DIALOG AXIATA PLC

Vs.

COMMISSIONER GENERAL OF INLAND REVENUE

COURT OF APPEAL
SAMARAKOON, J.
MAHENDRAN, J.
CA/TAX/12/2016
TAC/WHT/1/2014
OCTOBER 13,14, 2021

Tax Appeals Commission Act, No. 23 of 2011-Case stated-Inland Revenue Act, No. 10of2006, section 157(b)-Deduction of with holding tax-Meaning of the term "lottery"-Prize Competitions Act, No. 37 of 1957-Lotteries Ordinance, No. 8 of 1844, section 28

Further to obtaining the relevant permissions from the Western Provincial Council and paying 20% tax under the Prize Competition Act, No. 37 of 1957, the appellant conducted a prize competition called the "Lord of the Reload", under which every person who reloaded their mobile phone for a sum of Rs. 50 became automatically entitled to participate in a draw.

The assessor and thereafter the Commissioner General of Inland Revenue and the Tax Appeals Commission were of the opinion that the

aforesaid prize competition of the appellant was in fact a "lottery", which attracted the application of section 157(b) of the Inland Revenue Act, No. 10 of 2006, and required the appellant to deduct income tax at the rate of 10% on the gross payment of the prize.

The appellant moved the Tax Appeals Commission to present a case stated for the opinion of the Court of Appeal inter alia on the basis that the aforesaid prize competition was not a "lottery" and therefore section 157(b) of the Inland Revenue Act did not apply.

The respondent's principal contention was that a prize competition presupposes some element of skill on the part of the participants, which was lacking in the appellant's competition thereby rendering it a 'lottery'.

Held:

1. The term "lottery" has not been defined in the Lotteries Ordinance, No. 8 of 1844. However, it consists of three elements: prize, chance and consideration.

2. The selling of numbered tickets is an important prerequisite for a "lottery", which was not the case in the appellant's competition. If there is no selling of numbered tickets, it should at least be shown that the participants knew and chose to participate in the competition, which was also not the case in the appellant's competition.

3. The Prize Competition Act, No. 37 of 1957, is intended to control prize competitions in the nature of gambling and not those that involve skill. Therefore, the respondent's argument that only prize competitions that involve skill could be registered under the Prize Competition Act is untenable.

4. The appellant's competition was a game in the character of "gambling", which is wider in scope than a "lottery".

Cases referred to:

1. Imperial Tobacco Ltd v. Attorney General (1980) 2 WLR 466
2. Reader's Digest Association Ltd v. Williams (1976) 1 WLR 1109
3. R.M.D. Chamarbaugwalla v. The Union of India 1957 AIR 628, 1957 SCR 930
4. The State of Bombay v. R.M.D. Chamarbaugwala (1957) SCR 874

5. The Bengal Immunity Company Ltd v. The State of Bihar and others (1955) 2 SCR 603
6. Poppen v. Walker 520 N.W.2d 238 (1994)
7. Singette Ltd v. Martin (1971) AC 407 at 423

APPLICATION for an Opinion on a Case Stated by the Tax Appeals Commission.

Dr. Shivaji Felix with Niwantha Satharasinghe for the Appellant.

Milinda Gunatilake, P.C.,A.S.G., with Suranga Wimalasena. S.S.C.. for the Respondent.

cur. adv. vult.

December 17, 2021

SAMARAKOON, J.

The Assessor, Commissioner General of Inland Revenue and the Tax Appeals Commission holding against the appellant, Dialog Axiata PLC, the appellant has come to this Court by way of a case stated incorporating the following 4 questions.

1. Did the Tax Appeals Commission err in law when it came to the conclusion that the assessment of income tax (withholding tax) and penalty, as determined by the Commissioner General of Inland Revenue was not excessive, arbitrary and unreasonable?

2. Did the Tax Appeals Commission err in law when it concluded that "The Lord of the Reload Prize Competition" condu