DCIT, Circle-2(2), Hyderabad, Hyderabad V. Hyderabad Race Club, Hyderabad, Hyderabad

ITA 25/HYD/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2652 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-01-2017
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 22/HYD/2017 2005 - 06 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD M/S. HYDERABAD RACE CLUB, HYDERABAD [PAN: AAACH2773C] 23/HYD/2017 2007 - 08 24/HYD/2017 2008 - 09 25/HYD/2017 2009 - 10 FOR REVENUE : SMT. SUMAN MALIK, DR FOR ASSESSEE : NONE DATE OF HEARING : 06-04-2017 DATE OF PRONOUNCEMENT : 06-04-2017 O R D E R PER B. RAMAKOTAIAH, A.M. : THESE FOUR APPEALS ARE BY REVENUE AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-9, HYDER ABAD DATED 29-02-2016. 2. AT THE OUTSET IT IS NOTICED THAT THE APPEALS ARE FILED BELATEDLY WITH A DELAY OF NINETEEN DAYS. IT WAS SUBMITTED THAT THE DELAY IS DUE TO LATE RECEIPT OF AUTHORIZATION FROM OFFICE OF THE PR.CIT-II ON ACCOUNT OF TRANSFER OF PR.CITS AND ALSO THEIR BUSY SCH EDULES DUE TO INCOME DECLARATION SCHEME, 2016. CONSIDERING THE PR AYER, THE DELAY IN FILING THE APPEALS IS HEREBY CONDONED. M/S. HYDERABAD RACE CLUB :- 2 - : 3. AT THE TIME OF HEARING, LD. COUNSEL MR. K.C. DEVDAS , SOUGHT ADJOURNMENT ON THE REASON THAT HE WILL BE OUT OF STATION O N ACCOUNT OF PROFESSIONAL WORK. HOWEVER, CONSIDERING THE ISSUES INVOLVED, AFTER DISCUSSION WITH LD.DR, THE APPEALS AR E HEARD EX- PARTE RESPONDENT. 4. THE ONLY GROUND RAISED BY REVENUE IN ALL THESE A PPEALS IS WHETHER THE CIT(A) IS CORRECT IN HOLDING THAT AGENT AND PRINCIPAL DO NOT EXIST BETWEEN ASSESSEE AND OTHER CLUBS ( SIC) WHEN ASSESSEE PAID COMMISSION AT 23% OF ITS INCOME AS PER THE AGREEM ENT BETWEEN ASSESSEE AND OTHER CLUBS? THE ISSUE ARISE S AS THE ASSESSMENTS WERE COMPLETED BY THE ASSESSING OFFICER (AO), DISALLOWING THE AMOUNTS INVOKING THE PROVISIONS OF SE CTION 40(A)(IA) OF THE ACT. ASSESSEE PAID COMMISSION TO VARIOUS OTHER CLUBS AT RS. 1,93,31,876/-, RS. 2,68,27,314/-, RS. 2,94,28,031/- AND RS. 3,15,33,468/- FOR AYS. 2005-06 TO 2009-10 RESPECTIVE LY. IT WAS THE CONTENTION OF THE AO THAT SUCH PAYMENTS ARE IN THE NATURE OF COMMISSION AND TDS OUGHT TO HAVE BEEN DEDUCTED U/S. 1 94H. THE ASSESSMENT PROCEEDINGS ARE SUBJECT MATTER OF APPEALS E ARLIER AND ITAT HAS RESTORED THE ISSUE TO THE FILE OF THE AO TO EX AMINE THE CONTENTIONS. HOWEVER, AS RECORDED BY THE CIT(A) IN TH E ORDER, AO WITHOUT EXAMINING FURTHER HELD THAT THERE IS PRINCIPAL AND AGENT RELATIONSHIP (AS DISCUSSED BY THE LD.CIT(A) IN PARA 7 .3 OF THE ORDER). 5. LD.CIT(A) NOTED THAT THE SUBSTANTIAL ISSUE FOR CONSID ERATION IS WHETHER THE PAYMENTS MADE BY ASSESSEE TO OTHER RACE CLUB S ARE IN THE NATURE OF COMMISSION ATTRACTING THE PROVISIONS OF SECTION 194H AND IF SO, WHETHER DISALLOWANCE IS TO BE MADE U/S. 40 (A)(IA) M/S. HYDERABAD RACE CLUB :- 3 - : FOR NOT DEDUCTING THE TDS. ASSESSEE SUBMITTED THAT THERE WAS A SURVEY CONDUCTED ON 17-12-2008 AT THE ASSESSEES PRE MISES AND THE ACIT, RANGE-14 HAS NOT RAISED THE DEMAND U/S. 201( 1) BUT RAISED INTEREST U/S. 201(1A). HOWEVER, WHILE RAISIN G THE DEMAND, HE HAS CONCLUDED THAT THE RELATIONSHIP BETWEEN THE HRC A ND OTHER CLUBS IS IN THE NATURE OF AGENT AND PRINCIPAL AN D PROVISIONS OF SECTION 194H SQUARELY APPLY. AGGRIEVED BY THE ORDERS , THE ISSUE WAS CARRIED TO THE LD.CIT(A), WHO AFTER EXAMINING THE DETAILED SUBMISSIONS HAD CONCLUDED, FOR AYS. 2001-02 TO 2008- 09, VIDE HIS ORDER DT. 09-11-2009 THAT THE NATURE OF TRANSACTION ON ACC OUNT OF INTER-VENUE BETTING BETWEEN HRC AND OTHER CLUBS IS ON PRINCIPAL TO PRINCIPAL BASIS AND HENCE, THE DEMAND U/S. 201(1 A) DID NOT SURVIVE. IT WAS SUBMITTED THAT DEPARTMENT DID NOT PREFER APPEALS TO THE ITAT. HOWEVER, SIMILAR DEMAND WAS RAISED BY THE ACIT, OSD, RANGE-14 FOR AYS. 2009-10 TO 2013-14. LD.CIT(A ) SIMILARLY DECIDED AND DEPARTMENT PREFERRED AN APPEAL BEFORE THE ITAT. ITAT BY THE ORDER DT. 04-09-2015 IN ITA NOS. 319 TO 323/HY D/2015, DISMISSED THE REVENUE APPEALS FOR ALL THE YEARS. IT W AS SUBMITTED THAT ITAT HELD, SUPPORTING THE ORDER OF THE CIT(A), THAT THERE IS NO AGENT-PRINCIPAL RELATIONSHIP AND PROVISIONS OF SEC TION 194H ARE NOT ATTRACTED. EXPLAINING THE SAME BEFORE THE LD.CIT(A ), IT WAS SUBMITTED THAT MATTER GOT CONCLUDED BY THE ORDER OF THE CIT( A) UPTO AY. 2008-09 AS REVENUE DID NOT PREFER APPEAL AN D FOR AY. 2009-10 BY THE ORDER OF THE ITAT. 6. FOLLOWING THE SUBMISSIONS, LD.CIT(A) DELETED THE DISALLOWANCE MADE U/S. 40(A)(IA) BY HOLDING AS UNDE R: 7.1 I HAVE CAREFULLY GONE THROUGH THE WRITTEN SUBM ISSIONS OF THE ASSESSEE, THE FACTS OF THE CASE AND THE ASSESSMENT ORDERS. M/S. HYDERABAD RACE CLUB :- 4 - : 7.2 THE SUBSTANTIAL ISSUE FOR CONSIDERATION IS WHET HER THE PAYMENTS MADE BY THE ASSESSEE TO OTHER RACE CLUBS IS IN THE NATURE OF COMMISSION ATTRACTING PROVISIONS OF SEC.194H AND IF SO, WHETHE R DISALLOWANCE IS TO BE MADE U/S 40A(IA) FOR NOT DEDUCTING THE TDS. 7.3 THE HON'BLE ITAT IN ITS ORDER DT. 07.03.2012 RE STORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER IN ORDER TO GI VE OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE AND ESTABLISH THAT THE RE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND THE OTHER CLU BS. I HAVE FOUND FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS MERELY STATED THAT THERE IS PRINCIPAL AGENT RELATIONSHIP. HE HAS NOT D ISCUSSED AS TO WHAT ARE THE SERVICES PROVIDED BY THE AGENT TO THE ASSESSEE CLUB. HE MERELY RELIED ON THE WORD 'COMMISSION' IN TURF CLUB AUTHORITIES I NDIA RESOLUTION DT. 31- 03-2003. 7.4 THE CIT(A)-II, HYDERABAD WHILE DISPOSING THE AP PEALS ON TDS MATTERS FOR THE A.YS 2002-03 TO 2008-09 IN ITA NOS. 0046-0049 & 0016- 0025/CIT(A)- 11/09-10 DT 09-11-2009, DISCUSSED AT L ENGTH ON THE ABOVE ISSUE AND CONCLUDED THAT THERE IS NO PRINCIPAL AND AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND OTHER CLUBS. IT WAS SUBMI TTED BEFORE ME BY THE APPELLANT THAT THIS DECISION IS NOT APPEALED FURTHE R BY THE DEPARTMENT. 7.5 LATER THE CIT (A) -8, HYDE RABAD WHILE DECIDIN G APPEALS FOR THE A.YS 2009-10 TO 2013-14 IN ITA NO. 0171 TO 0175 /CI T(A)-8/HYD/2013-14 VIDE HER ORDER DT. 19-01-2015 FOLLOWED THE ORDER OF CIT(A)-II AND HELD THAT PAYMENTS MADE BY THE ASSESSEE TO OTHER CLUBS ARE NO T IN THE NATURE OF COMMISSION. HOWEVER, THIS ORDER WAS CHALLENGED BY R EVENUE AND REVENUE'S APPEALS WERE DISMISSED BY HON'BLE ITAT VI DE ITS ORDER DT. 04- 09-2015 IN ITA NO. 319 TO 323/HYD/2015. 7.6 FURTHER, THE OTHER TURF CLUBS ARE PROVIDING FAC ILITY TO VIEW LIVE TELE MATCHES AND THE ASSESSEE UTILIZES THIS FACILIT Y AND GET PUNTERS TO BET ON THOSE MATCHES. THE MATCHES ARE ACTUALLY THE PROP ERTY OF THE RESPECTIVE CLUBS BUT NOT THAT OF THE ASSESSEE. THUS HERE ASSES SEE IS GETTING REVENUE FROM PUNTERS FOR THE MATCHES CONDUCTED BY OTHER CLU BS. BUT AS PER THE UNDERSTANDING BETWEEN THE TURF CLUBS, THE REVENUE I S THE RIGHT OF THE ASSESSEE AND HE IS PARTING WITH THAT REVENUE @ 23% OF THE REVENUE GENERATED BY PUNTERS WHO COME TO WATCH THOSE LIVE M ATCHES AT ITS PREMISES. THE OTHER CLUBS DO NOT ARRANGE THE PUNTER S OR THE BETS. THEY PROVIDE FACILITY TO WATCH THOSE MATCHES LIVE BY PRO VIDING BROADCASTING FACILITY. HERE THE OTHER CLUBS HAVE NO AGENT RELATI ONSHIP WITH THE ASSESSEE. THEY ARE NOT ACTING ON BEHALF OF THE ASSESSEE RACE CLUB. FOR THESE REASONS AND THE ELABORATE ORDER OF THE CIT(A)-II REFERRED T O AT PARA 7.4 ABOVE, I AM UNABLE TO ACCEPT THAT THESE PAYMENTS COME UNDER THE PURVIEW OF COMMISSION U/S 194H. M/S. HYDERABAD RACE CLUB :- 5 - : 7.7 THUS, I HOLD THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 40A(IA) IS NOT SUSTAINABLE. SINCE THERE IS NO L IABILITY TO DEDUCT TDS ITSELF, THE OTHER GROUND RAISED BY THE ASSESSEE ON THE AMENDMENT MADE IN SEC. 40A(IA) BECOMES ACADEMIC AND NEED NOT BE ADJUD ICATED. 7. SINCE THE ORDER OF LD.CIT(A) IS IN CONSONANCE WITH THE ORDERS OF THE CIT(A) ON THE ISSUE UPTO AY. 2008-09 ON WHICH REVENUE HAS NOT PREFERRED ANY APPEAL AND ALSO IN TUNE WITH THE FIN DINGS GIVEN BY ITAT IN AY. 2009-10, THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). WE DO NOT FIND ANY MERIT IN APPEALS OF THE REVENUE. ACCORDINGLY, ALL THE APPEALS OF REVENUE AR E DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH APRIL, 2017 UPON CONCLUSION OF HEARING SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 6 TH APRIL, 2017 TNMM COPY TO : 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2( 2), HYDERABAD. 2. M/S. HYDERABAD RACE CLUB, 16-10-1/A/1, RACE COUR SE ROAD, HYDERABAD. 3. CIT (APPEALS)-9, HYDERABAD. 4. PR.CIT-2, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.