TMI Blog2016 (10) TMI 1232X X X X Extracts X X X X X X X X Extracts X X X X ..... a case where the assessee is giving any remuneration or prize to the sub agents, in as much as the value of prize winning lottery tickets is claimed from the government agency supplying the lottery tickets to the assessee. The government agency after deduction of TDS credits the value to the account of the assessee who, thereafter, passes on the same to the sub agents. In the facts of the present case we find that the application of section 194G/194H of the Act was not warranted. - Decided in favour of assessee. - ITA No. 510/Coch/2013 , ITA No. 511/Coch/2013, ITA No. 512/Coch/2013, ITA No. 514/Coch/2015, C.O. No. 30/Coch/2015 (A.Y. 2009-10) (Arising out of ITA No. 514/Coch/2015) - - - Dated:- 25-10-2016 - SHRI B.P. JAIN, HON BLE ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., HON BLE JUDICIAL MEMBER Assessee by : Shri R. Krishnan, C.A. Department by : Shri Shantham Bose, CIT DR and Shri A. Dhanraj, Sr. D.R. ORDER PER B.P. JAIN, A.M. : ITA No. 510/Coch/2013 1. This is an appeal by the Department against the order dated 04.06.2013 passed by CIT(A), in the case of the assessee for A.Y. 2008-09. 2. The assessee filed the return of income for A.Y. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the order passed by CIT(A) and has raised the following grounds of appeal :- 1. The order of the learned commissioner of Income Tax (A)-V, Kochi, in so far as the points stated below are concerned, is opposed to law on the facts and in the circumstances of the case. 2. The ld. Commissioner of Income Tax (Appeals) has erred in deleting the disallowance of ₹ 39,19,73,881/- u/s 40(a)(ia) for non-deduction of tax u/s 194H/194G of the Act from the payment of commission to sub-agents. 3. The ld.CIT(A) sought to have noted that in para 7 of the Assessment order, the AO has stated that even if for the sake of an argument, it is accepted that section 194H is not attracted, section 194G will be attracted , because section 194G also talks of liability to deduct tax while paying any income by way of commission, remuneration or prize (by whatever name called). 4. The ld.CIT(A), without correctly appreciating the nature of the payment made by the assessee to the sub-agents, wrongly placed reliance on the decision reported in 249 ITR 186 which was rendered in the context of discount received by the agent on bulk purchase of lottery tickets. The payment made by assessee to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decided in these grounds of appeal is whether the disallowance of ₹ 39,19,73,881/- under section 40(a)(ia) of the Act for non deduction of tax under section 194G by the assessee was within the bounds of law or not. 7. The ld. DR has relied upon the order passed by the AO to support his submissions. It was further argued by the ld. DR that the CIT(A) did not correctly appreciate the nature of payment made by the assessee to the sub-agents and the payments are nothing but commission for the sale of prize winning tickets. He further, argued that the CIT(A) erred in holding that there was no reference to section 194G in section 40(a)(ia). Reliance in this regard was placed on the judgment passed by the Hon ble Kerala High Court in the case of Shri P. MJuralidharan, Manjoo Lottery Vs. Union of India (CBEC), W.P. (C) 19625/2010 and Vodafone Essar Cellular Limited Vs. ACIT, ITA No. 1742/2009. 8. The ld.AR on the other hand argued that there was no principal agent relationship between the assessee and the sub agents. He placed reliance on the decision of the Kerala High Court in the case of M. S. Hameed and Ors., 249 ITR 186 (Ker.). He further argued that the role of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase we find that the application of section 194G/194H of the Act was not warranted. 11. The Hon ble ITAT Kolkata Bench in the case of M/s. Future Distributors Vs. Principal CIT, ITA No. 277/Kol/2016 while considering an identical question held as under :- 23. As rightly contended by the ld. counsel for the assessee, the amount in question can be considered a sin the nature of commission for the purpose of section 40(a)(ia) read with section 194G only if the same represents payment received or receivable, directly or indirectly, by a person acting on behalf of another person for any services rendered, inter alia, in the course of buying or selling of goods. In short, even if the amount in question is in the nature of income by way of remuneration or prize on lottery tickets and the person, who is responsible for paying to any person, who is or has been stocking, distributing, purchasing or selling lottery tickets, such income by way of remuneration or prize fails to deduct tax at source, the provision of section 40(a)(ia) cannot be invoked to make a disallowance on account of such remuneration or prize and the said provision would get attracted only when the amount is in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ockists, agents, resellers, etc. under the petitioners. 24. As per the terms and conditions of the agreements entered into between the assessee and its stockist (copy of stockist Agreement placed at pages 129 to 137 of the paper book), the assessee-firm and the stockists were acting on principal to principal basis, inasmuch as, the stockists were free to act in their capacity and once the lottery tickets were sold to them, such lottery tickets stood transferred to the stockists. The stockists were mainly concerned with their shares on sale of lottery tickets and they were not entitled to receive any commission on sale of lottery tickets from the assessee. They were free to sale the lottery tickets to any sub-stockists or retailers at the sale determined prices as per their free will and the contract between the assessee and the stockists was that of purchase and sale of lottery tickets and not that of rendering services on commission. In the matter of lottery business as governed by the relevant agreements, the stockists were to act on their own and not for or on behalf of the assessee. The relationship between the assessee and the stockists thus was that of principal to princip ..... X X X X Extracts X X X X X X X X Extracts X X X X
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