M S HAMEED Vs. DIRECTOR OF STATE LOTTERIES

JUDGEMENT

(1.) THE petitioners in this original petition challenge exhibit P-4 letter of the second respondent--State Government--addressed to the first respondent-Director of State Lotteries-dated March 17, 1999 For easy reference, the text of exhibit P-4 is extracted hereinbelow :

(2.) FROM the letter it appears that the Income-tax Department had demanded deduction of tax and remittance thereof from registered agents when the amounts exceeded one thousand rupees. The second respondent found nothing objectionable in the demands, and exhibits P-4 instructions were consequently issued. The three petitioners, who are directly affected by the said directions have approached this court for quashing the said proceedings mainly on the plea that Section 194G of the Income-tax Act cannot have application on the facts of the case and, consequently, the stand taken by the Government is illegal, and warrants interference. The Commissioner of Income-tax and the Income-tax Officer are respondents Nos. 3 and 4 in this writ petition.

(3.) THE import of the order will be that for a ticket worth Re. 1 an agent need pay between 75 paise to 71.5 paise only, depending on the off take. THE petitioner submits that there is no agency agreement, and the petitioners are termed as agents only on a loose basis. From the nature of the transactions, the Government and the petitioners deal as principal to principal. THE tickets purchased are thereafter distributed through other agents, and sub-agents, according to them, on commission basis. THEy point out that after purchase of the tickets, it is not the Government's look out as to how and when they are divided or distributed, and there is no control over the affairs thereafter. THErefore, the principal contention of the petitioner is that there is only payment of the price of the tickets fixed as payable by the principal, and no commission or discount are paid to them by the Government. As such, it is the contention of the petitioners that Section 194G of the Act has no application, and hence the demand of tax, as coming through exhibit P-4 is unsustainable and without jurisdiction.