI-generated summary — verify with the full judgment below

A B c D E F G COMMISSIONER OF INCOME TAX, MADRAS v. G.R. KARTHIKEY AN, COIMBATORE APRIL 22.1993 [B.P.JEEVAN REDDY AND N. VENKATACHALA,JJ.] Income Tax Act 1961: Sections 2(24)and 10(3 )-For Assessment-What constitutes Income-Prize Money-From All India Motor Car Rally-Whether constitutes Income.

The assessee participated in an All India Highway Motor Car Rally and on being declared a winner, received an amount of Rs. 22,000 as prize mone~·.

The Income-tax officer included the prize money in his income for the relevant assessment year relying upon the definition of'income' in clause (24) of Section 2 of Income Tax Act.

On an appeal preferred by the respondent-assessee the Appellate Assistant Commissioner, held that as the Rally was not a race, the prize money cannot be treated as income within the meaning of section .2(24) (ix). The Tribunal on an appeal ht the Revenue, held that the Rally was not a race and as it was a test of skill an~ endurance, it was not a 'game' within the meaning of Sec. 2 (24) (ix). As th¢ prize money received was casual in nature it fell outside Sec. 10(3) of the :Act.

The High Court on !l reference at the instance of the Revenue, u

The order continues below.

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