Lottery ticket trading margin was not commission, so tax deduction at source under Section 194G did not apply.

The difference between the face value of lottery tickets and the reduced price charged to distributors, stockists or dealers was a trading margin or rebate arising from principal-to-principal sales, not commission. Section 194G applies only where income by way of commission, remuneration or prize on lottery tickets is paid or credited to the recipient, and here no separate commission was paid or credited. As the basic conditions for tax deduction at source were absent, liability to deduct tax and consequential proceedings under Sections 201(1) and 201(1A) could not be sustained.

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Issues: Whether the margin between the face value of lottery tickets and the reduced price at which they were supplied to distributors, stockists or dealers constituted commission so as to attract tax deduction at source under Section 194G of the Income Tax Act, 1961 and justify proceedings under Sections 201(1) and 201(1A) of the Income Tax Act, 1961.

Analysis: Section 194G applies only where a person is responsible for paying income by way of commission, remuneration or prize on lottery tickets and such income is credited or paid to the recipient. The transactions in question were treated as outright purchases and sales on a principal-to-principal basis. The Assessee did not pay any separate commission to the dealers, nor was any income by way of commission credited to their accounts. The difference between the face value and the sale price was only a trading margin or rebate in the course of sale, and not commission within the meaning of the provision. Since the basic ingredients for attracting tax deduction at source were absent, proceedings under Sections 201(1) and 201(1A) could not stand.

Conclusion: The difference between the face value and the reduced price of lottery tickets did not amount to commission, Section 194G was not attracted, and the Assessee was not liable for deduction of tax at source or for action under Sections 201(1) and 201(1A).

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