1. This is an appeal by the assessee in respect of the assessment year 1979-80. For the previous year relevant to the assessment year 1979-80, the assessee who is a household lady filed the return on 29-9-1979 declaring total income at nil. The assessee entered in an All India Bombay Dyeing Competition and in this competition she has successfully answered the questions and as a result of it she was declared winner in the said competition. According to the terms of the competition the assessee could receive Rs. 30,000 or an Ambassador car. The assessee has chosen to receive an Ambassador car. According to the assessee the said receipt was not income at all and as such it was not taxable.
2. The ITO was not satisfied with the said explanation. According to him the said receipt is an income as defined in section 2(24) (ix) of the Income-tax Act, 1961 ("the Act"). After giving an exemption of Rs. 1,000, the ITO taxed the balance of Rs. 29,000 in the hands of the assessee.
3. The assessee took up the matter in appeal and, inter alia, contended that this receipt in question is not taxable under any provisions of the Act. The ITO has misconstrued the provisions of section 2(24) (ix).
Thus, it was contended that a sum of Rs. 29,000 is not taxable.
4. The learned AAC was not satisfied with the contentions of the assessee raised before him. According to the learned AAC car received by the appellant was not a gift because a gift has to be without any consideration. According to him the appellant could not enter into the competition unless she purchased goods of Bombay Dyeing worth Rs. 75.
So according to him the receipt of the Ambassador car was not gift. The learned AAC consequently held that in view of the provisions of section 2(24) (ix) the receipt in question is of a causal nature. So he agreed with the finding of the ITO.5. Before the Tribunal on behalf of the appellant it was contended that the finding of the learned AAC is not correct. It was also pointed out that the receipt in question would fall outside the provisions of Income-tax Act. In any view of the matter the receipt is not in the nature of income. According to the learned counsel, in the context of the legislative intent and in the light of the meaning of the word "winnings", it would be clear that what was intended to be taxed was only a windfall that reached the persons without any efforts on their part and without any skill being executed by them. In the present case, the appellant won the prize after replying all the questions successfully and in winning prize the appellant had to exercise great skill and intelligence. Thus, it was contended that the present case would not come within the definition of the words "any winnings from lotteries" used under section 2(24) (ix). Reliance was placed on the decision in the cases of Kanwar Singh v. Delhi Administration AIR 1965 SC 871, Pyarali K. Tejani v. Mahadeo Ramchandra Dange AIR 1974 SC 228, State of Bombay v. Chamarbaugwala (R. M. D.) AIR 1957 SC 699 and CIT v.G. R. Karthikeyan [1980] 124 ITR 85. Reliance was also placed on Circular No. 158 dated 27-12-1974 issued by the CBDT. According to the learned counsel for the assessee the receipts which are of a casual and non-recurring nature will be liable to income-tax only if they can properly be characterised as "income" either in its general connotation or within the extended meaning given to the term by the Income-tax Act.
According to the learned counsel for the assessee, this circular was issued in 1972, i.e., after section 10(3 ) of the Act was amended by the Finance Act, 1972. Since the said circular letter is beneficial to the interest of the assessee, the income-tax authorities are bound to follow the same. Thus, it was contended, that the learned AAC erred in sustaining the findings of the ITO.6. The learned departmental representative supported the order of the AAC. According to him the circular letter relied upon by the assessee is not applicable on the facts of the present case. The learned departmental representative further contended that the present case would come within the scope of the expression "any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever".
7. I have heard the parties and perused the entire evidence on record.
From the facts discussed above it is clear that the assessee won the first prize as a result of being declared as winner in an All India Bombay Dyeing Competition. The receipt is not by chance or windfall. If we consider the whole circumstances and the context in which words "any winnings from lotteries, etc.", were added in section 2(24) (ix), it would be clear that the word winnings should be assigned to the meaning of chance winning and not winning a prize.
8. Prior to the amendment of section 10(3) by the Finance Act, 1972, the persons who had this kind of windfall from lotteries, crossword puzzles, races including horse races, card games, etc., were completely free from having to pay any tax, while the persons who earned by the sweat of their brow had to pay the tax levied under the Act. This was an anomaly especially in an egalitarian society. This is also inconsistent with the cardinal doctrine of taxation based on ability to pay. Bearing these aspects in mind, the Parliament has brought in the relevant provisions so as to tax receipts by chance winnings or windfalls. In doing so, the Parliament virtually introduced a statutory fiction so as to enlarge the concept of taxable income by including the winnings in races, etc., which are not ordinarily regarded as income.
In the context of this legislative intent and in the light of the meaning given in the dictionary to the word "winnings", it would be clear that what was intended to be taxed was only a windfall that reached persons without any effort on their part, without any skill being exhibited by them. In the Oxford English Dictionary (Compact edn., vol. II, p. 178, col. 3, item 4), the word "winnings" is given the following meaning : "Things or sums gained, gains, profits, earnings (obs. or dial.) in modern use chiefly applied to money won by gaming or betting." For the word "winnings", the Oxford Dictionary refers to Law Reports, namely, Bridger v. Savage [1885] 15 QBD 363 (CA) in which the following passage occurs : "The defendant having won on those bets received the winnings from the persons with whom he had batted." This shows that the word is used in association with chance rather than skill. It is clear from the above dictionary meaning that there are two forms in the expression "winnings"-one in singular and the other in plural. As far as the plural form is concerned, it is given a specific meaning in the Oxford Dictionary. Especially, in current or modern usage, it is chiefly applied to "money won by gaming or betting".
Though the expression would in olden days comprehend all things or sums gained, gains, profits, earnings, still its modern usage is confined to money won by gaming or betting.
9. In the present case as already stated above, the assessee participated in a competition in which a lot of intelligence and skill was required. Ordinarily, person of average intelligence will not be successful in achieving such prize. Under the circumstances interpretation of the word "winnings" in the relevant section can only be applied in those cases where the money was won by chance as a kind of windfall as in a lottery, a horse race, gambling or betting. A similar issue came up for decision before the Hon'ble Madras High Court in the case of CIT v. G. R. Karthikeyan (supra). In that case the assessee participated in an All-India Highway Motor Rally, an event restricted to private motor cars and jointly sponsored by the Automobile Association of Eastern India and the Indian Oil Corporation and supported by other regional automobile associations as well as the Federation of Indian Motor Sports Clubs and the Federation of Indian Automobile Associations. According to the rules governing the rally, the emphasis was on endurance driving and was designated as a reliability test for automobiles. The race was to be run having due regard to the traffic regulations at different places and the prize was to be ascertained by adopting a system of penalty points for violation of the traffic rules and regulations. The competitor with the least penalty points was adjudged as successful among the participants. The assessee won the first prize in the rally and received Rs. 20,000 therefor from the Indian Oil Corporation and another sum of Rs. 2,000 from the All India Motor Rally. The ITO brought this sum of Rs. 22,000 to tax by invoking the provisions of section 2(24) (ix) in the view that the amount represented winnings from races. The AAC, however, held that the contest was not a race and hence, the amount could not be taxed. The Tribunal agreed with this view and held that the receipt was casual but was not income and that it fell outside the provisions of the Act and was not liable to be taxed.
"That the word 'winnings' in its plural form was chiefly applied in modern usage to 'money won by gaming or betting'. The race in the instant case involved skill in performance of driving of the vehicle with the least number of penalty points. Accordingly, the ordinary use of the expression 'winnings' would not comprehend the winning of a prize in a case of this kind. The Tribunal was, therefore, right in its conclusion." "What was intended to be taxed by section 2(24) (ix) was only a windfall that reached persons without any effort on their part, without any skill being exhibited by them." 11. The facts of the present case are more or less identical with the facts of the said case. In the present case the assessee competed along with other persons in which great intelligence and skill was required.
A person of ordinary intelligence could not be declared as winner of such competition. Under the circumstances the present case would not come within the definition of the words "winnings" used in section 2(24) (ix).
12. In the Circular No. 158 dated 27-12-1974 the Board in paragraph 2 of the letter stated as under : "Receipts which are of a casual and non-recurring nature will be liable to income-tax only if they can properly be characterised as income, either in its general connotation or within the extended meaning given to the term by the Income-tax Act." It means that before such receipt is liable to income-tax, such receipt must come within the definition of the word "income". On the facts of the present case the receipt in question would not come within the definition of "income" at all. The word "casual" in section 10(3) can only be applied to accidental or fortuitous receipts : occurring without stipulation, contract, calculation or design. It must be in the natu re of an unforeseen windfall, like the finding of an article of value, or money won in a bet, and the getting of an unexpected gift or legacy. Reference may be made to the ratio of decision in the case of CIT v. V. P. Rao [1950] 18 ITR 825 (Mad.). A test of casual is not only that it must be of a non-recurring nature but it must also be casual.
The receipt must be fortuitous in the sense that it is not anticipated or foreseen. Another test is that whether a receipt, not being a receipt arising from business or the exercise of a profession, vocation or occupation which was of a casual and non-recurring nature in the hands of the assessee (sic). The gist of the test which has been laid down in some cases is whether the receipt is one which is foreseen and anticipated and provided for by an agreement; if it is a result thereof, then it may not be defined as casual even if it is not likely to recur for a considerable time. As a matter of fact, there can be no rule laid down with regard to what is of a casual and non-recurring nature. Each case must be decided on its particular facts. Reference may be made to the ratio of decision in the case of CIT v. M. Ahmed Badsha Saheb [1943] 11 ITR 590 (Mad.).
13. Looking to the aforesaid facts, in my opinion, the present case is also covered by the Circular No. 158 referred to above. Once the present case is covered under the said circular, the income-tax authorities are bound to give benefit of the said circular to the assessee. It is now well settled as a result of two decisions of the Supreme Court in the cases of Navnitlal C. Javeri v. K. K. Sen [1965] 56 ITR 198 and Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 that a circular issued by the Board would be binding on all officers and persons employed in the execution of the Act even if it deviates from the provisions of the Act. A similar view was taken by the Supreme Court in the case of K. P. Varghese v. ITO [1981] 131 ITR 597.
14. Looking to the aforesaid facts, evidence on record and entirety of circumstances it is clear that the receipt in question is neither casual nor of non-recurring nature. As a matter of fact it is not income at all. At the most it can be called as a capital receipt. Thus, the learned AAC was wrong in holding that the receipt of the car comes within the definition of "winnings" used in section 2(24) (ix). Thus, the addition of Rs. 29,000 is uncalled for and the same is deleted.