TaxTMI 
TaxTMI 
2013 (11) TMI 619
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....y that order, the AO, held that the respondent-assessee had failed either to deduct the tax at source or to ensure that the tax had been paid before releasing the winnings as contemplated by Section 194B of the Act. 1.2. In ITA 144/02, the AO treated the respondent-assessee as an assessee in default and raised a demand of Rs.3,78,550/- for the assessment year 2001-02 and Rs.17,73,902/- for the assessment year 2002-03 in ITA 142/07. The orders of the AOs, in both the cases are dated 3.1.2002 and 28.3.2002 respectively. 2. The facts leading to this appeal, in brief, are as under: 2.1. The respondent is a Company engaged in the business of manufacture and sale of various consumer goods/products. During the previous years, relevant to the assessment years 2001-02 and 2002-03, it had conducted certain sales promotion Schemes. The respondent advertised the Schemes wherein coupons were inserted in packs/containers of their products. Some of those coupons indicated that on purchase of the packs/containers, they would get prizes, as indicated in coupons. The prizes that were offered were Santro Car, Maruthi Car, Gold chains, Gold Coins, Gold Tablas, Silver Coins, Emblems etc., The ....
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....nbsp; Total : Rs.2,91,754 Add: Int. u/s. 201(1A) : Rs. 86,796 Rs.3,78,550 2.3. Feeling aggrieved and dissatisfied with the order passed by the AO, the respondent filed two appeals bearing Appeal Nos.ITA 47/2002-03 & ITA 93/2001-02. Both the appeals were dismissed by the Common order dated 21.6.2002. The appellate authority affirmed the view taken by the AO. 3. The respondent, thereafter preferred two appeals under Section 253 of the Act before the Tribunal bearing Nos.1290 & 1291/Bang/2002. The Tribunal allowed both the appeals filed by the respondent holding that the schemes conducted by the respondent were not a lottery as the said expression was understood upto the Assessment Year 2001-02. The Tribunal found, as a matter of fact, that the customers did not pay any excess amount for getting coupons indicating winnings in the packs/containers of products they purchased, and therefore, nothing was paid by them for participating in the Scheme. Accordingly, the Tribunal concluded that although there was an element of chance, but as no consideration or payment was made by the customers for the purpose of participation in th....
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....igation under the proviso to Section 194B, merely because the assessee did not ensure that tax had been paid in respect of winnings, wholly in kind, before releasing the winnings, in favour of the winner-customers? 6. Having regard to the questions framed by us and the arguments advanced by learned counsel for the parties, we would like to deal with the third question first. We have framed the third question in view of challenge to the jurisdiction of the AO to initiate proceedings under Section 201. If we hold that the proceedings under Section 201 against the assessee and the orders passed by the AO and the AA are without jurisdiction, the first two questions need not be addressed. 7. We have heard learned counsel for the parties at considerable length. We are of the opinion that the third question of law will have to be answered in favour of the assessee and against the revenue. We, therefore, proceed to make brief reference to the arguments advanced by learned counsel for the parties on this question and record reasons for the same. 8. Mr.Aravind, learned counsel for the revenue, at the outset, invited our attention to the relevant provisions in the Act and submitted t....
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....n 194B where the prize is given only in kind. It was then submitted that having regard to the plain language used in the proviso to Section 194B, the person who conducts the Scheme and distribute prizes in kind is not obliged to deduct tax at source. The obligation is only to see to it that recipient of the prize in kind pays the tax on his winning before the prize is released. In short, Mr.Pardiwala, submitted the initiation of proceedings under Sections 201 and 201(1A) of the Act was without jurisdiction and hence the orders passed by the AO and of AA have rightly been set aside by the Tribunal. 10. It is in this backdrop, we now proceed to examine the third question first and the submission that in any case there was no obligation to deduct tax at source since the prize given was wholly in kind. In other words, the person who conducts the Scheme, where winnings are wholly in kind, is not obliged to deduct any tax at source but is only obliged to ensure that the tax has been paid in respect of the winnings, before releasing the winnings. 11. We would like to have a close look at Section 194B and Section 201 of the Act. Section 201 has undergone changes from time to time and....
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.... or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax: Provided that no penalty shall be charged under Section 221 from such person, principal officer or company unless the [Assessing] Officer is satisfied that such person or principal officer or company,, as the case may be has [without good and sufficient reasons] failed to deduct and pay the tax." 12.1. A plain reading of Section 201 shows that if the person referred to therein does not deduct the whole or any part of the tax or after deducting, fails to pay the tax as required by or under the Act, he shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of the tax. The proviso to this Section states that no penalty shall be charged under Section 221 of the Act, unless the AO is satisfied that such person has without good or sufficient reasons failed to deduct and pay the tax. 13. We have already perused Section 194-B, in particular, the proviso thereto. It is clear that there....