Matter Remanded to Determine if Bike Won Through Scratch Card Constitutes a Gift or Lottery Winnings.

Issue:

Whether a bike won through a scratch card should be treated as a gift under Section 56 of the Income-tax Act, 1961, or as lottery winnings taxable at a higher rate under Section 115BB.

Facts:

The assessee won a bike through a scratch card.
The Assessing Officer treated the value of the bike as lottery winnings and made an addition to the assessee’s income, applying the higher tax rate under Section 115BB.
The assessee contended that the bike was a gift and should be taxed under Section 56, not as lottery winnings under Section 115BB.
Neither the Assessing Officer nor the Commissioner (Appeals) specifically adjudicated on whether the bike constituted a gift or lottery winnings.

Decision:

The court held that since the nature of the prize (gift or lottery winnings) had not been determined by the lower authorities, the matter was to be remanded back to the Assessing Officer for necessary verification and to pass a fresh order (de novo) after considering the nature of the prize.

Key Takeaways:

The taxability of prizes won through promotional schemes like scratch cards depends on their nature (gift or winnings from a lottery).
Gifts are generally taxed under Section 56, while lottery winnings are subject to a higher tax rate under Section 115BB.
Assessing Officers must properly determine the nature of such prizes based on the facts and circumstances of the case.
When lower authorities fail to adjudicate on a crucial aspect, the matter may be remanded for fresh consideration.

IN THE ITAT RANCHI BENCH ‘SMC’

Surendra Ram Bharti

I.T.O., Ward 2(2), Dhanbad

Partha Sarathi Chaudhury, Judicial member

IT Appeal No. 138 (Ran.) of 2023
[Assessment Year 2008-09]

FEBRUARY 6, 2025

Rajesh Kumar Kapardar, Adv. for the Appellant. Khubchand T. Pandya, Sr.DR for the Respondent.

ORDER

Partha Sarathi Chaudhury, Judicial Member. – This appeal preferred by the assessee emanates from the order of learned Commissioner of Income Tax (Appeals), Dhanbad [in short, the ld. CIT(A)] dated 25/01/2019 for the Assessment Year (AY) 2008-09 as per the grounds of appeal on record.

2. This is a matter in which the department has alleged that the assessee has won Rs. 31,900/- from lottery. The Assessing Officer provided relief of Rs. 5,000/- as maximum limit of allowability under the Act. Therefore, the addition of Rs. 26,767/- was made by the Assessing Officer stating that this amount had to be taxed under Section 115BB(ii) of the Income Tax Act, 1961 (in short, the Act) at higher rate. The same was upheld by the ld. CIT(A).

3. Per contra, the contention of assessee through ld. Authorised Representative that it is not a lottery rather it is a gift from TATA Teleservices Ltd. in the form of scratch card which was given to the assessee. The assessee had won a bike through scratch card of which the value was Rs. 31,900/-. Therefore, question does not arise for taxing this amount of gift at a higher rate under Section 115BB(ii) of the Act.

4. I have carefully considered the submissions placed by the parties and the documents on record alongwith facts and circumstances in this case. The contention of department is that the alleged amount has been won in lottery whereas the assessee has contended that it is in the nature of a gift. However, neither in the order of Assessing Officer nor in the order of ld. CIT(A), this fact has been adjudicated. In order to ascertain the taxability of an income, the relevant facts needs to be verified. In view thereof, I set aside the order of ld. CIT(A) and remand the matter back to the file of Assessing Officer for necessary verification and passing an order de novo as per law complying with the principles of natural justice. Needless to direct that before passing the order on merit, the Assessing Officer shall grant reasonable opportunity of hearing to the assessee. As per the above terms, the grounds of appeal raised by the assessee stands allowed for statistical purposes only.

5. In the result, this appeal of assessee is allowed for statistical purposes.