Law: Income Tax Act, 1961

Section: 2(24)

Income-tax---Assessment---Status---Association of persons---Condition precedent--¬Joint venture with object of earning income---Several persons entering into written agreement for purchase of lottery tickets from contributions--¬Winnings to be equally distributed---Prize money assessable in status of association of persons---Indian Income Tax Act, 1961, S.2(24). The ten respondents were all employees in the sales department of a company. They organised a joint venture, under which they agreed to jointly purchase lottery tickets for the total amount contributed by the members, of the group. The ticket numbers were to be typed with a written agreement signed by all members of the group and the proceeds of winning tickets would be equally divided among the members. The total number of members of the group was to be ten, although one or two members might be excluded and new members admitted from time to time. The respondents entered into an agreement on February 17, 1977, under which they agreed to jointly purchase lottery tickets of the Tamil Nadu Government for which the prize was declared on February 28, 1977. They secured a prize of rupees one lakh for one of the tickets, thus, purchased. The ten persons authorised the first respondent to collect the prize amount through the Punjab National Bank. The bank, after realising the prize amount, credited the net amount, thus, drawn, i.e., Rs.67,000 (Rs.1,00,000 minus Rs.33,000 deducted by the Director of Raffles) to the respective bank accounts of the ten persons. Each one of the ten persons, thus, got a sum of Rs.6,700. The Income-tax Officer was of the view that the ten persons should be assessed in the status .of association of persons, and brought the receipt to tax accordingly. The Appellate Assistant Commissioner held that the joint purchase of the lottery tickets was not an investment for definite expected gains, that it did not amount to any business, that there was no management involved in getting the prize money and that, therefore, the prize money could not be assessed to tax in the hands of the assessees as an association of persons, but should be assessed individually in the hands of the ten persons The…

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