Income: Accrual: S/s. 5 and 145: A. Y. 1989-90 and 1990-91: Assessee selling lottery tickets to stockists subject to return of unsold tickets before one day of draw: Income on sale of tickets accrues on the date of draw:

The assessee was engaged in the business of printing of lottery tickets and organising lotteries on behalf of, inter alia, the Government of Sikkim. The following question of law was raised by the Revenue in appeal before the Delhi High Court:

“Whether, on the facts and the circumstances of the case, the Tribunal was right in law in holding that the tickets sent to the stockists do not become a sale on their dispatch but assumes the character of a sale on the happening of various events including the draw taking place?”

According to the Revenue, the moment the assessee dispatches the tickets to its stockists, a sale takes place. Therefore, the fact that the tickets were sent to the stockists within the accounting year would mean that the sales had been finalised during that year. It is also the contention of the revenue that it is irrelevant as to when the draw actually takes place.

The High Court upheld the decision of the Tribunal and held as under:

“i) After going through the agreement, the Tribunal had observed that the arrangement by which the assessee sent tickets to the stockists who in turn sold the same to their agents did not indicate that the sale took place at the point of dispatch of tickets to the stockists. We also notice that the unsold tickets are to be returned to the organising agent of the assessee at least one day before the actual date of the draw and any tickets received thereafter would not be accepted and treated as sold by the stockists.

ii) This makes it clear that those tickets which are returned by the stockists cannot be treated as having been sold. The corollary to this is that mere dispatch of tickets to the stockists would not entail a sale. It is only those dispatches of tickets which are not returnable in the manner indicated as above which would be recorded as sales.

iii) Thus, till the date of the draw or just prior to the date of the draw it cannot be ascertained as to whether the dispatched tickets were actually sold or not.

iv) We, therefore, agree with the view taken by Tribunal and, consequently, decide this question in favour of the assessee and against the Revenue.”