TaxTMI 
TaxTMI 
TaxTMI 
2016 (10) TMI 1232
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....in the business as stockist for the sale of lottery tickets of various government / quasi government agencies, state government. The assessee sells the lottery tickets purchased from the Government agencies to its subagents and the sub-agent sells it to the retailers. Thereafter, the retailers sell the lottery tickets to the general public. During the relevant year, the assessee has shown credit to 56 such sub-agents for an amount of Rs. 39,19,73,881/- for the value of prize winning lottery tickets collected and submitted to the assessee. The assessee has also shown an amount of Rs. 39,33,85,169/- towards credit received from the government agencies for the value of prize winning tickets given to them. 3. The AO during the course of assessment proceedings was of the opinion that even though the principal gent deducts tax at source while making payment to the assessee, the liability of the assessee remains to deduct tax while making payments to the sub-stockist/agent. According to the AO, the assessee cannot take the position that it is all mere conduit between the lottery department of the Government / principal and the sub agents. The AO further held that since the deduction cont....
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....ction 40(a)(ia) and hence, disallowance made by the AO for default u/s 194G is not sustainable in law. Section 40(a)(ia) very clearly states that where "any interest, commission, brokerage..., on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted...", the amount shall not be deducted in computing the income. The intent and purport of the clarification of the term "commission and brokerage" given in Explanation (i) to section 40(a)(ia) was not to exclude section 194G from the purview of disallowance, rather it was intended to convey as to what the term "commission or brokerage" means. 6. The ld. CIT(A) has erred in holding that there is no rendering of service involved in the purchase and sale of lottery. The Hon'ble jurisdictional High Court, in the case of Shri P. Muralidharan, Manjoo Lottery vs. Union of India (CBEC), held that there is rendering of service in relation to lottery and the services to rendered are subject to service tax as per Explanation introduced to section 65 (19) (ii) of the Service Tax Act. Therefore, the CIT(A)'s finding that there is no service rendered in relation to lottery are quite contrary to the findings of the....
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....lottery tickets is made by the assessee and, therefore, there was no service rendered by the assessee in such transaction. 9. We have heard the rival submissions and perused the record of the case. The assessee, in the present case, purchases lottery tickets from various government department and sells the same to the sub agents, who thereafter, sell the lottery tickets further down the leader to retailers and then to the general public. Admittedly, the assessee collects the value of prize winning tickets from the government agency on which TDS is already deducted by the government agency / supplier before crediting the amount to the assessee. The assessee thereafter, passes on the said value to the sub agents, claiming the value of prize winning tickets. The assessee is not responsible for announcing any award or making payment by itself to the sub agents. The assessee merely passes on the value of prize winning tickets to the sub agents. 10. The provisions contained in section 194G of the Act provides for deduction of TDS by any person who is responsible for paying to any person, who is stocking, distributing, purchasing or selling lottery tickets, any income by way of commissi....
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....or indirectly, by a person acting on behalf of another person for services rendered, inter alia, for the purpose of buying or selling of goods and as rightly contended by the ld. counsel for the assessee, there has to be a relationship of principal-agent between the concerned two persons in order to say that the payment received or receivable by one person acting on behalf of another person for the services rendered is in the nature of commission. In this regard, the ld. counsel for the assessee has relied on the decision of the Hon'ble High Court of Sikkim in the case of M/s. Future Gaming & Hotel Services Pvt. Limited -vs.- Union of India rendered on 24.01.2015 in W.P. (C) No. 39 of 2015. In the said case, the petitioner was engaged in the business of sale of paper lottery tickets and had produced, during the course of said business, the lottery tickets in bulk from the Government and resold the same to the public at large through various agents, stockists, re-sellers., etc. The issue that arose for the consideration of Hon'ble High Court of Sikkim was whether the petitioner was liable to pay service tax. In this context, Hon'ble High Court of Sikkim examined the relationship bet....