Law:

Section:

Section 80TT of the income-tax act, 1961-Deduction-Income by way of winnings from lottery-Assessee subscribed to a chit fund scheme whereunder chits taken out periodically and whosoever's name came first was entitled to get full amount without further contribution-Assessee received Rs. 12,000 and claimed deduction of Rs. 8,500 under section 80TT-Whether tribunal justified in allowing assessee's claim-Held, on facts, yes Facts The assessee was a subscriber to a scheme, carried on by a chit fund company, under which chits were taken out periodically and any person whose name came first was entitled to get full amount without further contribution. For the assessment year 1974-75, the assessee returned a gross income of Rs. 12,000 representing receipts from the chit fund company and claimed deduction of Rs. 8,500 thereon under section 80TT. The ITO held that the provisions of section 80TT were not applicable and, treating the income accrued as of a casual nature, allowed an exemption of Rs. 1,000 only under section 10(3 ). On appeal, the AAC accepted the assessee's claim, which was upheld by the Tribunal. On reference: Held 1. The word "lottery" is not defined in the Act. However, from the definitions given by various authors, 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 lottery though none of the competitors is a loser, and even if the prize money came out of the interest earned from the subscribers' contributions. The touch-stone 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. 2. In the instant case, the chits were taken out periodically and whosoever's name came first, was entitled to get the full amount without further contribution. As such, the impugned income was an income from the "lottery" entitling the assessee…

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