Lottery ticket pool not treated as business, so partnership registration failed and assessment stood as an association of persons.

A concern formed only to purchase lottery tickets and divide any winnings was treated as not carrying on a business under the Income-tax Act, because such activity is extra-commercium and lacks the agency element required for a partnership under the Partnership Act. On that basis, the arrangement could not be regarded as a genuine firm entitled to registration under section 185(1)(a). The tax consequence noted is that the income was assessable in the status of an association of persons or body of individuals rather than in the hands of the individual partners.

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Issues: Whether the assessee-firm, formed for purchasing lottery tickets and sharing any winnings, was entitled to registration under section 185(1)(a) of the Income-tax Act, 1961, and whether the assessment could consequently be made in the hands of the individual partners rather than as an association of persons or body of individuals.

Analysis: For registration under section 185(1)(a), the Income-tax Officer must be satisfied that a genuine firm existed in the previous year with the constitution specified in the partnership deed. A partnership under section 4 of the Indian Partnership Act, 1932 requires an agreement to share profits of a business carried on by all or any acting for all, and the element of agency is essential. The firm's activity was only the purchase of lottery tickets and waiting for a prize draw; it did not involve trade, commerce, or business. Lottery activity of this nature is extra-commercium and cannot be treated as business within section 2(13) of the Income-tax Act, 1961, even if lottery tickets may be described as goods in another context.

Conclusion: The assessee-firm was not entitled to registration under section 185(1)(a) of the Income-tax Act, 1961, and the assessment was rightly to be made treating the concern as an association of persons or body of individuals. The answer was therefore in favour of the Revenue.

Final Conclusion: The references were answered against the assessee and the Tribunal's view was reversed on the core question of registration and assessment status.

Ratio Decidendi: A concern engaged only in purchasing lottery tickets for possible winnings does not carry on a business within the meaning of the Income-tax Act and cannot claim partnership registration under section 185(1)(a) merely on the basis of profit-sharing arrangements.

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