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Facts
The assessee, a reseller of government lottery tickets, reported 'Profit Money from Unsold Lottery Tickets' as business income. The Assessing Officer treated these winnings as income from lotteries under Section 115BB, disallowing deductions and the set-off of business loss, and taxed it at 30%. The CIT(A) allowed the assessee's appeal, relying on a Coordinate Bench decision for a sister concern.
Held
The Tribunal upheld the CIT(A)'s decision, confirming that winnings from unsold lottery tickets in the hands of a dealer constitute business income. It was held that the business loss incurred by the assessee is eligible for set-off against winnings from lotteries under Section 71 of the Income Tax Act, aligning with previous precedents.
Key Issues
Whether prize winning from unsold lottery tickets is 'income from business' or 'income from other sources' and if business loss can be set off against lottery winnings under Section 71 of the Income Tax Act.
Sections Cited
56(2)(ib), 2(24)(ix), 58(4), 115BB, 71
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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI SANDEEP SINGH KARHAIL, HONBLE
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “A”, MUMBAI
BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON'BLE ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, HON'BLE JUDICIAL MEMBER
ITA NO. 604/MUM/2024 (A.Y: 2016-17) DCIT 41(4)(1) v. LOTUS MARKETING Room No 425, Kautilya Bhavan 181/1450 Ground Floor BKC, Mumbai- 400051 Motilal Nagar No. 1, Goregaon West Mumbai, Maharashtra-400104 PAN: AAFFL8985J (Appellant) (Respondent) Assessee Represented by : None Department Represented by : Shri Ajay Chandra
Date of conclusion of Hearing : 28.05.2024 Date of Pronouncement : 28.05.2024
O R D E R PER NARENDRA KUMAR BILLAIYA (AM)
This appeal by the Revenue is preferred against the order dated 14.12.2023 by National Faceless Appeal Centre, Delhi [hereinafter in short “Ld. CIT(A)”] pertaining to A.Y.2016-17.
ITA NO. 604/MUM/2024 (A.Y: 2016-17) LOTUS MARKETING 2. The grievance of the revenue read as under: -
"Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in holding that prize winning from unsold lottery tickets in the hands of the assessee would constitute "Income from business" without appreciating the fact that that the assessee was holder of unsold lottery ticket at the time of draw and accordingly participated in the draw?" 2. "Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in holding that prize winning from unsold lottery tickets in the hands of the assessee would constitute "Income from business" without appreciating that the Income tax Act provides exclusive provisions u/s.56(2)(ib) r.w.s. 2(24)(ix) r.w.s 58(4) for assessing income by way of any winning from lotteries?" 3. "The appellant craves leave to add, amend, alter any grounds of appeal."
Briefly stated the facts of the case are that the, assessee filed its return of income on 14.10.2016. The return was selected for scrutiny assessment under CASS and accordingly, statutory notices were issued and served upon the assessee. The assessee firm is engaged in the business of reseller of Government Paper Lottery Tickets.
During the course of the scrutiny assessment proceedings and on perusal of the financial accounts of the assessee, the Assessing Officer noticed that the assessee has credited a sum of ₹.26,49,16,705/- under the head “Profit Money from Unsold Lottery Tickets” and after claiming various expenses net profit was shown at ₹.40,31,546/-. The Assessing
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ITA NO. 604/MUM/2024 (A.Y: 2016-17) LOTUS MARKETING Officer further noticed that the assessee has claimed setoff of ₹.13,52,796/- and claimed credit of TDS.
On verification, the Assessing Officer came to know that the assessee has received the money as winning from Director of Lotteries of Mizoram and Director of Lotteries of Bodoland Territorial Council. When asked about it, the assessee replied that these are winnings from unsold lottery tickets and as business income. The Assessing Officer was of the firm belief that the provisions of section 115BB of the Act squarely apply and the assessee is required to pay Tax @30% of winning from lottery. Applying the provisions of section, the Assessing Officer treated the winning from lotteries under section 115BB of the Act and came to the conclusion that the assessee is not entitled for any deduction and accordingly disallowed the claim of expenditure and also declined the set off business loss and computed the taxable income at ₹.26,08,85,159/-.
Assessee agitated the matter before Ld. CIT(A) and strongly contended that the facts of the case are identical to the facts considered by the Coordinate Bench in the case of the sister concern of the assessee M/s. Pooja Marketing in ITA No. 2596/MUM/2019 for the
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ITA NO. 604/MUM/2024 (A.Y: 2016-17) LOTUS MARKETING A.Y.2014-15. In alternative, the assessee also contended that, even if the price winnings from the unsold tickets are taxable as “income from other sources” and not “business income” even then the business loss which the assessee firm has incurred in distributing the lottery tickets is to be adjusted against the “income from other sources” under section 71 of the Act and the net effect would be tax neutral.
After considering the facts and submissions and carefully perusing the order of the Coordinate Bench in the case of M/s. Pooja Marketing (supra), the Ld. CIT(A) was convinced with the contention of the assessee and allowed the appeal.
Before us, Ld. DR strongly supported the findings of the Assessing Officer but could not point out any factual / legal error in the findings of the Ld. CIT(A).
We have given a thoughtful consideration to the order of the authorities below. The undisputed fact is that the assessee is in the business of selling lottery tickets. Therefore, any ticket left unsold would constitute stock-in-trade of the assessee. It is also a fact that the unsold lottery ticket lying with the assessee being a dealer in lottery
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ITA NO. 604/MUM/2024 (A.Y: 2016-17) LOTUS MARKETING tickets had to fetch some price money and such winnings from price money need to be construed only as business income. In our understating of the law section 115BB of the Act is a special provision under the Act to tax the income by way of winnings from lotteries and its nature of income whether it is a “business income” or “income from other sources” is wholly irrelevant. Now the only issue which needs to be decided is whether the business loss incurred by the assessee after exclusion of price money from net profit is eligible for set off against winning from lotteries under section 71 of the Act. On identical situation the Coordinate Bench in the case of M/s. Pooja Marketing (supra) has decided this issue in favour of assessee and against the revenue. Since the Ld. CIT(A) has followed the decision of the Coordinate Bench, we do not find any reason to interfere with the findings of the Ld. CIT(A).
In the result, appeal filed by the revenue is dismissed.
Order pronounced in the open court on 28th May, 2024.
Sd/- Sd/- (SANDEEP SINGH KARHAIL) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 28.05.2024 Giridhar, Sr.PS
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ITA NO. 604/MUM/2024 (A.Y: 2016-17) LOTUS MARKETING Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.
//True Copy// BY ORDER
(Asstt. Registrar) ITAT, Mum
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