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Case law › Circulars › 1988 › Circular No. 507
CBDT circular 23 February 1988

Circular No. 507

Financial Year 1987-88

What this is

Circular No. 507 was issued by the Central Board of Direct Taxes on 23 February 1988. Its subject is Financial Year 1987-88.

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Adds a surcharge to the tax deductible from winnings for part of the financial year 1987-88. Section 3 of the Finance (Amendment) Act, 1987 amended the First Schedule to the Finance Act, 1987 so that income-tax deducted under sections 194B and 194BB from winnings from lotteries, crossword puzzles and horse races, computed at the rates communicated by Circular No. 485, dated 27-5-1987, is to be increased by a surcharge for the purposes of the Union at 5 per cent of that income-tax. The surcharge takes effect from 16-12-1987.

Why it was issued

To carry to deductors the amendment of the First Schedule to the Finance Act, 1987 by the Finance (Amendment) Act, 1987, which the earlier circular of 27-5-1987 could not have covered.

Who it reaches

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.
Under the 1961 ActNow
s.3s.3
s.194Bs.393, s.402

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

FINANCIAL YEAR 1987-88
Instructions for deduction of tax at source from winnings from lottery or crossword puzzle or horse race during financial year 1987-88 at the rates specified in Part II of First Schedule to Finance Act, 1987

Deduction of tax at source computed on the basis of Circular of 27-5-1987 to be increased by a surcharge at the rate of 5 per cent - Effective from 16-12-1987—
1. I am directed to invite reference to this Department’s Circu­lar No. 485, dated 27-5-1987 [Clarification 1] on the above subject and wherein the rates at which deduction of tax under sections 194B and 194BB to be made during the financial year 1987-88 from winnings from lottery or crossword puzzles or horse races were communicated to you.
2. It is brought to your notice that by section 3 of the Finance (Amendment) Act, 1987, the First Schedule to the Finance Act, 1987 has been amended. According to this amendment the amount of income-tax computed on the basis of the aforesaid circular shall be increased by a surcharge for the purposes of the Union calcu­lated at the rate of 5 per cent of such income-tax. The levy of surcharge comes into force with effect from 16-12-1987.
Circular : No. 507 [F.No. 275/22/88-IT(B)], dated 23-2-1988.

What to watch

Where you meet it

In a short-deduction demand on a lottery agent or race club for prize payments made in the closing months of the financial year 1987-88.

An example

Ours, not the Board’s: a worked case built from the rule the instrument sets, to show how it falls out.

A race club paying winnings on 1st January, 1988 computes the deduction at the Circular No. 485 rate and then adds 5 per cent of that income-tax as surcharge. On a computed income-tax of Rs. 10,000 the surcharge is Rs. 500, so Rs. 10,500 is deducted. For a payment made in November 1987 no surcharge would have been added.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

← Circular No. 511  ·  Circular No. 508 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.