Case Law Details

Case Name : The Assistant Commissioner of Income-tax Vs Smt. Biji Suresh (ITAT Cochin)
Appeal Number : ITA No. 335/Coch/2018
Date of Judgement/Order : 03/10/2018
Related Assessment Year : 2014-15
Courts : All ITAT (6762) ITAT Cochin (118)

ACIT Vs Smt. Biji Suresh (ITAT Cochin)

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 commission, remuneration or prize on such tickets, at the time of credit of such income to the account of the payee.

The said section 194G has to be read as a whole and the requirement of deduction of tax will only arise when there is a payment of income by way of commission, remuneration or prize on lottery tickets. In the resent case, the assessee is not giving any commission to the sub agents as there is a sale being effected between the assessee and the sub agents and the assessee after transferring the lottery tickets to the sub agents has no control over the same.

Moreover, it is not a case where the assessee is giving any remuneration or prize to the sub agents, in as much as the value of prize winning lottery tickets is claimed from the government agency supplying the lottery tickets to the assessee.

The government agency after deduction of TDS credits the value to the account of the assessee who, thereafter, passes on the same to the sub agents. In the facts of the present case we find that the application of section 194G/194H of the Act was not warranted.

FULL TEXT OF THE ITAT JUDGMENT

This appeal filed by the Revenue and the Cross Objection filed by the assessee are directed against the order of the CIT(A) dated 25-04-2018 and pertain to the assessment year 2014-15.

2. There was a delay of 16 days in filing the appeal by the Revenue before the Tribunal.  The Ld. DR has filed a condonation petition accompanied by an affidavit stating that the order of theCIT(A), Kottayam was received by the Pr. CIT, Kottayam on 02/05/2018 and the last date of filing the appeal with the Tribunal was 01/07/2018. It was submitted that the officer holding the regular charge was on election duty in Karnataka and after returning from election duty, he was transferred to Kolkata.  The petitioner took charge of Circle-1, Kottayam and was undergoing training at NADT, Nagpur and the other officer who was holding the additional charge of Circle-1, Kottayam along with the regular charge of Circle-1, Thiruvalla had filed the appeal before the Tribunal on 17/07/2018. Therefore, it was submitted that due to these administrative exigencies, the appeal could not be filed in time and prayed that the delay may be condoned and the appeal be admitted.

3. After hearing both the parties, we find that there is good and sufficient cause for condoning the delay in filing the appeal before the Tribunal. Accordingly, we condone the delay and admit the appeal for adjudication.

4. The facts of the case are that the Assessing Officer disallowed the amount of Rs.1,00,50,000/- under section 40(a)(ia) of the Act on the ground that the assessee failed to deduct tax u/s. 194G of the Act on commission paid to sub- agents.

5. On appeal, the CIT(A) allowed the appeal of the assessee by placing reliance on the decision of the ITAT, Cochin Bench in the case of M/s. Meenakshy Enterprises in ITA No. 510/Coch/2013 dated 25/10/2016 and held that provisions of section 194G of the Act are not applicable to payments made to sub-agents by the assessee.

6. Against this, the Revenue is in appeal before us. The Ld. DR submitted that facts and circumstances of the case of the Meenakshy Enterprises was not exactly the same in so far as the assessee had admitted that the amount of Rs.1,00,50,000/- was paid as commission to sub agents and the judgment clearly states that 194G is not applicable where the payment of commission or remuneration etc. has not arisen. The Ld. DR relied on the decision of the ITAT, Mumbai Bench in the case of Bambino Investment & Trading Co. Ltd. (2 SOT 585). It was submitted that the ratio laid down in the judgment of Jurisdictional High Court in the case of M.S. Hameed vs. Director of State Lotteries (249 ITR 186) held that if there was only the payment of price of tickets without commission, section 194G cannot be applicable. Further, it was submitted that section 40(a)(ia) of the Act clearly states that where “any interest, commission, brokerage…., on which tax is deductible at source under Chapter XVII-B and such has not been deducted….., the amount shall not be deducted in computing the income. It was submitted that the intent and purport of the clarification of the term “commission and brokerage” given in Explanation (i) to 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.

7. The Ld. AR relied on the order of the CIT(A).

8. After hearing both the parties, we find that a similar issue came up for consideration before the Tribunal in the case of M/s. Meenakshy Enterprises cited supra wherein it was held as under:

“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 commission, remuneration or prize on such tickets, at the time of credit of such income to the account of the payee. The said section has to be read as a whole and the requirement of deduction of tax will only arise when there is a payment of income by way of commission, remuneration or prize on lottery tickets. In the resent case, the assessee is not giving any commission to the sub agents as there is a sale being effected between the assessee and the sub agents and the assessee after transferring the lottery tickets to the sub agents has no control over the same. Moreover, it is not a case where the assessee is giving any remuneration or prize to the sub agents, in as much as the value of prize winning lottery tickets is claimed from the government agency supplying the lottery tickets to the assessee. The government agency after deduction of TDS credits the value to the account of the assessee who, thereafter, passes on the same to the sub agents. In the facts of the present case we find that the application of section 194G/194H of the Act was not warranted.”

8.1 While delivering the decision of the Tribunal, the Tribunal took note of the binding decision of the Jurisdictional High Court in the case of M.S. Hameed and Ors. Vs. Director of State Lotteries reported in 249 ITR 186 wherein it was held that the assessee is not liable to deduct TDS under section 194G of the Act and therefore, no disallowance under section 40(a)(ia) of the Act is called for.

8.2 In view of the above order of the Tribunal cited supra and the binding decision of the Jurisdictional High Court cited supra, we are inclined to decide the issue in favour of the assessee and against the Revenue.

9. Since the appeal of the Revenue has been disposed of, the Cross Objection filed by the assessee in C.O. No.62/Coch/2018 has become infructuous and is dismissed as infructuous.

10. In the result, the appeal filed by the Revenue is dismissed and the Cross Objection filed by the assessee is dismissed.

Order pronounced in the open Court on this 3rd October, 2018.

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