Holding

The prize money is taxable income under the inclusive definition of "income" in Section 2(24) and is not exempt as a casual receipt under Section 10(3).

Summary

G.R. Karthikeyan, an individual assessee, won Rs 22,000 as prize money in the All India Highway Motor Rally and the Income‑Tax Officer included it in his total income under the definition of "income" in Section 2(24) of the Income‑Tax Act, 1961. The Appellate Assistant Commissioner, the Tribunal and the Madras High Court held that the rally was not a race or a game, that the prize was a casual receipt and therefore fell outside both Section 2(24)(ix) and the exemption in Section 10(3). On appeal, the Supreme Court held that the definition of "income" in Section 2(24) is inclusive and that a receipt need not fall within any specific sub‑clause to be taxable. It further held that even casual receipts are "income" if they exceed Rs 1,000 under Section 10(3). Consequently, the prize money was declared taxable income and the High Court’s decision was set aside. The appeal was allowed in favour of the Revenue.

Issues considered

Whether prize money received from a motor rally constitutes "income" within the meaning of Section 2(24) of the Income‑Tax Act, 1961.
Whether sub‑clause (ix) of Section 2(24) is exhaustive and excludes receipts arising from non‑gambling contests such as a rally.
Whether a casual receipt of prize money is exempt under Section 10(3) of the Act.

Legislation cited

Income Tax Act, 1961s. 10(3), s. 2(24), s. 74(A)

Subjects

Income TaxDefinition of IncomePrize MoneyMotor RallyCasual ReceiptSection 2(24)Section 10(3)Taxability

Judgment

A COMMISSIONER OF INCOME TAX, MADRAS .......
v.
G.R. KARTHIKEY AN, COIMBATORE

APRIL 22.1993

B [B.P.JEEVAN REDDY AND N. VENKATACHALA,JJ.]

Income Tax Act 1961:

Sections 2(24)and 10(3 )-ForAssessment-What constitutes Income-Prize
Money-From All India Motor Car Rally-Whether constitutes Income.
c
The assessee participated in an All India Highway Motor Car Rally and
on being declared a winner, received an amount of Rs. 22,000 as prize mone~·.
The Income-tax officer included the prize money in his income for the
relevant assessment year relying upon the definition of'income' in clause (24)
of Section 2 of Income Tax Act.
D
On an appeal preferred by the respondent-assessee the Appellate
Assistant Commissioner, held that as the Rally was not a race, the prize money
cannot be treated as income within the meaning of section .2(24) (ix). The
Tribunal on an appeal ht the Revenue, held that the Rally was not a race and
E as it was a test of skill an~ endurance, it was not a 'game' within the meaning
of Sec. 2 (24) (ix). As th¢ prize money received was casual in nature it fell
outside Sec. 10(3) of the :Act.

The High Court on !l reference at the instance of the Revenue, upholding
the findings of the Tribu~al, observed thatthe expression' winnings' cannotes
F money won by betting 'or gambling and therefore the prize money not
represent 'winnings'. In~smuch as the amount in question was obtained by
participating in a rally which involved skill in driving the vehicle, it held, It
cannot be included in th~ assessee's income, also because it fell outside the
--
perview of s.l 0 (3).

G
Allowing the Appeal, the Court,

HELD: 1. The expression 'income: must be construed in its widest sense.
The definition of 'income' is an inclusive one. Even if a receipt does not fall
within sub-clause (ix) or any of the sub-clauses of Sec.2(24) of the Act it ma~·
H yet constitute 'income. Hence the prize-money received by the respondent-
328
C.I.T. v. G.R. KARTIHKEYAN 329
- assessee constitutes 'income' ·as defmed in clause (24) of Section 2 of the Act. A
(335-C)

2. The High Court erred in reading several sub-clauses in Sec. 2(24) as
exhaustive when the statute expressly says that the definition is inclusive.
Even if a receipt does not fall within the ambit of any of the sub-clauses in Sec.
2(24) it may still be income if it partakes of the nature of income. The idea B
behind providing inclusive definition in Sec. 2(24) is not to limit its meaning
but to widen its net. This Court has repeatedly said that the word 'income' is
of widest amplitude and that it must be given its natural and grammatical
meaning. (335-D)
c
Kamakshya Narayan Singh v. C./. T 11 ITR 513 P.C., Navin Chandra
Mafatla.l v. C.I.T, Bombay 26 ITR (SC) and Bhagwan Das Jain v. Union ofIndia
128 ITR 315 SC, followed.

Gopal Saran Narain Singh v. Commissioner ofIncome Tax, 3 ITR 237 P.C.,
referred to. D

3. If the monies which are not earned in the true sense of the word
Constitute income, it is difficult to appreciate why do monies earned by skill
and toil not constitute income? The Rally was a contest, if not a race. The
Respondent-assessee entered the contest to win it. The Prize-money which he E
got in return for winning the contest was a reward for his skill and endurance.
It does constitute his income-which expression must be construed in its widest
sense. (335-8)

4. The sub-clause (ix) of Sec. 2(24), is not confined to games of gambling
nature alone. Some of them are games of skill. F

State of Bombay v. R.M.D. Chamarbaugwala AIR 1957 SC 699; and State
of Andhra Pradesh v. K. Satyanarayan [196812 SCR 515, followed.

5. As the definition of income in Sec. 2(24) is an inclusive one, its ambit G
should be the same as that of the word 'income' occurring in Entry 82oflist
I of the Seventh Schedule of the Constitution of India. (334-8)

6. Even casual income is 'income' as is evident from Sec. 10(3). A casual -
receipt which should mean in the context, casual income-is liable to be
· included in the total income, ifit is in excess of Rs.1,000 by virtue of clause (3) H
330 SUPREME COURT REPORTS (1993) 3 S.CJt

A of Sec. 10. The Tribunal erred in its finding that the prize money fell outside
the purview of Sec. 10 (3) inspite of holding that the receipt in question as
casual in nature. (335-E)

CIVILAPPELLATEJURISDICTION: Civil Appeal No. 3908 (NT)/1983.

B
From the Judgment and Order dated 20.11.1979 of the Madras High Court
in Tax Case No. 330of1976.

A. Raghuvir and Ms. A. Subhashini for the Appellant.

C T.A. Ramachandran and Mrs. Janaki Ramachandran for the Respondent.

'
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The Judgment of the Court was delivered by

B.P. JEEVAN REDDY, J. This appeal is preferred against the Judgment
D of the Madras High Court answering the question referred to it in the affirmative
i.e., in favour of the asses see and against the Revenue. The question referred under
section 256 (1) of the Income-tax Act reads as follows:

I

"Whether, on the facts and in the circumstances of the case, the
Appellate Tribunal was right in holding that the total sum of Rs.
E 22,000 received by the assessee from the Indian Oil Corporation
and All India Highway Motor Rally should not be brought to tax?"

The assessment year concerned ~s 1974-75. The assessee, G.R.Karthikeyan,
assessed as an individual, was having income from various sources including
salary and business 'income. During the accounting year relevant to the said
F
assessment year, he participated in the All India Highway Motor Rally. He was
awarded the first prize of Rs. 20,00(J by the Indian 0il Corporation and another
Sum ofRs. 2,000 by the All India Highway Motor Rally. The Rally was organised
jointly by the Automobile Association of Eastern India and the Indian Oil
Corporation and was supported by several Regional Automobile Associations as
G well as Federation of Indian Motor Sports Clubs and the Federation of Indian
Automobile Associations. The rally was restricted to private motor cars, the length
of the rally route was approximately 6,956 kms. One could start either from Delhi,
Calcutta, Madras or Bombay, proceed anti-clock wise and arrive at the starting
H point. The rally was designed to test endurance driving an.d the reliability of the
C.l.T. v. G.R. KARTiilKEYAN (JEEVAN REDDY, J.] 331
automobiles. One had to drive his vehicle observing the traffic regulations at A
different places as also the regulations prescribed by the Rally Committee. Prizes
were awarded on the basis of overall classification. The method of ascertaining the
fir$t prize was based on a system of penalty points for various violations. The
competitor with the least penalty points was adjudged the first-prize winner. On
the above basis, the assessee won the first prize and received a total sum of Rs.
22,000. The Income Tax Officer included the same in the income of the respon- B
dent-assessee relying upon the definition of 'income' in clause (24) of section 2.
On appeal, the Appellate Assistant Commissioner held that inasmuch as the rally
was not a race, the amount received cannot be treated as income within the
meaning of section 2 (24) (ix). An appeal preferred by the Revenue was dismissed
by the Tribunal. The Tribunal recorded the following findings:
c
(a) That the said rally was not a race. It was predominantly a test of skill and
endurance as well as of reliability of the vehicle.

(b) That the rally was also not a 'game' within the meaning of section 2(24)
D
(ix).

(c) That the receipt in question was casual in nature. It was nevertheless not
an income receipt and hence fell outside the provisions of section 10 (3) of the Act.

E
3. At the instance of the Revenue, the question aforementioned was stated
for t'1e opinion of the Madras High Court. The High Court held in favour of the
assessee on the following reasoning:

(a) The expression 'winnings' occuring at the inception of sub-clause (ix) in
section 2(24) is distinct and different from the expression 'winning'. The expres- F
sion 'winnings' has acquired a connotation of i.ts own. It means money won by
gambling or betting. The expression 'winnings' controls the meaning of several
expressions occurring in the sub-clause. In this view of the matter, the sub-clause
cannot take in the receipt concerned herein which was received by the assessee by
participating in a race which involved skill in driving the vehicle. The rally was not G
a race. In .other words the said receipt does not represent 'winnings'.

(b) A perusal of the memorandum explaining the provisions of the Finance
Bill. 1972, which inserted the said sub-clause in section 2(24), also shows that the
idea behind the sub-clause was to rope in windfalls from lotteries, races and card
games etc. H
332 SUPREME COURT REPORTS [1993] 3 S.C.R.

A (c) Section 74 (A) which too was introduced by the Finance Act, 1972
supports the said ~iew. Section 74 (A) provides that any loss resulting from any
of the sources mentioned therein can be set off against the income received from
that source alone. The sources referred to in the said section are the very same
sources mentioned in sub-clause (ix) of section 2(24) namely lotteries, crossword
puzzles, races including horse races, card games etc.
B
The correctness of the view taken by the High Court is questioned herein.
----
The definitic:m of 'income' in !>ection 2(24) is an inclusive definition. The
Parliament has been adding to the definition by adding sub-clause (s) from time
C to time. Sub-clause (ix) which was inserted by the Finance Act, 1972 reads as
follows:

"(ix) any winnings from lotteries, crossword puzzles, races includ-
-
ing horse races, card gaines and other games of any sort or from
gambling or betting of any form or nature whatsoever;"
D

We may notice at this stage a provision in section 10. Section 10 occurs in
chapter III which carries the heading "Incomes which do not form part of total
income". Section 10 in so far as is relevant reads thus:

E "I 0, Incomes not included in u>tal income: Ih computing the total in.come of
a previous year of any person, any income falling within any of the following
clauses shall .not be includ.ed:

. (d) any receipts which are of a casual and non recurring nature, not being
winnings from lotteries, to the extent such receipts do not exceed one thousand
--
F
rupees in the aggregate". (The clause has been amended by Finance Act, 1986 but
we are not concerned with it. Similarly it is not necessary to notice the proviso to
the said clause.)

It is not easy to define income. The definition in the Act is an inclusive one.
G As said by Lord Wright inKamakshyaNarayan Singh v. C.I.T. 111.T.R. 513 P.C.
"income............ .is~ word difficult and perhaps impossible to define in any precise
general formula. It is a word of the broadest connotation". In Gopttf&lran Narain ....
Singh v. Commissioner ofIncome Tax 3.1.T.R. 237 P.C., the Privy Council pointed
out that "anything than can properly be described as income is taxable under the
·Act unless expressly exempted." This Court had to deal with the ambit of the
H expression 'income' ~Navin ChandraMafatlalv. C.l.T. Bombay 261.T.R. (S.C.)

,·
I
C.l.T. v. G.R. KARTHIKEYAN [JEEVAN REDDY, J.) 333

The Indian Income-tax and Excess Profits Tax (Amendment) Act, 1947 had A
inserted section 12 (B) in the Indian Income-tax Act, 1922. Section 12(B) imposed
a tax on capital gains. The validity of the said Amendment was questioned on the
ground that tax on capital gains is not a tax on 'income' within the meaning of entry
54 of list-1, nor is it a tax on the capital value of the assets of individuals and
companies within the meaning of entry-55, oflist-1 of the seventh schedule to the
Government of India Act, 1935. The Bombay High Court repelled the attack. The B
matter was brought to this Court. After rejecting the argument on behalf of the
assessee that the word 'income' has acquired, by legislative practice, a restricted
meaning-and after affirming that the entries in the seventh schedule should
receive the most liberal construction-the Court observed thus:

c
"What. then, is the ordinary, natural and grammatical meaning of
the word "income"? According to the dictionary it means "a thing
that comes ih." (See Oxford Dictionary, Vol. V,p. 162; .Stroud,
vol.II, pp. 14-16). In the United States of America and.in Australia
both of which also are English speaking countrje'f:.the word "in-
come" is understood in a wide sense. so as to include a capital gain. D
Reference may be made to-'Eisner v. Macomber', [1919] 252 US
189 (K); -'Merchants' Loan and Trust Co. v. 'Smietanka' [1920)
255 US 509 ( L) and-'United States ofAmerica Ii. Stewart', [1940]
311US60 (M) and- 'Resch v. Federal Commissioner of Taxation',
[1943] 66 CLR 198 (N). In each of these cases very wide meaning .
was ascribed to the word "income" as its natural meaning. E

The relevant observations of learned Judges deciding those cases ,
which have been quoted in the judgment of Tendolkar J. quite
clearly indicate that such wide ~eaning was put upon the word 1
"income" not because of any particular legislative practice either in
F
tlie United States or in the Common we:µ th of Australia but because
such was the normal concept and conno.tation of the ordinary
English word "income". Its natural meaning embraces any profit or
gain which is actually received. This is in consonance with the
observations of Lord Wright to which reference has already been
made. G

The argument founded on an assumed legislative practice being
thus out of the way, there can be no difficulty in applying its natural .
and grammatical meaning to the ordinary English word "income".
As already observed, the word should be given its widest connora..: ·n
334 SUPREME COURT REPORTS [1993] 3 S.C.R.

A tion in view ofthe fact that it occurs in a le_gislative head conferring
legislative power."

8. Since the definition of income in section 2(24) is an inclusive one, its
ambit, in our opinion, should be the same as that of the word income occurring in
entry 82 of list 1 of the Seventh Schedule to the Constitution (corresponding to
B entry 54 of list 1 of the Seventh Schedule to the Government of India Act).

9. In Bhagwandas Jain v. Union ofIndia 128 l.T.R. 315 S.C. The challenge
was to the validity of section 23(2) of the Act which provided that where the
property consists of house in the occupation of the owner for the purpose of his own
c residence, the annual value of such house shall first be determined in the same
manner as if the prop~rty had been let and further be reduced by one half of the
amount so determined or Rs. 1,800 whichever is less. The contention of the
assessee was that he was not deriving any monetary benefit by residing in his own
house and, therefore, no tax can be levied on him on the ground that he is deriving

D
income from that house. It was contended that the word income means realisation
of monetary benefit arld that in the absence of any such realisation by the assessee,
thMnclusion of any amount by way of notional income under section 23(2) of the
Act in th~ chargeable income was impermissible and outside the scope of entry 82
..
of .li8t~1 of the Seventh Schedule to the Constitution. The said contention was
rejected affirming that the expression income is of the widest amplitude and that
it includes not merely what is received or what comes in by exploiting the use of
E the property but also that which can be converted into income.

10, Sub-clause (ix) of section 2(24) refers to lotteries, crossword puzzles,
races including horse' races, card games, other games of any sort and gambling or'
betting of any form or nature whatsoever. All crossword puzzles are not of a
F gambling nature. Some are; some are not. See State of Bombay v. R.M.D.
ChamarbaugwalaA.I.R. 1957 S.C. 699. Even in card games there are some games
which are games of skill without an element of gamble (See State of Andhra
Pradesh v. K. Satyan'arayan [1968] 2 S.C.R. 515. The words "other games of any
sort" are of wide amplitude. Their meaning is not confined to games of a gambling
nature alone. It thus appears that sub-clause (ix) is not confined to mere gambling
G or betting activities. But, says the High Court, the meaning of all. the aforesaid
words is controlled by the word 'winnings' occurring at the inception of the sub-
clause. The High Court .says, relying upon certain material, that the expression
'winnings' has come to acquire a P¥ticular meaning viz, receipts from activities
of a gambling or betting nature alone. Assurning,.t_hat the High Court is right in its
H interpretation of the expression 'winnings'. docs it follow that merely because
C.I.T. v. G.R. KARTIUKEYAN [JEEVANREDDY,J.) 335

winnings from gambling/betting activities are included within the ambit of A
income, the monies received from non-gambling l!iid non-betting activities are not
so included? What is the implication flowing from insertion of clause (ix)? If the
monies which are not earned-in the true sense of the word--constitute income
why do moneies earned by skill ~d toil not constitute income? Would it not look
odd. if one is to say that monies received from games and races of gambling nature
represent income but not those received from games and races of non-gambling B
nature? The rally in question was a contest, ifnot a race. The respondent-assessee
entered the contest to win it and to win the first prize. What he got was a 'return'
for his skill and endurance. Then why is it not income-which expression must be
construed in its widest sense. Further, even if a receipt does not fall within sub-
ciause (ix), or for that matter, any of the sub-cl!iuses in section 2(24), it may yet
constitute income. To say otherwise, would mean reading the several clauses in
c
section 2(24 ))lS~!thaustive of the meaning of'income' when the Statu.te expressly
says that it is inclusive. It would be a wrong approach to try to place a given receipt
under one or the other sub-clauses in section 2(24) and if it does not fall under any
of the sub-clauses, to say that it does not constitute income. Even if a receipt does
not fall within the ambit of any of the sub-clauses in section 2(24), it may still be D
income if it partakes of the nature of the income. :fhe idea behind providing
inclusive definition in section 2(24) is not to limit its meaning but to widen its net.
This Court has repeatedly said that the word_ 'jncome' is of widest amplitude, and
that it must be given its natural and grammatical meaning. Judging from the above
standpoint, the receipt concerned herein is also income. May be it is causal in
·nature but it is income nevertheless. That even the casual income is 'income' is E
evident from section 10 (3). Section 10 seeks to exempt certain 'incomes' from ·
being included in the 'total income'. A casual receipt- which-Should mean, in the
context, casual income - is liable to be included in t}l!}tot~ income if it is in excess
of Rs. 1,000, by virtue of clause (3) of section 10. Even though it is a clause
exempting a particular receipt/income to a limited extent,oitis yet relevant on the
meaning of the expression 'income'. In our respectful opinion, the High Court, F
having found that the receipt in question do.es not fall within sub-clause (ix) of
~ection 2(24), erred in concluding that it does not constitute income. The High
Court has read the several sub-clauses in .section 2(24) as exhaustive of the
definition of income when in fact it is not so. In this connection it is relevant to
notice the finding of the Tribunal. It found that tberecelpt in question was casual
G
in nature but-it opined-it was nevertheless not an income receipt and fell
outside the provision of section IO (3) of the Act. We have found it difficult to
follow the logic behind the argument.

11. For the above reasons we hold that the receipt il>question herein does B
336 SUPREME COURT REPORTS [1993] 3 S.C.R.

A constitute 'income' as defined,in clause (24) of section 2 of the Act. The appeal
is accordingly allowed and the question referred by the Tribunal under section
256(1) of th~ Act is answered .in the negative i.e., in favour of the Revenue and
against the assessee. There shall be no order as to costs.

RSK. Appeal allowed.

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