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TMI Blog1999 (2) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... ubscription till the completion of the Scheme of 52 months. After the completion of the scheme on the expiry of 52nd month, all the remaining subscribers, who were not successful in the monthly draws would get back their contributions without any interest. This is the modus operendi of the prized scheme, which commenced in September, 1985. We are concerned in these appeals with the continuation of the Scheme till financial year 1988-89. 3. The Assessing Officer treated the scheme as a lottery scheme, and cast a liability on the assessee to deduct tax at source as provided in section 194B. He found that the assessee was at default of not deducting tax at source. So, he passed an order under section 201(1) directing the assessee to pay the amount that should have been deducted by it as tax at source. He also passed another order imposing interest on this amount under section 201(1A) in a sum of Rs. 34,378. This order was rectified by another order, whereby the interest charged was modified as Rs. 44,440. The CIT(A), when all these orders were appealed against, set aside the same, by his orders dated 30-8-1989 and 26-12-1989, with a direction to reexamine the matter and give a fresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s erroneously construed by the lower authorities. According to him, a scheme of lottery essentially has two characteristics. The first is that any subscriber to a lottery scheme should have only a chance of winning. He may or may not win. The second essential condition is that the subscriber irrespective of winning or losing the lottery, should lose the amount paid for participating in the lottery. In support of these contentions, he relied on the following authorities --- (a) Viveswaraiah Lucky Centre v. CIT [1991] 189 ITR 698/56 Taxman 80 (Kar.), (b) CIT v. Sanjeev Kumar [1980] 123 ITR 187 (Punj. Har.), (c) Extract from Black's Law Dictionary, (d) Extract from Pollock Mulla's Indian Contract Act, According to the learned counsel, this is a scheme, where irrespective of winning or losing the chance in the draw, one continues to be a member of the scheme, during the entire period of scheme, and at the end of the scheme, all those, who were not successful winners in the draw were to be returned the monies paid by them. Thus, 52 subscribers out of 250 who get the chance of winning the monthly lottery would get scooter or its money worth of Rs. 15,100, and the remaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mar's case. 9. Regarding the third contention of the learned counsel, he contended that the assessee has never proved before the Assessing Officer that the subscribers to the scheme were not assessable to income-tax. Therefore, that contention has no merit, and the facts of the decision rendered in Tata Chemicals Ltd.'s case are distinguishable. 10. We heard both sides and considered the matter in detail. We have gone through all the materials placed by the learned counsel before us, and also the case-laws cited by the learned counsel. We find that it would be better if we examine the second contention of the assessee that the scheme was not a lottery, since the outcome of this contention will decide the necessity or otherwise to consider the other two contentions on limitation, and non-liability of the members to income-tax. 11. 'Lottery' as generally understood is a scheme for the distribution of prizes by lot or by chance. Now, it is conducted even by some State Governments to raise funds for public purposes. The lottery by its strict generic sense may even reach upto the edge of gambling. But still, it is lawfully recognised and accepted scheme of gambling. The 'word' lot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectly out of the proceeds received by way of subscription from the participants or from the interest earned thereon. Let us examine the facts of the present case in the light of the tests laid down by the Courts in the cases discussed above. All the subscribers are contributing by way of monthly subscriptions to participate in the scheme. The monthly lucky draw is taken, and a winner is declared every month to win a scooter or its money worth of Rs. 15,100. Intention of all the subscribers is to win the prize. The subscription monthly made by the men, hers might be refunded to all those who may not win any prize, at the end of the scheme. But such a refund is only an attraction for the members to join the scheme and try their luck. Whether the assessee is paying for the prizes of the lucky winners or for the refund of the contributions to the remaining members at the end of the scheme, it does not effect the character of the scheme, being a lottery. If there is no intention of winning the prizes in the minds of the members at the time of their joining the scheme, they would not have put their amounts monthly with the assessee for as many as 52 months, to get back just their own c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished the details of the scheme before the Assessing Officer, before initiating the proceedings. The assessee has not deducted tax at source. He has not filed any statutory return regarding deduction and payment of tax, etc. before the Assessing Officer. Therefore, the Assessing Officer was constrained to collect all the necessary details before finalising the present proceedings. Considering the peculiar facts and circumstances of this case, the period taken by the Assessing Officer to pass the consequential orders in pursuance of the orders of the first appellate authority in the original proceedings cannot be said to be undue and unreasonable, so as to warrant being treated as barred by limitation. In the case in K.P. Narayanappa Setty Co.'s case, rendered by the jurisdictional High Court, the order imposing penalty was passed in 1963, whereas the assessment was made in 1954, in a matter relating to assessment year 1946-47. In that case, the delay was prima facie inordinate and unreasonable. The facts of the present case are entirely different. In these proceedings, we cannot say that there was inordinate or unexplainable delay, so as to warrant invoking the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate that if the person liable to deduct tax at source does not deduct tax, or after deducting such tax, fails to pay the tax as required by or under the Act, he shall be deemed to be an assessee in default in respect of the tax. Once the assessee is declared as an 'assessee in default ' under the statute in respect of that tax, the Assessing Officer is perfectly justified in demanding the payment of tax from the assessee. Therefore the third contention is also decided against the assessee. 17. What is demanded by the Assessing Officer by the impugned orders under section 201 and section 201(1A) is the amount of tax that the assessee was liable to deduct while paying out prize monies to the subscribers under the scheme operated by him which he failed to deduct, and interest thereon leviable under the statute, itself. Once it is held that the scheme operated by the assessee satisfies all the tests to be branded as a scheme of lottery, the provisions of section 194B are attracted, and for failure on the part of the assessee under the said provisions, the consequences under section 201 and section 201(1A) are to follow. In the circumstances, the orders of the Assessing Officer in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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