TMI Blog2000 (11) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... lling lottery tickets, any income by way of commission, remuneration or prize on such tickets in all amount exceeding one thousand rupees, to deduct income-tax thereon at the rate of ten per cent. This ten per cent. of tax can be collected at the rate of selling the lottery tickets to registered agents or any other person where the amount exceeds Rs. 1,000. Whether the registered agents purchasing, the tickets sell the ticket direct to public or to sub-agents or not does not change the nature of the responsibility to collect the tax and the further sale of tickets need not be considered by lottery officer. They can collect the tax at the time of first sale by them. In these circumstances, there is no illegality in the demand of the income-tax authorities to remit the tax. Therefore, I am to request you to comply with the relevant provisions of the Income-tax Act. 2. From the letter it appears that the Income-tax Department had demanded deduction of tax and remittance thereof from registered agents when the amounts exceeded one thousand rupees. The second respondent found nothing objectionable in the demands, and exhibits P-4 instructions were consequently issued. The three petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the stand of the parties better : 194G. Commission, etc., on sale of lottery tickets.--(1) Any person who is responsible for paying, on or after the 1st day of October, 1991, to any person, who is or has been stocking, distributing, purchasing or selling lottery tickets, any income by way of commission, remuneration or prize (by whatever name called) on such tickets in an amount exceeding one thousand rupees shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent. (2) Where the Assessing Officer is satisfied that the total income of any person who is or has been stocking, distributing, purchasing or selling lottery tickets justifies the deduction of income-tax at any lower rate or no deduction of income-tax, as the case may be, the Assessing Officer shall, on an application made by such person in this behalf, give to him such certificate as may be appropriate. (3) Where any such certificate is given, the person responsible for paying the income referred to in sub-section (1) shall, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to derive an income as well. The petitioners, according to him, were engaged in a transaction, as spoken to by the section. As there was no statutory authority for attempting collection of tax from them, he submitted that exhibit P-4 was misconceived, and the State Government simply obliged the Income-tax Department, when a request had come forth, without independent application of mind. 9. Counsel also referred to section 206C of the Act, which was in Part BB of Chapter XVII which authorised collection of tax at source. This was con fined to specified items, and a comparable provision was not there in respect of lottery tickets. As the authority for the demand was vested in section 194G, since the pre-condition for application of the section was conspicuously absent, according to counsel, the levy was unauthorised. 10. Counsel also relied on the decisions reported in Union of India v. A. Sanyasi Rao [1996] 219 ITR 330 (SC), referring to a statutory fiction being employed. A concession or rebate was never considered as the income derived by an assessee, and for the proposition, reliance was placed on CIT v. Udhoji Shrihrishnadas [1983] 139 ITR 827 (MP). Counsel also referred to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the technical arguments therefore were unsustainable. 13. It was also stated that the tax worked out to ten per cent. of the commission amount, and the maximum payable was 2.8 per cent., and at the time of regular assessment, further adjustments could be made. A revenue loss was sought to be plugged by appropriate statutory prescription. Referring to the decision reported in Union of India v. A. Sanyasi Rao [1996] 219 ITR 330 (SC), with reference to section 44A, it was highlighted that the tax deserved to be deducted at source, so as to prevent evasion. Nor could the method be dubbed as irrational for the reason that there was a liability to pay tax. It was well accepted, according to counsel, that notional income was also taxable. Coming to the facts of the case, it had been pointed out that by getting a one rupee ticket for 71.5 paise definitely the persons were making a profit of 28.5 paise per rupee, and it was a reality. Citing the Law Lexicon, it was also pointed out that commission is used as meaning discount, and in any case, if a common sense view is taken, whatever is the nomenclature, the transaction resulted in an income---a profit, which was undeniable. For this pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made a profit. 17. Now I may briefly refer to the decisions which were cited at the Bar. Counsel for the petitioners relied on the decision reported in Hyderabad Industries Ltd. v. ITO [1991] 188 ITR 749. It appears that the observations of the Karnataka High Court might be relevant here: It is not understandable as to why a benefit which will not be included in the total income of a person, should be considered as 'income' for the purpose of deduction of tax at source at all. The purpose of deduction of tax at source is not to collect a sum which is not a tax levied under the Act ; it is to facilitate the collection of the tax lawfully leviable under the Act. The interpretation put on those provisions by the respondents would result in collection of certain amounts by the State which is not a tax qualitatively. Such an interpretation of the taxing statute is impermissible. 18. According to counsel, this applies to the situation at hand, and I am of the opinion that the observations are entitled to due weight when the issue is considered. Also I note that the Madras Bench of the Tribunal in ITA No. 2713 of 1996 and connected cases have almost on identical facts held that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore it became assessable. Apart from a decision regarding the characteristics of commission and rebate , I find no guidelines that could be profitably accepted from the above decision: for the purpose of deciding the present case. If it is a case of rebate to the individual partners the decision points out, it could not be treated as an income of the partnership. 21. According to me, the transaction which the petitioners have entered into do not appear to be one in the contemplation of section 194G. The sub-headings of the section is commission, etc., on sale of lottery tickets. The liability is for deduction at source, under Chapter XVII. The general provision by section 190 prescribes for deduction, collection at source or advance payment. It is not disputed that if at all the first alone is applicable here. Section 192 concerns salary. Deduction at the time of payment is compulsory. Section 193 refers to the deductions made at the time of payment of interest, and section 194 concerns with dividends payable by a company. Likewise section 194A concerns payments of certain types of interests, section 194B deals with winnings from lottery or crossword puzzle, section 194C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the Legislature to levy a tax, that power itself must be widely construed ; it must include the power to impose a tax and select the articles or commodities for the exercise of such power; it must likewise include the power to fix the rate and prescribe the machinery for the recovery of the tax. This power also gives jurisdiction to the Legislature to make such provisions as, in its opinion, would be necessary to prevent the evasion of the tax. In imposing taxes, the Legislature can also appoint authorities for collecting taxes and may prescribe the procedure for determining the amount of taxes payable by any individual ; all these provisions are subsidiary to the main power to levy a tax... 25. However, as pointed out by the Supreme Court of India in CIT v. Khatau Makanji Spinning and Weaving Co. Ltd. [19601 40 ITR 189, this also is a case where the Act could have resorted to some fiction which might conceivably have met the case, but it has failed to do so. The provision has failed to achieve the underlying objective. Reliance on Union of India v. A. Sanyasi Rao [1996] 219 ITR 330 (SC), that what could be converted to income can reasonably be regarded as giving rise to incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
