264 : Circular No. 264, dated 11-02-1980

Circular No. 264, dated 11-02-1980

SECTION 194B l WINNINGS FROM LOTTERY OR CROSSWORD PUZZLE

1075. Prizes awarded to agents under "lucky dip draws" scheme - Whether they are "lotteries" within the meaning of the section from which tax is required to be deducted at source

1. This Ministry has had an occasion to consider the question of the deduction of tax at source under section 194B from prizes awarded to lottery agents in what are popularly known as "lucky dip draws".

2. Under the scheme of "lucky dip draws", the agents are generally grouped into various categories according to the number of tickets purchased by them. The prizes are awarded category-wise, through draws of the lucky tickets. These prizes are "lotteries" within the meaning of section 194B as they are dependent wholly on the chance draw of a lucky ticket.

3. The State Governments and Union territories running lotteries are, therefore, requested to deduct tax at source at the rates prescribed by the Annual Finance Act in respect of "lotteries or crossword puzzles" from "lucky dip" prizes won by lottery agents.

4. This clarification may please be brought to the notice of all concerned under the control of the State Governments and Union territories.

Circular: No. 264 [F. No. 275/58/79-IT(B)], dated 11-2-1980.

JUDICIAL ANALYSIS

EXPLAINED IN - In Commercial Corpn. of India Ltd. v. ITO [1993] 201 ITR 348 (Bom.), the above circular was commented upon with the following observations :

"It must be seen in the first place that this circular has not been issued by the Central Board of Direct Taxes and the circular has been issued by the Ministry of Finance. Needless to say it covers what is known as "lucky dip draws" which is meant purely for agents and not for the purchases of the lottery tickets. In any case, it is the contention of the Ministry of Finance that the prizes awarded in lucky dip draws are lotteries within the meaning of section 194B on the sole ground that they are dependent wholly on a chance draw of a lucky ticket." (p. 367)

"...We conclude that the principle of contemporanea expositio cannot be made available to the Income-tax Department because, firstly, there is no exposition whatsoever by the Central Board of Direct Taxes and, secondly, we are not construing an ancient statute and, lastly, for the reason that we are not concerned with the construction of any provisions of the statutes which are ambiguous or which pose difficulties." (p. 369)