TMI Blog2002 (4) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... anbazar, Guwahati, under section 201(1) of the Income-tax Act, 1961 (hereinafter called "the Act"). By the order dated January 25, 1994, the Assistant Commissioner of Income tax, Circle-TDS, had asked the Director, State Lotteries, Assam, to deposit a sum of Rs.2,80,16,800 within three days from the date of the said notice of demand as the Director, State Lotteries, Assam, had failed to deduct tax at source in respect of the lottery draws held during the period November 16, 1993 to December 31, 1993. Similarly, vide order dated June 6, 1994, the Assist ant Commissioner of Income-tax had raised a demand of Rs.7,92,06,400 against the Director, State Lotteries, Assam, on alleged short deduction of tax at source under section 194B of the Act in respect of 1,494 numbers, of lottery draws held during the period from February 6, 1992 to December 12, 1992. The aforesaid two orders dated January 25, 1994, and June 6, 1994, were made the subject-matter of challenge in Civil Rules Nos. 405 of 1994 and 2786 of 1994 respectively. Pursuant to the powers conferred on the States under article 298 of the Constitution of India the State of Assam has been carrying on the business of State organise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Government of Assam may be benefited of having more royalty than the annual fixed royalty. In case of more draws than the minimum prescribed above, the organising agent shall pay the same fixed royalty of Rs.10,500 per draw for each excess draw (i.e., more than the minimum draw 1,460 per annum) held in a year. The fixed royalty amount shall be paid within 15 days of the draw held provided that when the organising agent fails to pay any instalments during the stipulated limit they shall be liable to pay interest at 6 per cent. per annum for each day of default subject to a maximum of 180 days and thereafter 12 per cent. per annum for each day of defaulted. 10. The organising agent hall retain with the Government a deposit of Rs.10 lakhs (rupees ten lakhs only) as one time deposit of taxable prize money for ten daily and weekly lotteries excluding bumper lotteries to cover up to maximum number of draws to be run by the organising agent. This deposit shall remain with the Government until the same is claimed by the prize winners. In case the taxable prizes are not claimed by the public or are among the unsold tickets of the organising agent, the same deposit with the Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prize money from unsold tickets as also the refund of the unclaimed prizes to the organising agent is not given by way of winning from any lottery and, therefore, section 194B of the Act is not attracted. However, the case of the Revenue was that the sale is involved when the agent gets tickets from the Director of Lotteries and all tickets, whether sold or unsold by the agent, participate in the lottery and the refund of prize money towards unsold ticket(s) in the hands of the agent or refund of unclaimed prizes by any winner of the holder of lottery ticket(s), is the property of the agent and the refund to the agent amounts to income by way of winning from a lottery and, therefore, the Director of Lotteries was required to deduct income-tax therefrom at the rate in force at the relevant time under section 194B of the Act. The learned single judge after detailed discussion held that the agreement between the Director of Lotteries and the agent was a mere agency for organising lottery. There was no sale of the lottery tickets involved by the Director of Lotteries to the agent and the money which was refunded to the agent in the case of prize winning tickets remaining unsold in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the hands of the agent really do not win the prize and if a prize winner to whom the ticket might have been sold does not come to claim the prize within the stipulated period, the refund of that amount to the agent does not amount to payment towards winning from any lottery. After hearing learned counsel for the parties we are of the view that there is no force in these appeals. Our analysis of section 194B would clearly indicate that the person responsible for payment under section 194B is only to make deduction if he is paying the money as an income by way of winning from any lottery and not otherwise. Supposing in a case an agent sells a ticket which wins prize, the prize winner does not come forward to claim the prize within the stipulated period. As per the agreement that money has to be refunded by the Director of Lotteries to the agent (see clause (10) of the agreement). Surely, when the agent gets the refund, he is not getting the refund as income by way of winning from a lottery ticket, inasmuch as, the winner was somebody else who did not come forward to claim the prize. The agent does not become a prize winner from a lottery when the real prize winner does not come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the agent does not become the purchaser of the ticket and it cannot be said that the unsold tickets in the hands of the agent are participating in the lottery. As per the agreement, the State Government is entitled to a fixed amount of money as royalty from the agent. The Bombay High Court in Commercial Corporation of India Ltd. v. ITO [1993] 201 ITR 348, while dealing with an almost similar agreement came to the conclusion that the agreement of agency where the State or the principal and the person to whom the right to organise the lottery was given was an agent. No transaction of sale could be read into the agreement. The Bombay High Court further held as under: "We have already seen, having regard to the definition of lottery, that it is chance for a prize. Therefore, there must be consideration paid for taking a chance. The company does not purchase any lottery tickets. Therefore, they do not take any chance at the draw. The company also does not equally participate in the draw. It is, therefore, not possible to hold that when the ex-officio Director of Lotteries credits the amount under the second part of clause 15 of the agreement, the Government gives prizes to the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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