Law: Income Tax Act, 1961

Section: 2(24)(ix),28,194B

(a) Income-tax---Income---Lottery---Agent in, lottery tickets---Meaning of "lottery"--­Lottery implies a right to participate in draw---Agent in lottery tickets does not have right to participate in draw---Income accruing to agent in respect of prizes on unsold unclaimed tickets in his possession---Not income from lotteries---Assessable as business income---Indian Income Tax Act, 1961, Ss.2(24)(ix) & 28. (b) Income-tax--- ----Deduction of tax at source---Lottery---Deduction of tax at source from winning from lottery---Section 194B applies only in case of actual payment-­Income accruing to agent in lottery tickets in respect of prizes on unsold/unclaimed tickets in his possession---Petitioner not liable to deduct tax at source in respect of unsold/unclaimed prize-winning tickets---Indian Income Tax Act, 1961, S. 194B. The term "income" has been defined under section 2(24) of the Income Tax Act, 1961. Sub-clause (ix) of section 2(24) of the Act was inserted by the Finance Act, 1972, which brought winnings from lotteries within the purview of the Act. Three things must concur to establish a thing as a "lottery"; a prize or prizes; the award or distribution of the prize or prizes by chance; and the payment either directly, or indirectly by the participants of a consideration, for the right or privilege of participating. An agent or trader in lottery tickets is not entitled to participate in the draw and claim the prize in such a draw, whereas a participant is entitled to participate in a draw and claim the prize from such draw. The agent or trader does not participate in the lottery draw with an intention to win a prize, but derives income from selling lottery tickets. The gains or commission from the sale of lottery tickets is a business income assessable under section 28. The income accruing to an agent/trader in respect of prizes on unsold/unclaimed tickets in the possession of an organising agent is income from business and does not constitute winnings from lotteries, and, therefore, it cannot be brought within the meaning of section 2(24)(ix). Under the provisions of section 194B for the purpose of deducting taxes at source in respect of winnings from…

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