ACIT, Kottayam v. Late Sri.T.Murugan by Lhr Usha Murugan, Kottayam

ITA 512/COCH/2013 | 2008-2009
Pronouncement Date: 25-10-2016 | Result: Dismissed

Appeal Details

RSA Number 51221914 RSA 2013
Assessee PAN AAHFM8965F
Bench Cochin
Appeal Number ITA 512/COCH/2013
Duration Of Justice 3 year(s) 1 month(s) 22 day(s)
Appellant ACIT, Kottayam
Respondent Late Sri.T.Murugan by Lhr Usha Murugan, Kottayam
Appeal Type Income Tax Appeal
Pronouncement Date 25-10-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 25-10-2016
Date Of Final Hearing 28-09-2016
Next Hearing Date 28-09-2016
Assessment Year 2008-2009
Appeal Filed On 03-09-2013
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL : COCHIN BENCH : COCHIN BEFORE SHRI B.P. JAIN HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K. HONBLE JUDICIAL MEMBER IT A NO. 5 1 0 / COCH /201 3 (A.Y. 200 8 - 0 9 ) ACIT CIRCLE - 1 VS M/S.MEENAKSHY ENTERPRISES KOTTAYAM. YMCA ROAD KOTTAYAM. PAN NO. AAHFM8965F ITA NO. 511 / COCH /201 3 (A.Y. 200 6 - 0 7 ) ITA NO. 512/COCH/2013 (A.Y. 2008 - 09) ACIT CIRCLE - 1 VS SHRI T. MURUGAN (LATE) KOTTAYAM. L/H USHA MURUGAN L /H OF LATE SHRI T. MURUGAN M/S. MEENAKSHY LUCKY CENTRE YMCA ROAD KOTTAYAM 686 001. PAN NO. AIVPS3690L ITA NO. 514/COCH/2015 (A.Y. 2009 - 10) ITO (TDS) VS M/S. MEENAKSHNY LUCKY CENTRE KOTTAYAM. YMCA ROAD KOTTAYAM. PAN NO. AAQFM3674E C.O. NO. 30/COCH/2015 (A.Y. 2009 - 10) (ARISING OUT OF ITA NO. 514/COCH/2015) MEENAKSHY LUCKY CENTRE VS ITO (TDS) C/O. M/S. RANGAMANI & CO. KOTTAYAM. CHARTERED ACCOUNTANT PB NO. 117 KOTTAYAM - 1. PAN NO . AAQFM3674E (APPELLANT) (RESPONDENT) 2 DATE OF HEARING : 28 /0 9 /2016 DATE OF PRONOUNCEMENT : 2 5 /10/2016. ASSESSEE BY : SHRI R. KRISHNAN C.A. DEPARTMENT BY : SHRI SHANTHAM BOSE CIT DR AND S HRI A. DHANRAJ SR. D.R. PER B.P. JAIN A.M. : ITA NO. 510/COCH/2013 1. THIS IS AN APPEAL BY THE DEPARTMEN T AGAINST THE ORDER DATED 04.06.2013 PASSED BY CIT(A) IN THE CASE OF THE ASSESSEE FOR A.Y. 2008 - 09. 2. THE ASSESSEE FILED THE RETURN OF INCOME FOR A.Y. 2008 - 09 DECLARING A TOTAL INC OME OF RS. 98 26 433/ - . THE CASE WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS AS STOCKIST FOR THE SALE OF LOTTERY TICKETS OF VARIOUS GOVERNMENT / QUASI GOVERNMENT AGENCIES ST ATE GOVERNMENT. THE ASSESSEE SELLS THE LOTTERY TICKETS PURCHASED FROM THE GOVERNMENT AGENCIES TO ITS SUB - AGENTS 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 ASSE SS EE H A S 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 3 DEDUCT TAX WHILE MAKING PAYMENTS TO THE SUB - STOCKIST/AGENT. ACCORDING TO THE AO THE ASSESSEE CANNOT TAKE THE POSITION THAT IT IS AL L MERE CONDUIT BETWEEN THE LOTTERY DEPARTMENT OF THE GOVERNMENT / PRINCIPAL AND THE SUB AGENTS. THE AO FURTHER HELD THAT SINCE THE DEDUCTION CONTEMPLATED UNDER 194G OF THE ACT WAS NOT MADE BY THE ASSESSEE THE COMMISSION PAID TO THE SUB AGENTS IS TO BE DISALLOWED UNDER SECTION 4 0(A)(IA) OF THE ACT. ACCORDINGLY AN ADDITION OF RS. 39 19 73 881/ - WAS MADE. 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 31.12.2010 THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) VIDE IMPU G NED ORDER CONSIDERED THE QUESTION RAISED BY THE ASS ESSEE AS TO WHETHER THE PAYMENT MADE BY THE ASSESSEE TO THE SUB - AGENTS FALL WITHIN THE CLUTCHES OF SECTION 194G OF THE ACT AND WHETHER THE PROVISION S OF SECTION 40(A)(IA) ARE ATTRACTED TO SUCH PAYMENTS. HOLDING BOTH THE QUESTION IN FAVOUR OF THE ASSESSEE THE CIT(A) OBSERVED THAT IT IS THE SELLERS OF THE LOTTERY TICKETS TO THE APPELLANT WHO ARE PERSON RESPONSIBLE UNDER THE ACT FOR MAKING THE PAYMENT OF TAX AS CONTEMPLATED UNDER THE ACT. IT WAS FURTHER OBSERVED THAT SE C TION 40(A)(IA) DOES NO T CONTEMPLATE ANY DISALLOWANCE CONSEQUENT UPON DEFAULT UNDER SECTION 194G OF THE ACT. 5. THE DEPARTMENT IS IN APPEAL AGAINST THE ORDER PASSED BY CIT(A) AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A) - V KOCHI IN SO FAR AS THE POINTS STATED BELOW ARE CONCERNED IS OPPOSED TO LAW ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 39 19 73 881/ - U/S 40(A)(IA) FOR NON - DEDUCTION OF TAX U/S 194H/194G OF THE ACT FROM THE PAYMENT OF COMMISSION TO SUB - AGENTS. 4 3. THE LD.CIT(A) SOUGHT TO HAVE NOTED THAT IN PARA 7 OF THE ASSESSMENT ORDER THE AO HAS STATED THAT EVEN IF FOR THE SAKE OF AN ARGUMENT IT IS ACCE PTED THAT SECTION 194H IS NOT ATTRACTED SECTION 194G WILL BE ATTRACTED BECAUSE SECTION 194G ALSO TALKS OF LIABILITY TO DEDUCT TAX WHILE PAYING ANY INCOME BY WAY OF COMMISSION REMUNERATION OR PRIZE (BY WHATEVER NAME CALLED). 4. THE LD.CIT(A) WITHOUT C ORRECTLY APPRECIATING THE NATURE OF THE PAYMENT MADE BY THE ASSESSEE TO THE SUB - AGENTS WRONGLY PLACED RELIANCE ON THE DECISION REPORTED IN 249 ITR 186 WHICH WAS RENDERED IN THE CONTEXT OF DISCOUNT RECEIVED BY THE AGENT ON BULK PU R CH A SE OF LOTTERY TICKETS. THE PAYMENT MADE BY ASSESSEE TO SUB - AGENTS IN THE INSTANT CASE IS NOTHING BUT COMMISSION/INCENTIVE FOR THE S A LE OF PRIZE WINNING TICKETS. 5. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THERE IS NO REFERENCE TO SECTION 194G IN SECTION 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 CLE A RLY STATES THAT WHERE ANY INTERE S T COMMISSION BROKERAGE... ON WHICH TAX IS DEDUCTIBLE AT SOU R CE UNDER CHAPTER XVII - B AND SUCH TAX HAS NOT BEEN DEDUC TED... 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 DISALLO WANCE 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 HONBLE 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 EXPLAN A TION 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 HONBLE KERALA HIGH COURT. 7. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE EXPLANATION TO SEC. 194 H C LARIFIES THAT COMMISSION OR BROKERAGE INCLUDES ANY 5 PAYMENTS RECEIVED BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED OR FOR SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS... ONCE THE ASSESSES S TOCKIST RECEIVED THE COMMISSION / INCENTIVE FROM THE GOVERNMENT THEN THE ASSESSEE CERTAINLY HAS THE RESPONSIBILITY TO DEDUCT TAX AT SOURCE WHILE MAKING THE PAYMENT OF SUCH COMMISSION TO SUB - AGENTS. 8. THE CIT(A) OUGHT NOT TO HAVE HELD THAT THE ASSESSEE MERELY ACTS AS A CONDUIT AND HENCE NOT LIABLE TO DEDUCT TAX. FOR INSTANCE EVEN IN THE CASE OF A CONTRACTOR WHEN HE RECEIVES MONEY FROM THE BUILDER AND PASSES ON THE SAME TO THE SUB - CONTRACTOR HE IS LIABLE TO DEDUCT TAX. SO THE CIT(A)S FINDING THAT THE ASSESSEE ACTS AS A CONDUIT/POSTM AN AND IS NOT LIABLE TO DEDUCT TAX FROM THE PAYMENT OF COMMISSION IS AGAINST THE PROVISIONS OF TDS. 6. THE ONLY QUESTION TO BE DECIDED IN THESE GROUNDS OF APPEAL IS WHETHER THE DISALLOWANCE OF RS. 39 19 73 881/ - UNDER SECTION 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX UNDER SECTION 194G BY THE ASSESSEE WAS WITHIN THE BOUNDS OF LAW OR NOT. 7. THE LD. DR HAS RELIED UPON THE ORDER PASSED BY THE AO TO SUPPORT HIS SUBMISSIONS. IT WAS FURTHER ARGUED BY THE LD. DR THAT THE CIT(A) DID NOT CORRECTLY APPRECIA TE THE NATURE OF PAYMENT MADE BY THE ASSESSEE TO THE SUB - AGENTS AND THE PAYMENTS ARE NOTHING BUT COMMISSION FOR THE SALE OF PRIZE WINNING TICKETS. HE FURTHER ARGUED THAT THE CIT(A) ERRED IN HOLDING THAT THERE WAS NO REFERENCE TO SECTION 194G IN SECTION 40(A)(IA). RELIANCE IN THIS REGARD WAS PLACED ON THE JUDGMENT PASSED BY THE HONBLE KERALA HIGH COURT IN THE CASE OF SHRI P. MJURALIDHARAN MANJOO LOTTERY VS. UNION OF INDIA (CBEC) W.P. (C) 19625/2010 AND VODAFONE ESSAR CELLULAR LIMITED VS. ACIT ITA NO. 1742/2009. 8. THE LD.AR ON THE OTHER HAND ARGUED THAT THER E WAS NO PRINCIPAL A GENT RELATIONSHIP BETWEEN THE ASSESSEE AND THE SUB AGENTS. HE PLACED RELIANCE 6 ON THE DECISION OF THE KERALA HIGH COURT IN THE CASE OF M. S. HAMEED AND ORS. 249 ITR 186 (KER.). HE FURTHER ARGUED THAT THE ROLE OF THE ASSESSEE IS THAT OF A POSTMAN OR A CONDUIT AND IT IS THE GOVERNMENT WHICH DEDUCTS TAX AT SOURCE IN RESPECT OF PRIZE AWARDED. THE LD. AR AVERRED THAT THE ASSESSEE HAS NO CONTROL OVER THE SUB AGENT AFTER THE SALE OF 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 L E ADER 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 PROVI SIONS 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 AHS 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 7 REMUNERATION OR P RIZE ON LOTTERY TICKETS. IN THE PRESENT 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 HA S 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 O F THE PRESENT CASE WE FIND THAT THE APPLICATION OF SECTION 194G/194H OF THE ACT WAS NOT WARRANTED. 11. THE HONBLE ITAT KOLKATA BENCH IN THE CASE OF M/S. FUTURE DISTRIBUTORS VS. PRINCIPAL CIT ITA NO. 277/KOL/2016 WHILE CONSIDERING AN IDENTICAL QUESTION HELD AS UNDER : - 23. AS RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THE AMOUNT IN QUESTION CAN BE CONSIDERED A SIN THE NATURE OF COMMISSION FOR THE PURPOSE OF SECTION 40(A) (IA) READ WITH SECTION 194G ONLY IF THE SAME REPRESENTS PAYMENT RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECTLY BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR ANY SERVICES RENDERED INTER ALIA IN THE COURSE OF BUYING OR SELLING OF GOODS. IN SHORT EVEN IF THE AMOUNT IN QUESTION IS IN THE NATURE OF INCOME BY WAY OF REMUNER ATION OR PRIZE ON LOTTERY TICKETS AND THE PERSON WHO IS RESPONSIBLE FOR PAYING TO ANY PERSON WHO IS OR HAS BEEN STOCKING DISTRIBUTING PURCHASING OR SELLING LOTTERY TICKETS SUCH INCOME BY WAY OF REMUNERATION OR PRIZE FAILS TO DEDUCT TAX AT SOURCE THE PROVISION OF SECTION 40(A)(IA) CANNOT BE INVOKED TO MAKE A 8 DISALLOWANCE ON ACCOUNT OF SUCH REMUNERATION OR PRIZE AND THE SAID PROVISION WOULD GET ATTRACTED ONLY WHEN THE AMOUNT IS IN THE NATURE OF COMMISSION AS DEFINED IN CLAUSE (I) OF EXPLANATION TO SECTI ON 194H. AS ALREADY NOTED THE TERM COMMISSION AS DEFINED IN CLAUSE (I) OF EXPLANATION 194H INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECTLY BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED INTER ALIA FOR THE PUR POSE 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 ACTIN G ON BEHALF OF ANOTHER PERSON FOR TH E SERVICES RENDERED IS IN THE NATURE OF COMMISSION. IN THIS REGARD THE LD. COUNSE L FOR THE ASSESSEE H A S RELIED ON THE DECISION OF THE HONBLE 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 LOT TERY 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 HONBLE HIGH COURT OF SIKKIM WAS WHETHER THE PETITIONER WAS LIABLE TO PAY SERVICE TAX. IN THIS CONTEXT HONBLE HIGH COURT OF SIKKIM EXAMINED THE RELATIONSHIP BETWEEN THE CONCERNED PARTIES IN THE LIGHT OF THE AGREEMENT ENTERED INTO BETWEEN THEM AND AFTER REFERRING TO THE RELEVANT TERMS AND CONDITIONS OF THE SAID AGREEMENT THE SUMS AND SUBSTANCE OF WHICH IS SIMILAR TO THE AGREEMENT ENTERED INTO BY THE ASSESSEE IN THE PRESENT CASE WITH ITS STOCKIST(SAMPLE COPY AVAILABLE AT PAGE 129 TO 1 37 OF THE PAPER BOOK) 9 IT WAS HELD BY THEIR LORDSHIPS THAT THE ACTIVITY OF THE PETITIONER COMPR ISING OF PROMOTION ORGANISING RESELLING OR IN ANY OTHER MANNER ASSISTING OR ARRANGING THE LOTTERY TICKETS OF TH E STATE DID NOT ESTABLISH THE RELATIONSHIP OF PRINCIPAL AND AGENT BUT IT WAS RATHER THAT OF A BUYER AND A SELLER ON PRINCIPAL TO PRINCIPA L BAS I S IN VIEW OF THE NATURE OF THE TRANSACTIONS BEING BULK PURCHASE OF THE LOTTERY TICKETS BY THE PETITIONERS FROM THE STATE GOVERNMENT ON FULL PAYMENT OF PRICE AS A NATURAL BUSINESS TRANSACTION AS WELL AS OTHER RELATED FEATURES AND THERE BEING NO PRIVITY OF CONTRACT BETWEEN THE STATE G O VERNMENT AND THE STOCKISTS AGENTS RESELLERS ETC. UNDER THE PETITIONERS. 24. AS PER THE TERMS AND CONDITIONS OF THE AGREEMENTS ENTERED INTO BETWEEN THE ASSESSEE AND ITS STOCKIS T ( COPY OF STO CKIST AGREEMENT PL A CED AT PAGES 129 TO 137 OF THE PAPER BOOK) THE ASSESSEE - FIRM AND THE STOCKISTS WERE ACTING ON PRINCIPAL TO PRINCIPAL BASIS INASMUCH AS THE STOCKISTS WERE FREE TO ACT IN THEIR CAPACITY AND ONCE THE LOTTERY TICKETS WERE SOLD TO THEM SUCH LOTTERY TICKETS STOOD TRANSFE RRED TO THE STOCKISTS. THE STOCKISTS WERE MAINLY CONCERNED WITH THEIR SHARES ON SALE OF LOTTERY TICKETS AND THEY WERE NOT ENTITLED TO RECEIVE ANY COMMISSION ON SALE OF LOTTERY TICKETS FROM THE ASSESSEE. THEY WERE FREE TO SALE THE LOTTERY TICKETS TO ANY SUB - STOCKISTS OR RETAILERS AT THE SALE DETERMINED PRICES AS PER THEIR FREE WILL AND THE CONTRACT BETWEEN THE ASSESSEE AND THE STOCKISTS WAS THAT OF PURCHASE AND SALE OF LOTTERY TICKETS AND NOT THAT OF RENDERING SERVICES ON COMMISSION. IN THE MATTER OF LOTTERY BUSINESS AS GOVERNED BY THE RELEVANT AGREEMENTS THE STOCKISTS WERE TO ACT ON THEIR OWN AND NOT FOR OR ON BEHALF OF THE ASSESSEE. THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE STOCKISTS 10 THUS WAS THAT OF PRINCIPAL TO PRINCIPAL AND THERE BEING NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THEM AS HELD BY THE HONBLE HIGH COURT OF SIKKIM IN THE CASE OF FUTURE GAMING AND HOTEL SERVICES PVT. LIMITED (SUPRA) WE AGREE WITH THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT IN Q UESTION WAS NOT IN THE N ATURE OF COMMISSION AS DEFINED IN CLAUSE (I) OF EXPLANATION TO SECTION 194H SO AS TO ATTRACT THE PROVISION OF SECTION 40(A)(IA) READ WITH SECTION 194G. IN OUR OPINION THE AMOUNT IN QUESTION REPRESENTING THE DISBURSAL OF PRIZE MONIES ON LOTTERY TICKETS THU S WAS NOT LIABLE TO BE DISALLOWED UNDER SECTION 40(A)(IA) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THERE WAS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER NOT MAKING SUCH DISALLOWANCE AS ALLEGED BY THE LD.CIT JUSTIFYING REVISION UNDER SECTION 263. 12. HAVING HELD THAT THE SECTION 194G OF THE ACT IS NOT APPLICABLE TO THE PRESENT CASE WE DO NOT CONSIDER IT NECESSARY TO GO INTO THE OTHER QUESTION RAISED BY THE DEPARTMENT AS TO WHETHER THE TRANSACTION WAS IN THE NATURE OF SERVICE OR WHETHER THE DISALLOWANCE UNDER SECTION 40(A)(IA) EXCLUDES SECTION 194G OF THE ACT. 13. IN THE RESULT T HE A PPEAL IS DISMISSED. 14. NOW WE TAKE UP THE APPEALS OF REVENUE IN ITA NO. 511 512 AND 514/COCH/2014 AS UNDER: - 1 5 . THE ISSUE RAISED IN THE PRESENT APPEALS BY THE DEPARTMENT ARE IDENTICAL TO THOSE RAISED IN ITA NO. 510/COCH/2013 WHEREIN WE HAVE DISMISSED THE APPEAL OF THE DEPARTMENT. 11 16 . FOLLOWING OUR OWN ORDER IN ITA NO. 510/COCH/2013 WHICH SHALL BE IDENTICALLY APPLICABLE IN PRESENT APPEALS EXCEPT CHANGE IN QUANTUM AS PER GROUNDS AND ORDER OF AUTHORITIES BELOW WE DISMISS THE APPEAL IN ITA NO. 511 5 12/COCH/201 3 AND ITA NO. 514/COCH/2015. 1 7 . THE ASSESSEE HAS ALSO FILED CROSS OBJECTION IN APPEAL NO. 514/COCH/2015 OF REVENUE WHICH IS SUPPORTIVE IN NATURE TO ORDER OF LD. CIT(A) AND THEREFORE INFRUCTUOUS AND IS DISMISSED. 16. IN THE RESULT APPEAL OF REVENUE IN ITA NOS. 510 511 512 /COCH/2013 AND 514/COCH/201 5 AND CO NO. 30/COCH/2015 ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 2 5 /10/2016. S D / - S D / - (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC O UNTANT MEMBER DATED : 2 5 /10/2016 A/N COPY TO : - 1 - APPELLANT 2 - RESPONDENT 3 - CIT(A) 4 - CIT 5 - D/R ITAT COCHIN. ASSISTANT REGISTRAR