Lottery falls within ambit of betting, gambling: Bombay HC

Lottery falls within the purview of betting and gambling, the Bombay High Court has ruled and upheld a Maharashtra government's act which levies tax on sale of lottery tickets in the state.

A division bench of justices S C Dharmadhikari and Bharati Dangre dismissed last week a petition filed by a company named Mangal Murti Marketing, challenging the validity of the Maharashtra Tax on Lotteries Act, 2006.

The company, which operates as a sub-distributor of state-organised lottery of the governments of Arunachal Pradesh and Nagaland, sought a direction to the Maharashtra government to restrain itself from levying and/or collecting tax on sale of lottery tickets in the western state.

Under the Act, the government levied tax on promoter of the lottery tickets. It was made imperative for the promoter to submit to the tax authorities a statement relating to lottery scheme, of which tickets are sold in the state.

The promoter has to also pay in advance the amount of tax payable under the Act, as per the scheme.

The petitioner's counsel P S Raman had argued that the Act was passed to indirectly restrict and prohibit sale of tickets of lottery organised by other states in Maharashtra.

The petition added that Parliament has already enacted the Lottery Regulation Act, 1998 to regularise the conduct of state organised lottery business and with a view to offer security to ticket purchasers.

It further claimed that the Maharashtra government cannot levy taxes on another state government's revenues.

Advocate General Ashutosh Kumbhakoni, appearing for the state government, argued that the Lottery Regulation Act was enacted only to regularise (the business) but it does not cover the element of taxation.

He further told the court that the state legislature was empowered to impose tax as lotteries are included within the ambit of the meaning of the term "betting".

The high court in its judgement accepted the government's argument and also relied on a Supreme Court order which said lottery was a species of gambling.

"The word lottery is defined, as in the dictionary, as a type of gamble in which people buy numbered tickets. Several numbers are then chosen randomly and people who have those numbers on their tickets win a prize," the court said in its order.

The court further said that the Act does not levy tax on sale of lottery tickets but the levy of tax is on betting and gambling, which is offered within the state of Maharashtra by organising sale of tickets or participation in the lottery.