1999 JTR(SC) 1212
2000 10 SCC 420 ; 2000 KHC 4314 ; 1999 3 KLT(Online) 1127
SUPREME COURT OF INDIA
D.P.Mohapatra : S.P.Bharucha : V.N.Khare
Sunrise Associates
Versus
Government Of Nct Of Delhi
Case No. : 4552 , 4557 of 1998
Date of Decision : 10/13/99
The court questioned the legal validity of splitting a lottery ticket purchase into a taxable 'right to participate' and a non-taxable 'right to win,' suggesting these rights are inextricably linked and the issue requires reconsideration by a Constitution Bench.
Act
Referred
:SALE OF GOODS ACT
: S.2(7)
(A) Sales Tax - Taxability of lottery tickets - Whether the entire consideration paid for the purchase of a lottery ticket is liable to sales tax - Previous judicial view held that only the transfer of the right to participate in the lottery draw amounted to a transfer of goods, whereas the right to claim the prize, depending on chance, was an assignment of an actionable claim (Paras 1, 2).
(B) Sale of Goods - Nature of lottery ticket - Prima facie, the only right of the purchaser of a lottery ticket is to take the chance of winning the prize - No justification exists to split the transaction of the sale of a lottery ticket into the acquisition of the right to participate in the lottery draw and the right to win the prize (Para 4).
Facts of the case:
Appeals were filed against a decision of the High Court which held that the entire consideration paid for the purchase of a lottery ticket was liable to sales tax. The appellants argued that the sale of a lottery ticket does not constitute a sale of goods but is a transfer of a chose in action, or alternatively, that the right to participate and the right to win are inextricably linked, making the transaction non-taxable.
Findings of Court:
The court observed that the previous legal position, which split the transaction into two distinct rights for the purpose of taxation, requires reconsideration as the rights involved appear to be inseparable.
Issues: Whether the sale of a lottery ticket constitutes a sale of goods liable to sales tax and whether the transaction can be split into the right to participate in the draw and the right to win the prize.
Ratio Decidendi: The court reasoned that there is no good reason to divide the purchase of a lottery ticket into the right to participate and the right to win, as the primary right of the purchaser is simply the chance of winning the prize.
Result: Matter referred to a Constitution Bench.
(B) Sale of Goods - Nature of lottery ticket - Prima facie, the only right of the purchaser of a lottery ticket is to take the chance of winning the prize - No justification exists to split the transaction of the sale of a lottery ticket into the acquisition of the right to participate in the lottery draw and the right to win the prize (Para 4).
Facts of the case:
Appeals were filed against a decision of the High Court which held that the entire consideration paid for the purchase of a lottery ticket was liable to sales tax. The appellants argued that the sale of a lottery ticket does not constitute a sale of goods but is a transfer of a chose in action, or alternatively, that the right to participate and the right to win are inextricably linked, making the transaction non-taxable.
Findings of Court:
The court observed that the previous legal position, which split the transaction into two distinct rights for the purpose of taxation, requires reconsideration as the rights involved appear to be inseparable.
Issues: Whether the sale of a lottery ticket constitutes a sale of goods liable to sales tax and whether the transaction can be split into the right to participate in the draw and the right to win the prize.
Ratio Decidendi: The court reasoned that there is no good reason to divide the purchase of a lottery ticket into the right to participate and the right to win, as the primary right of the purchaser is simply the chance of winning the prize.
Result: Matter referred to a Constitution Bench.
Lottery - Held that the transfer of the right to participate in a lottery draw amounts to a transfer of goods, while the right to claim the prize is an assignment of an actionable claim.
Consideration - Held that only the portion of the lottery ticket consideration relating to the right to participate in the draw was liable to sales tax.
Agreement - A three-judge bench in this case agreed with the decision rendered in H. Anraj.
S.P.BHARUCHA , J.
(1) THESE appeals arise upon a decision rendered by a Division Bench of the High Court at Delhi. Following the judgment of this Court in H. Anraj v. Govt. of T.N it was held that the entire consideration paid for the purchase of a lottery ticket was liable to sales tax. The High Court declined to follow the view taken by the Karnataka High Court in Nirmal Agency v. CTO that the entire consideration was not liable to sales tax but only that portion thereof which related to the right of the purchaser of the ticket to participate in the lottery draw was so liable.
(2) THE judgment in H. Anraj held that only the transfer of the right to participate in the lottery draw, which took place on the sale of a lottery ticket, amounted to a transfer of goods; to the extent that the sale involved the transfer of the right to claim the prize, depending on chance, it was an assignment of an actionable claim.
(3) THE argument on behalf of learned counsel for the appellants before us is that there is no sale of goods when the ticket of a lottery organised by a State is sold; at best, there is a transfer of chose in action. Alternatively, that the two rights of the purchaser, as found in H. Anraj, are inextricably linked so that no tax can be levied upon the latter element, namely, the right to participate in the lottery draw. In other words, the principal argument on behalf of the appellants is that the judgment in H. Anraj requires reconsideration.
(4) WE are inclined to agree that the judgment in H. Anraj requires reconsideration for the reason that, prima facie, the only right of the purchaser of a lottery ticket is to take the chance of winning the prize. There seems to us to be no good reason to split the transaction of the sale of a lottery ticket into the acquisition of (i) the right to participate in the lottery draw, and (ii) the right to win the prize, dependent on chance.
(5) IN the case of Vikas Sales Corpn. v. Commr. of Commercial Taxes a Bench of three learned Judges agreed with the decision in H. Anraj. It is, therefore, necessary that these appeals should be heard by a Constitution Bench.
(6) THE papers and proceedings shall be placed before the Honble the Chief Justice for appropriate directions.