TMI Blog2003 (12) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... venue in this appeal is as to whether the Tribunal was right in holding that distribution of prizes under the District Level Gift Linked Savings Mobilisation Scheme did not constitute "lottery" and the provisions of section 194B of the Income-tax Act are not applicable and if applicable, as to whether the Tribunal was right in cancelling the penalty imposed. In order to encourage thrift as also to mobilise funds for developmental works, saving schemes are operated by the Government. Under the gift linked scheme, a prize coupon is given to the investor when the investment made is in excess of Rs. 1,000. The investor does not pay any price for those coupons. Prizes are awarded to the holder of the lucky coupon, which is chosen by lot. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduct income-tax thereon at the rates in force: Provided that no deduction shall be made under this section from any payment made before the 1st day of June, 1972: Provided further that in a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the winnings." By the Finance Act, 1972, which introduced section 194B, a new sub-clause (ix) was introduced in the definition of "income" in section 2(24) of the Act, which reads thus: "2(24).... (ix) any winnings from lotteries, cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to the holders of numbers drawn at random." Words and Phrases, Permanent Edition, Volume 25, sets out the definitions of "lottery", one of which reads thus: "A 'lottery' may be defined to be a game by which a person paying money becomes entitled to money or other thing of value on certain contingencies, determinable by lot cast in a particular way by the manager of the game." Halsbury's Laws of England, Fourth Edition Reissue, Volume 4(1), at paragraph 7, which deals with "lotteries", reads thus: "There is no statutory definition of a lottery. However, it has been said that: 'A lottery is the distribution of prizes by chance where the persons taking part in the operation, or a substantial number of them, make a payment or conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, a promoter sets up a scheme by which participants are given genuinely free chances to win a prize, the scheme will not be treated as an unlawful lottery merely because it encourages some participants to purchase the promoter's goods and thereby increases his profits, even if the prizes are paid for out of those profits." In The Law Lexicon by P. Ramanatha Aiyar, "lottery" is defined "as a hazard in which sums are ventured for a chance of obtaining a greater value...A lottery is a species of gaming, which may be defined as a scheme for the distribution of prizes by chance among persons who have paid, or agreed to pay, a valuable consideration for the chance to obtain a prize." Thus, before the scheme can be regarded as a lottery, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t whatever other benefits the subscriber or competitor may get in return for his money, the chance of his getting the prize was also part of the bargain and must have entered into his calculation. The decision of this court with regard to kuris in Sesha Ayyar v. Krishna Ayyar, AIR 1936 Mad 225 was rendered after considering earlier English decisions, and by following the same. Subsequent decisions of the English courts by the Queen's Bench in the case of Reader's Digest Association Ltd. v. Williams [1976] 3 All ER 737 and the one by the House of Lords in the case of Imperial Tobacco Ltd. v. Attorney General [1980] 1 All ER 866 set out the current state of the law with regard to lotteries in England. In the case of the Reader's Digest [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of prizes by lot or chance, and that the chances should be secured by some payment or contribution by those who take part." While the reported English cases dealt with advertisement campaigns to promote the sale of goods, in the kuri case decided by this court the scheme was held to be a lottery on the ground that there was no further obligation on the part of the winner at the monthly draw to pay future subscriptions. The scheme here is not one for the promotion of sale of any goods. The investor is not offered interest payable on a larger sum, even-when a smaller sum is invested. When the investment is made the full amount is payable and interest is paid thereon for the specified period, the investment as also the interest being el ..... X X X X Extracts X X X X X X X X Extracts X X X X
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