Tax deduction on winnings in kind does not apply; payer must ensure tax payment before releasing the prize.

Where winnings are wholly in kind, Section 194B does not require deduction of tax at source because deduction presupposes a monetary payment; instead, the payer must ensure that tax has been paid before the prize is released. On that construction, Section 201 does not apply to a failure to discharge the proviso obligation under Section 194B, since that provision targets failure to deduct tax or, after deduction, failure to remit it. The text also notes that the Act contains other provisions, including Sections 271C and 276B, to address breach of the proviso duty. The revenue's appeals therefore failed, and the Tribunal's orders in favour of the assessee were left undisturbed.

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Issues: Whether proceedings under Section 201 of the Income-tax Act, 1961 could be initiated where winnings were wholly in kind and the payer's obligation under Section 194B was only to ensure payment of tax before release of the prize.

Analysis: The substantive part of Section 194B applies to deduction of tax at source from winnings, but its proviso deals separately with cases where the winnings are wholly in kind or partly in kind and cash is insufficient. In such cases, the duty is not to deduct tax from an amount paid, but to ensure that tax has been paid before releasing the winnings. Since deduction presupposes subtraction from a monetary payment, it cannot operate where the prize is wholly in kind. Section 201, on its plain terms, applies where there is failure to deduct tax or, after deduction, failure to pay it. The Court further noted that the Act contains other provisions, including Sections 271C and 276B, which address failure to discharge the obligation under the proviso to Section 194B.

Conclusion: Proceedings under Section 201 were not maintainable against the assessee for failure to ensure payment of tax in respect of winnings wholly in kind.

Final Conclusion: The revenue's appeals failed, and the orders of the Tribunal in favour of the assessee were left undisturbed.

Ratio Decidendi: Where winnings are wholly in kind, Section 194B does not require deduction of tax at source; it requires only assurance that tax has been paid before release of the prize, and failure to perform that duty does not attract Section 201.

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