The Commissioner of Income Tax, Coimbatore v. M/s Martin Lottery Agencies Ltd., Madras High Court.

The Madras High Court[1] upheld that the discount extended to dealers on sale of lottery tickets does not amount to payment of commission, and consequently no tax deduction at source is required under Section 194G of the Income-tax Act, 1961.

The assessee, a lottery agency purchasing tickets from State Governments at reduced rates and selling them to dealers at a price below face value, was held liable by the Assessing Officer for failing to deduct TDS on the difference between face value and sale price, which was treated as commission paid to dealers.

The Court affirmed the findings of the CIT(A) and the ITAT, holding that taxation attaches to what enters a person’s pocket, not to what he saves. Since the assessee never paid any amount to the dealers by way of commission and the transaction was simply a sale at a discounted price, the difference could not be characterised as commission. In the absence of any actual payment or credit of commission, Section 194G had no application whatsoever.

[1] TC No. 955 of 2008, decided on 9^th April, 2026