ACIT (TDS), TDS Circle-1(1), Hyd, Hyderabad V. Hyderabad Race Club, Hyd, Hyderabad

ITA 321/HYD/2015

• Counselvise Citation: 32122514 RSA 2015
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-09-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 31-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Section: 133A; 201(1); 63

Judgement Text

ITA NOS.319 TO 323 OF 2015 HYDERABAD RACE CLUB HYDE RABAD PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NOS.319 TO 323/HYD/2015 (ASSESSMENT YEARS: 2009-10 TO 2013-14) ASSTT. COMMISSIONER OF INCOME TAX ( TDS ) CIRCLE 1(1) HYDERABAD VS. HYDERABAD RACE CLUB HYDERABAD PAN: AAACH 2773 C (APPELLANT) (RESPONDENT) FOR REVENUE : SMT. NIVEDITA BISWAS, CIT (DR) FOR ASSESSEE : SHRI K.C. DEVDAS DATE OF HEARING : 0 2 .09 .2015 DATE OF PRONOUNCEMENT : 04 .09. 2015 O R D E R PER SMT.P. MADHAVI DEVI, J.M. ALL THE ABOVE APPEALS FOR THE A.YS 2009-10 TO 2013 -14 ARE FILED BY THE REVENUE AGAINST THE ORDERS OF THE CIT (A) DELETING THE DEMANDS RAISED BY THE AO U/S 201(1) AND 201(1A) OF THE I.T. ACT. 2. BRIEF FACTS OF THE CASE FOR THE A.Y 2009-10 AND 2010-11 ARE THAT THE ASSESSEE, A COMPANY REGISTERED UNDER THE C OMPANIES ACT, IS CARRYING ON THE BUSINESS OF RACING AND PROM OTES RACE MEETINGS AT ITS MALAKPET RACE COURSE, HYDERABAD. TH E ASSESSEE IS COLLECTING ENTRY FEE AND BETTING MONEY FROM PUNT ERS AND UTILIZING THE SAME FOR PAYMENTS AS WINNINGS ON HORS E RACE TO PUNTERS, PAYMENT OF STAKE MONEY TO HORSE OWNERS AND TO MEET THE ADMINISTRATIVE COST AND OTHER EXPENSES. 3. A SURVEY OPERATION U/S 133A OF THE ACT WAS CONDU CTED IN THE PREMISES OF THE ASSESSEE ON 11.02.2013. DURING THE SURVEY ITA NOS.319 TO 323 OF 2015 HYDERABAD RACE CLUB HYDE RABAD PAGE 2 OF 7 OPERATION, THE SURVEY PARTY OBSERVED THAT THE ASSES SEE IS NOT MAKING TDS ON PAYMENTS OF STAKE MONEY DISBURSED AMO NGST THE WINNING HORSE OWNERS AND ALSO ON PAYMENTS MADE UNDE R THE HEAD WINNINGS FROM HORSE RACES, SHARE OF INCOME TO OTHER CENTRES/ROYALTY TO OTHER CENTRES. THEREFORE, ASS ESSEE WAS ASKED TO EXPLAIN AS TO WHY IT IS NOT TO BE TREATED AS AS SESSEE IN DEFAULT U/S 201(1) FOR FAILURE TO COMPLY WITH THE TDS PROVISIONS U/S 194B, 194BB AND 194H OF THE I.T. ACT. THE ASSES SEE SUBMITTED ITS REPLIES VIDE LETTERS DATED 28.2.13, 1 1.3.13, 10.3.13 AND 15.3.13. AFTER CONSIDERING THE WRITTEN SUBMISSI ONS AND ALSO THE FINDINGS OF THE SURVEY PARTY, AO OBSERVED THAT SECTION 194B HAS BEEN WIDENED BY THE INSERTION OF THE WORDS (OR CARD GAME AND OTHER GAME OR ANY SORT) W.E.F. 1.6.2001. THERE FORE, ACCORDING TO HIM, THE HORSE RACING BEING A GAME IS INCLUDED U/S 194B OF THE ACT. HE OBSERVED THAT THE ASSESSEE IN I TS REPLY HAD STATED THAT THE ASSESSEE HAS NOT DEDUCTED ANY TAX A T SOURCE IN STAKE MONEY CREDITED TO THE RESPECTIVE HORSE OWNE RS, AS, IN ITS OPINION, SECTION 194BB IS APPLICABLE BEING A SPECIA L PROVISION WITH RESPECT TO HORSE RACING INCOME AND THEREFORE, ITS PREVAILS OVER ALL THE REMAINING PROVISIONS. HE OBSERVED THAT THE ASSESSEE HAD RELIED UPON THE CBDT CIRCULAR NO.240 DATED 17 TH MAY, 1978 REPORTED IN 117 ITR (STATUTES) 39, WHEREIN, ACCORDI NG TO THE LEARNED COUNSEL FOR THE ASSESSEE, IT WAS REAFFIRMED THAT TDS PROVISION DOES NOT APPLY TO PAYMENTS OF WAY OF STA KE MONEY. THE AO HOWEVER, WAS NOT SATISFIED WITH THE SUBMISSI ONS OF THE ASSESSEE AND HELD THAT THE PROVISION OF SECTION 194 B IS APPLICABLE TO THE FACTS OF THE CASE AND THEREFORE, ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE WHILE MAKING THE PAY MENT OF STAKE MONEY TO THE OWNERS OF THE WINNING HORSES. HE ACCO RDINGLY HELD THE ASSESSEE TO BE AN ASSESSEE IN DEFAULT. AS RE GARDS THE NON DEDUCTION OF TAX U/S 194BB FROM THE WINNINGS FROM H ORSE RACE, ITA NOS.319 TO 323 OF 2015 HYDERABAD RACE CLUB HYDE RABAD PAGE 3 OF 7 THE AO OBSERVED THAT THE ASSESSEE IS DEDUCTING TAX U/S 194BB AS PER APPLICABLE RATE ON PAYMENTS TO PUNTERS AFTER DEDUCTING THE AMOUNT OF RS.2500 FROM THEIR PAYMENTS. THEREFOR E, ACCORDING TO HIM, THE ASSESSEE IS NOT DEDUCTING TAX ON THE ENTIRE GROSS AMOUNT. ASSESSEE WAS THEREFORE, ASKED TO EXPL AIN AS TO WHY IT SHOULD NOT BE TREATED AS ASSESSEE IN DEFAUL T FOR SHORT DEDUCTION OF TDS U/S 194BB OF THE ACT. VIDE ITS LET TER DATED 13.03.2013, ASSESSEE EXPLAINED THAT AS PER THE PRAC TICE, ASSESSEE HAS BEEN DEDUCTING TAX AT APPLICABLE RATES ON THE W INNINGS AFTER DEDUCTION OF BASE THRESHOLD LIMIT OF RS.2500 AND IS DEPOSITING THE SAME TO THE GOVT. ACCOUNT. IT WAS SUBMITTED THA T THE SAME ISSUE HAD ARISEN IN A.Y 2008-09 AS WELL AND THE CIT (A), AFTER CAREFUL CONSIDERATION OF THE FACT, HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ACCEPTING THE BASIC DEDUCTION OF RS .2500 AND THAT THE ORDER OF THE CIT (A) HAS BEEN AFFIRMED BY THE ITAT IN ITS ORDER DATED 23.04.2010. THE AO HOWEVER, HELD THE AS SESSEE TO BE AN ASSESSEE IN DEFAULT ON THE GROUND THAT THE ISS UE HAS BEEN AGITATED BY THE DEPARTMENT IN THE HON'BLE HIGH COUR T OF HYDERABAD. HE, THEREFORE, TREATED THE ASSESSEE AS AN ASSESSEE IN DEFAULT U/S 201(1) AND ALSO LEVIED INTEREST U/S 20 1(1A) OF THE I.T. ACT ON THIS ISSUE ALSO. 4. HE FURTHER OBSERVED THAT THE ASSESSEE IS CONDUCT ING HORSE RACE IN VARIOUS PARTS OF THE COUNTRY SUCH AS BANGAL ORE, MUMBAI, KOLKATA ETC. AND THE ASSESSEE PAYS AN AMOUNT OF 23% OF THE INCOME FROM THE TOTE POOLS AND BOOK MAKERS COMMISSI ON TO THE OTHER RACE CLUBS WITHOUT DEDUCTION OF TAX AT SOURCE . HE HELD THAT THE ASSESSEE IS LIABLE TO MAKE TDS FROM THESE PAYME NTS U/S 194H OF THE ACT. HE, THEREFORE, ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE. IN RESPONSE TO THE SAME, THE ASSESSEE SUB MITTED THAT SIMILAR ISSUE HAD ARISEN IN ASSESSEES OWN CASE FOR A.Y 2008-09 ITA NOS.319 TO 323 OF 2015 HYDERABAD RACE CLUB HYDE RABAD PAGE 4 OF 7 AND THE CIT (A) HAD DELETED THE SAME AND IT WAS FUR THER NOT TAKEN APPEAL TO ITAT AND HENCE HAS BECOME FINAL. AO HOWEVER, HELD THAT THE RES JUDICATA DOES NOT APPLY TO THE TAXATION LAW AND THEREFORE THE ASSESSEE IS IN ASSESSEE IN DEFAU LT U/S 201(1) OF THE ACT. HE ACCORDINGLY RAISED THE DEMAND U/S 20 1(1) AND 201(1A) OF THE I.T. ACT. AGGRIEVED, ASSESSEE PREFE RRED APPEAL BEFORE THE CIT (A) WHO GRANTED RELIEF TO THE ASSESS EE. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US FOR ALL THE A.YS. 5. THE LEARNED DR SUPPORTED THE ORDERS OF THE AO WH ILE THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE OR DER OF THE CIT (A). 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE AO HAS APPLIED THE PROVISI ONS OF SECTION 194B TO THE PAYMENTS MADE TO HORSE OWNERS AS STAKE MONEY ON THE GROUND THAT BY INSERTION OF WORDS OR CARD G AME AND OTHER GAME OF ANY SORT W.E.F. 1.6.2001, THE HORSE RACING INCOME COMES UNDER THE AMBIT OF OTHER GAME OF ANY SORT, WE FIN D THAT THIS ISSUE HAD ARISEN IN THE CASE OF BANGALORE TURF CLUB LTD. VS. UNION OF INDIA AND OTHERS AND THE HON'BLE KARNATAKA HIGH COURT IN THE WRIT PETITION FILED BY THE BANGALORE TURF CL UB HAS DEALT WITH THIS ISSUE AT LENGTH AND HAS HELD THAT THE AME NDED PROVISION OF SECTION 194B DO NOT APPLY TO HORSE RAC ING. THE RELEVANT PORTION OF THE JUDGMENT OF THE HON'BLE HIG H COURT IS REPRODUCED HEREUNDER FOR READY REFERENCE: 58 . WHEN THE WORDS 'AND OTHER GAME OF ANY SORT' USED IN SECTION 194B IS EXAMINED WITH REFERENCE TO THE PRECEDING WO RDS AND INTERPRETED, THE ONE AND ONLY CONCLUSION WHICH CAN BE DRAWN WOULD BE THAT ACTIVITY OF OWNING AND MAINTAINING HORSES C ANNOT BY ANY STRETCH OF INTERPRETATION BE HELD THAT IT WOULD FAL L WITHIN THE DEFINITION OF 'AND OTHER GAME OF ANY SORT'. ITA NOS.319 TO 323 OF 2015 HYDERABAD RACE CLUB HYDE RABAD PAGE 5 OF 7 59 . THUS, HARMONIOUS READING OF THE STATUTORY PROVISI ONS WOULD INDICATE THAT FROM THE YEAR 1972 ITSELF, THE TERM OTHER GAME OF ANY SORT' WAS TAXABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AND TDS WAS NOT ATTRACTED ON SUCH INCOME. 60. SUB-SECTIONS (1) AND (2) OF SECTION 74A WHICH WAS INTRODUCED BY FINANCE ACT, 1972, WITH EFFECT FROM 01.04.1972 WAS OMITTED BY FINANCE ACT, 1986 WITH EFFECT FROM 01.04.1987. HOWE VER, SUB- SECTION (3) TO SECTION 74A WAS INSERTED BY FINANCE ACT, 1974, WITH EFFECT FROM 01.04.1975 INDICATING THE DISTINCTION B ETWEEN 'WINNINGS' AND 'ACTIVITY OF OWNING AND MAINTAINING HORSES' WHI CH HAS CONTINUED TILL DATE. THOUGH, SECTION 194BB PROVIDED FOR TDS T O BE MADE ON 'WINNINGS FROM RACE HORSES' WITH EFFECT FROM 01.04. 1978, THE CIRCULAR 240 DATED 17.05.1978 CAME TO BE ISSUED CLA RIFYING THAT IT DID NOT APPLY TO STAKE MONEY. HENCE, INSERTION OF T HE WORDS 'CARD GAME OR OTHER GAME OF ANY SORT' TO SECTION 194B WIT H EFFECT FROM 2001 WOULD HAVE NO BEARING ON PAYMENT OF STAKE MONI ES PAID BY THE TURF CLUBS TO THE RACE HORSE OWNERS. 61 . EXPLANATION (II) TO SUB-SECTION (IX) OF SECTION 2 4 CAME TO BE INSERTED BY FINANCE ACT, 2001. IT IS AN INCLUSIVE D EFINITION. THE TERM 'OR ANY OTHER SIMILAR GAME' FOUND IN EXPLANATION (I I) WILL HAVE TO BE EJUSDEM GENERIS AND SO ALSO THE TERM 'ANY OTHER SIMILAR GAME' FOUND IN SECTION 2(24)(IX) OF THE ACT. ON ADVENT OF GAME SHOWS INVOLVING PRIZE MONEY BEING TELECAST THROUGH ELECTR ONIC MEDIA AND SAID PRIZE MONEY HAVING NOT FOUND ITS PLACE IN THE DEFINITION CLAUSE OF 'INCOME' UNDER THE INCOME-TAX ACT, 1961, LEGISLATUR E INTRODUCED EXPLANATIONS (I) AND (II) TO SUB-CLAUSE (IX) OF SUB -SECTION (24) OF SECTION 2 SO AS TO INCLUDE SUCH PRIZE MONEY ALSO UN DER DEFINITION OF 'INCOME', SINCE IN THOSE EVENTS PEOPLE WOULD COMPET E WITH EACH OTHER TO WIN PRIZES. IN FACT, THIS POSITION BECOMES CLEAR FROM THE BUDGET SPEECH OF THE FINANCE MINISTER WHICH CAME TO BE REN DERED ON THE FLOOR OF PARLIAMENT IN THE BACKDROP OF AMENDMENT BR OUGHT TO SECTION 194B AND SECTION 2(24)(IX). EXPLANATIONS (I) AND (I I) WHICH IS ONCE AGAIN EXTRACTED HEREIN BELOW: 'WINNINGS FROM LOTTERIES, CROSS-WORD PUZZLES ETC., ARE CURRENTLY TAXED AT 40%. AS THE MARGINAL PERSONAL INCOME-TAX RATES H AVE NOW STABILISED AT 30%, THIS INCOME WILL ALSO NOW BE TAXED AT 30%. TELEVISION GAME SHOWS ARE VERY POPULAR THESE DAYS. I WISH THE WINNE RS WELL. AT THE SAME TIME, I PROPOSE THAT INCOME-TAX AT THE RATE OF 30% WILL BE DEDUCTED AT SOURCE FROM THE WINNINGS OF THESE AND ALL SIMILAR G AME SHOWS.' EJUSDEM GENERIS, PRINCIPLE OF CONSTRUCTION WOULD ME AN SAME KIND OR NATURE, WHEREBY WIDE WORDS ASSOCIATED IN THE TEXT W ITH MORE LIMITED WORDS ARE TAKEN TO BE RESTRICTED BY IMPLICATION TO MATTERS OF THE SAME LIMITED CHARACTER. FOR THIS PRINCIPLE TO APPLY THER E SHOULD BE SUFFICIENT ITA NOS.319 TO 323 OF 2015 HYDERABAD RACE CLUB HYDE RABAD PAGE 6 OF 7 INDICATION OF A CATEGORY THAT CAN PROPERLY BE DESCR IBED AS A CLASS OR GENUS, EVEN THOUGH NOT SPECIFIED AS SUCH IN THE ENA CTMENT. THE NATURE OF GENUS IS GATHERED BY IMPLICATION FROM THE EXPRES S WORDS WHICH SUGGESTS IT. 62 . NOW, TURNING MY ATTENTION TO THE FACTS ON HAND AN D EXPLANATION (II) INSERTED BY FINANCE ACT, 2001 IS PERUSED AND ALSO R EAD ALONG WITH SECTION 194B IT CAN BE EASILY INFERRED THE LEGISLAT URE HAS INTENDED TO BRING SUCH INCOME EARNED BY THE PRIZE WINNING MEMBE RS WHO COMPETE WITH EACH OTHER AND WIN PRIZES IN ANY GAME SHOW OR ENTERTAINMENT PROGRAMME ON TELEVISION OR ELECTRONIC MEDIA AND GAM ES SIMILAR TO IT. HENCE, 'STAKE MONEY' WHICH IS PAID TO RACE HORSE OW NERS ON THEIR HORSES BEING PLACED 1, 2 OR 3 ONWARDS IN A HORSE RA CE CANNOT FORM THE GENUS OF THE WORDS FOUND INEXPLANATION II TO SECTIO N 2(24)(IX) NOR IT CAN BE HELD THAT SUCH WINNINGS WOULD FALL WITHIN TH E WORDS 'AND OTHER GAME OF ANY SORT' FOUND IN SECTION 194B. 63 . HENCE, THIS COURT IS OF THE CONSIDERED VIEW THAT AMENDMENT BROUGHT ABOUT BY FINANCE ACT OF 2001 TO SECTION 2(24) AND 1 94B WOULD HAVE NO BEARING ON THE INCOME EARNED FROM 'OWNING AND MAINT AINING HORSES'. IN OTHER WORDS, THE TERM 'ANY OTHER SIMILAR GAME' FOUN D IN EXPLANATION (II) TO SECTION 2(24)(IX) HAS TO BE HELD AS INCLUSIVE DE FINITION AND HAS TO BE READ EJUSDEM GENERIS AND AS SUCH, ACTIVITY OF OWNIN G AND MAINTAINING HORSES CANNOT BY ANY STRETCH OF IMAGINATION FALL IN THE DEFINITION OF 'CARD GAME O OTHER GAME OF ANY SORT' FOUND IN SE CTION 194B. 7. WE FIND THAT THE CIT (A) HAS FOLLOWED THE DECISI ON OF THE HON'BLE KARNATAKA HIGH COURT TO DELETE THE DEMAND R AISED U/S 201(1A) AND 201(1)A OF THE ACT ON THIS ISSUE AND TH EREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE SAME. THUS , THE REVENUES GROUND OF APPEAL NO.2 AGAINST THIS ISSUE FOR BOTH THE A.YS IS REJECTED. 8. THE GROUND NO.3 OF REVENUE IS AGAINST THE DELETI ON OF THE DEMAND RAISED BY THE AO U/S 201 (1) AND 201(1A) OF THE ACT BY APPLYING THE THRESHOLD LIMIT OF RS.2500 ON EACH PAY MENT FOR MAKING TDS U/S 194BB OF THE ACT. THE GRIEVANCE OF T HE REVENUE IS THAT THE BASIC LIMIT IS ON THE AGGREGATE PAYMENT MADE IN A YEAR ITA NOS.319 TO 323 OF 2015 HYDERABAD RACE CLUB HYDE RABAD PAGE 7 OF 7 AND NOT ON EACH PAYMENT. ON THIS ISSUE, WE FIND THA T THE CIT (A) HAD FOLLOWED THE ORDER OF THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR A.YS 2002-03 TO 2008-09 IN GRANTING RELIEF TO THE A SSESSEE. SINCE THE CIT (A) HAD FOLLOWED THE PRECEDENT ON THE ISSUE AND THE REVENUE HAS NOT BEEN ABLE TO REBUT THIS FINDING WIT H ANY EVIDENCE OR DECISION TO THE CONTRARY, WE SEE NO REA SON TO INTERFERE WITH THE SAME. THEREFORE, GROUND NO.3 OF THE REVENU E IS ALSO REJECTED. WE FIND THAT IN THE A.YS 2011-12 TO 2013- 14, THE ONLY ISSUE IS ABOUT THE APPLICABILITY OF SECTION 194B OF THE ACT TO THE ASSESSEE. FOR THE DETAILED REASONING GIVEN FOR THE A.Y 2009-10 AND 2010-11 RESPECTIVELY AS ABOVE, THE SOLE GROUND OF APPEAL IN ALL THESE YEARS IS REJECTED. 9. IN THE RESULT, REVENUE APPEALS FOR ALL THE A.YS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2015. S D/ - S D/ - (B. RAMAKOTAIAH) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 4 TH SEPTEMBER, 2015. VNODAN/SPS COPY TO: 1. ASSTT. COMMISSIONER OF INCOME TAX (TDS), CIRCLE 1(1 ), 4 TH FLOOR, INCOME TAX TOWERS, AC GUARDS, HYDERABAD 5000 04 2. M/S. HYDERABAD RACE CLUB, MALAKPET, HYDERABAD 3. CIT (A)-8, HYDERABAD 4. CIT (TDS) HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER