9911796707
TMI Blog1999 (7) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... 29-5-1999 by the Tamil Nadu Government are as follows : --- "In Government Order first read above, Orders issued to implement the District Level Gift Linked Savings Mobilisation Scheme during 1996 97. In the letter second read above, the Director of Small Savings has sent proposal for the continuance of the District Level Gift Linked Savings Mobilisation Scheme during 1997-98 also with slight modification. The Government after careful consideration accept the proposal of the Director of Small Savings and direct that the District Level Gift Linked Savings Mobilisation Scheme be implemented during 1997-98 also with the following salient features :--- (i) Period of the Scheme 1-4-1997 to 31-3-1998. (ii) Each District in Tamil Nadu shall form a separate unit with District Collector as Manager of the Scheme. The Director of Small Savings shall be the Manager of the scheme for Chennai District. (iii) There shall be a draw for each series consisting of one lakh gift coupons. The draw will be conducted for each series after all the one lakh gift coupons in that series are distributed to the investors. (iv) Every investment of Rs. 1,000 paid by both individuals and institutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 201(1A) for contravening the provisions of section 194B of the Act against the Dy. Director of Small Savings, Chennai. The Assessing Officer had considered this transaction as lottery and proceeded against the assessee as aforesaid. The Assessing Officer while doing so placed reliance on the decision of the Hon'ble Madras High Court in the case of Sesha Ayyar v. Krishna Ayyar 59 ILR Mad. 562. The relevant extract from the order of the Assessing Officer is as follows :--- "As per Oxford Dictionary the word 'Lottery' has been given the following meanings:--- 'Arrangement for distributing prizes by chance among purchasers of tickets. (fig.) thing that defies calculation'. As per the prize scheme, for every investment of Rs. 1,000 in Post Offices of Tamil Nadu in specific schemes such as NSC, PPF, NSS etc. a prize coupon is given. This indicates that to become eligible for a prize coupon, the person has to make investment for Rs. 1,000 i.e., there is a cost factor involved in getting the prize coupon. The prize winners are determined on the basis of draw conducted for each series. Prize winners are selected on lucky draws conducted. Hence, in the selection of prize winners, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the learned counsel reiterated the points mentioned in the written submissions. 9. On the other hand, the learned departmental representatives, vehemently contended that the assessee is conducting draws. The assessee has distributed prizes without deduction of tax at source under section 194B of the Act. There is no violation of the provisions of section 194B, according to which 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 tax paying shall, before releasing the winnings, ensure that the tax has been paid in respect of the winnings. The learned departmental representatives heavily relied on the observations made by the Commissioner (Appeals) in his order in para 4.1, which is as follows: "It is true that the word 'lottery' is not defined under the Income-tax Act. In the context of allowability of deduction under section 80TT, the Punjab and Haryana High Court in CIT v. Sanjiv Kumar [1980] 123 ITR 187 has outlined the basic ingredients of lottery. The view taken by the Punjab and Haryana High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircuitously from the interest earned on the subscriber's contributions or are paid directly from those contributions. The risk of loss is not necessary. He further submitted that since there is an element of chance in the transaction it certainly amount to 'lottery' or 'raffle' and therefore, the assessee is duty bound to comply with the provisions of section 194B. The investors, by virtue of their making the sum of Rs. 1,000 has become eligible to obtain a coupon and ultimately some of them got prizes. Therefore, he argued that distribution of prizes to the investors on the basis of winning coupons amounts to 'lottery'. He also strongly supported the order of the Assessing Officer as well as Commissioner (Appeals) in every aspect. 10. We have heard rival submissions and perused the records. First of all it has to be seen whether the transactions under consideration amounts to 'lottery' or 'raffle'. In Law of Lexicon by P. Ramanatha Aiyar (1997 Edn.) edited by Justice Y.V. Chandrachud (former Chief Justice of India) a reference to 'raffle' has been given, as follows : 'Raffle' --- A raffle is a game of perfect chance in which every participant is equal with every others in pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry there should be purchase of chance and risk of loss of the money of the participant. Issuing a gift coupon to the depositors and distributing prizes to the successful depositors after the draw, does not assume the character of lottery or raffle. In every raffle or lottery sale and purchase of chance (for instance sale and purchase of raffle ticket) is the prime essential element. But here in the instant case, there is no sale and purchase of coupon. Moreover, there is no risk of loss of the money by virtue of obtaining the gift coupon. The coupons, admittedly, are not sold. This itself will go to show that the authorities below were totally misconceived the facts and misquoted the provisions of law. Therefore, we find much force in the stand taken by the assessee. 13. The learned departmental representative and the learned CIT(A) placed much reliance on the decision of the Punjab and Haryana High Court in the case of Sanjiv Kumar . In that case periodically chits were taken out and whosoever's name comes was entitled to get the full amount without further making any contribution in this scheme of chit. The successful bidder claim deduction under section 80TT. In the above cite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80TT of the Act. 16. In the case before us there is no sale or purchase of chance because the coupon was a gift to the investor. There is no risk of loss to the investors as they get their own deposit with dividend as announced by the Government of India on its maturity. Above all, it is quite obvious and apparent from the facts that the intention of the depositors were to invest their money in saving schemes as introduced by the Government of India. The primary object of the depositors was to take part in the savings scheme. 17. A reading of the orders of the Assessing Officer and the learned CIT(A) we find that much reliance has been placed on the decisions of Punjab Haryana High Court and Madras High Court. We have already distinguished the decision of the Punjab Haryana High Court on facts. However, it is pertinent to import the relevant ratio laid down by the Madras High Court in Sesha Ayyar's case at page 600, as follows : "As stated above, the question for consideration is whether a kuri or chit fund of the said description is a lottery. A lottery is a species of gaming or wagering and may be described as an agreement whereby a prize or prizes are to be awarded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, even the decision of the Madras High Court though relied on by the authorities below, only supports the case of the assessee, that the transaction will not come under the purview of section 194B. The ratio being rendered by the Full Bench of the Madras High Court and which is still a good law, this Tribunal is bound to follow the ratio laid down by the jurisdictional High Court. At the same time we do not accept the contention of Shri V. Ramachandran, the learned counsel for the assessee that section 194B is not applicable to the distribution of prizes in kind. In this aspect section 194B is very clear in view of the second proviso to section 194B. 18. In view of the above, we have no hesitation in holding that the transaction in question before us is not lottery and the provisions of section 194B is not applicable as viewed by the authorities below. At best it can be treated as an incentive by the State Government for encouraging the savings of the public at large. Therefore, the penalty imposed under section 271C of the Income-tax Act, 1961, is hereby cancelled and we order accordingly. 19. Now coming to the issue of charging of interest under section 201(1A), the poi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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