ROYAL WESTERN INDIA TURF CLUB LIMITED,MUMBAI vs. INCOME TAX OFFICER, TDS WARD 2(1)(3), MUMBAI, MUMBAI

He further held that although Section 194BB does not include in its scope of the stake money payments, however, the same is precluded from the wider ambit from winning from game of any sort as provided u/s.194B.

In so far as reliance placed on the decision of the Tribunal in assessee‟s own case for A.Y.2012-13, he held that the decision of the Tribunal has not been accepted and department is in appeal before the Hon‟ble High Court and the Tribunal has erred in holding that provision of Section 194B are not attracted of stake money. Accordingly, he treated the amount of stake money of Royal Western India Turf Club Limited Rs.34,39,66,299/- liable for TDS and has computed TDS in default u/s.201(1) of Rs.10,34,89,890/- and computed the interest of Rs.9,12,18,585/-. The Ld. First Appellate Authority has simply confirmed the said reasoning of the ld. AO.

We find that exactly same issue has been dealt in detail by the Tribunal wherein the Tribunal has considered the arguments from both the parties and also analysed the relevant provisions of the Act and CBDT Circular. The relevant finding of the Tribunal reads as under:- 17. We have carefully considered the rival submissions. The issue before us is limited to the applicability of TDS on the „stake money‟ paid by the assessee to the owners of the horses who win the races. In this context, we shall first discuss the type of payments made by the assessee to owners on winning of the horse races. The assessee makes two types of payments. First, is in the nature of amount paid to the person who bets on the horses / jockeys. There is no dispute with regards to applicability of TDS on this type of payment as the same is liable for TDS u/s 194BB of the Act. We are concerned with the second type of payment made by the assessee, which are in the nature of prize money paid by the assessee to the owner of horses on account of the horse winning the race or standing second or in any lower position, which is termed as „stake money‟. The Assessing Officer has not disputed the fact that the payment made by the assessee is in the nature of „stake money‟, thus there is no dispute with respect to the fact as to what constitutes „stake money‟. The Assessing Officer is of the view that by virtue of amendment in Section 194B of the Act by Finance Act, 2001, the scope of Section 194B of the Act has been widened to cover within its ambit winning from games of any sort even though Circular No. 240 dated 17.05.1978 (supra) issued in the context of Section 194BB of the Act excluded from its ambit „stake money‟; as per the Assessing Officer, due to the amendment assessee was very much liable to deduct tax at source u/s 194B of the Act. On the other hand, the appellant vehemently contends that the expression “card game and other game of any sort”

Royal Western India Turf Club Limited derives its meaning from the words accompanying it and cannot be read to mean all games of any sort. It was further pointed out that specific provision shall prevail over general provision and Section 194BB of the Act being a special provision dealing with TDS on income arising from horse races and Circular no. 240 dated 17.05.1978 (supra) specifically excluding „stake money‟ from the ambit of TDS, it was further argued that the amendment in general provision cannot bring back to tax what has been specifically excluded from its ambit by the special provision. Thus, it was submitted that provisions of Section 194B of the Act were not applicable on „stake money‟ even after the amendment. The learned representative had also raised an alternate plea that the recipients of „stake money‟ have already paid the taxes on the „stake money‟ received from the assessee and thus, assessee should not be treated as “assessee in default” in view of the decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola (supra) and provisions of Section 201(1) of the Act.

At the outset, we find that heading of Section 194B of the Act is “Winning from lottery or crossword puzzle”. It is a well settled principle of interpretation that the heading of a section should also be assigned meaning while interpreting the section. From the heading of the Section 194B of the Act it is amply clear that there is no whisper that Section 194B of the Act was intended to cover within its purview winnings from horse races. Now coming to the heading of Section 194BB of the Act, which reads as “Winning from horse race”. Going by the heading of the two sections, it can be seen that Section 194BB of the Act is a specific section dealing with TDS on the winnings from horse races. Though the CBDT has specifically excluded “stake money” from the ambit of section 194BB of the Act by way of Circular No. 240 dated 19.05.1978, but it cannot be disputed that Section 194BB of the Act is the specific section which deals with TDS on „Winning from horse races‟.

Now, coming to the argument raised by the Assessing Officer that the Finance Act, 2001 has inserted the words 'card game or other game of any sort‟ in Section 194B of the Act which will even cover the “stake money” which is otherwise not covered by Section 194BB of the Act. We find that at the time when the amendment was brought in Section 194B of the Act, Section 194BB of the Act, which specifically dealt with TDS on winning from horse races, was already on the statute and the Legislature in its wisdom could have made the amendment in Section 194BB of the Act itself Royal Western India Turf Club Limited to include „stake money‟ within its ambit; that would have obviated any need to make amendment in Section 194B of the Act, which is a general provision for TDS, in order to cover „stake money‟ in its ambit. The learned representative has rightly pointed out to the Budget speech of the Finance Minister wherein it was stated that “television game shows are very popular these days and I propose that income tax at 30 % will be deducted at source from the winnings of these and all similar game shows." Another way of bringing to tax the „stake money‟ was by way of withdrawal of Circular No. 240 dated 17.05.1978, which clarified that tax was not required to be deducted u/s 194BB of the Act with respect to income by way of „stake money‟ as the same is not regarded as winning from horse races. However, said Circular is still in existence and the ld. DR has not disputed this fact. The entire gamut of the legal position leads to an irresistible conclusion that position of TDS on „stake money‟ has not changed even after amendment in Section 194B of the Act by Finance Act, 2001 and the position prior to amendment continues to prevail, i.e. the stake money is not liable to TDS either under Section 194BB or under Section 194B of the Act.

Further, it is a well settled proposition of law that the CBDT Circulars are binding on the Department as it clarifies the understating of the provisions of the Act by the Revenue which cannot be disregarded by the income-tax authorities while construing the provisions of the Act. The ld. DR was not able to point out why the interpretation given in the CBDT Circular relied upon by the assessee should not prevail. We find that the Department has tried to indirectly tax what cannot be taxed by virtue of Circular issued by the CBDT, a situation which is impermissible in law. Thus, on this aspect also, we hold that „stake money‟ is not liable to TDS u/s 194B of the Act.

The next contention of the learned representative for the assessee was that the horse owners have duly reported the income received from the assessee and evidence in this regard was filed by the assessee before the Assessing Officer. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Hindustan Coca Cola (supra) and as per the proviso of Section 201(1) of the Act, which provides that if the recipient of the income has paid taxes on the income received from the assessee and has filed the return of income, assessee should not be treated as an „assessee in default‟. We find enough substance in the said stand of the appellant. The TDS provisions are in place to keep track on the Royal Western India Turf Club Limited payment of taxes on the income received by the recipient and recover part of the tax in advance at the time of receipt of income by the recipient. In case the payer fails to deduct the TDS and the recipient has directly paid the taxes on the said income, the assessee-deductor cannot be compelled to pay TDS again on the same income because it would lead to double taxation on the same income. Thus, respectfully following the decision of the Hon'ble Supreme Court in the case of Hindustan Coca Cola (supra), we hold that where the assessee has produced the confirmation from the parties that they have duly reported the income received from the assessee in their respective returns of income, the assessee should not be treated as an „assessee in default‟ in terms of Section 201(1) of the Act.

In light of our above discussion, we hold that the „stake money‟ received by the horse owners is not liable to TDS under Section 194B of the Act or under Section 194BB of the Act and thus, assessee should not be treated as an „assessee in default‟ u/s 201(1) of the Act. We further hold that if the assessee furnishes confirmation from all horse owners to the effect that they have included the incomes received from assessee in their respective returns of income, irrespective of our earlier decision, assessee ought to be allowed benefit of decision of the Hon'ble Supreme Court in the case of Hindustan Coca Cola (supra) and should not be treated as an „assessee in default‟. Therefore, we set-aside the order of CIT(A) and direct Assessing Officer to delete the demand raised on account of non deduction of tax at source under Section 201(1) of the Act as well as interest u/s 201(1A) of the Act on „stake money‟ and the assessee is not liable to be treated as an „assessee in default‟.

Thus, once the Tribunal has given a categorical finding on each and every point which has been raised by the ld. AO therefore, respectfully following the aforesaid decision, we hold that assessee was not liable to deduct TDS on stake money received by the horse owners u/s.194B or u/s.194BB and therefore, assessee cannot be treated as „assessee in default‟

In the result, appeal of the assessee is allowed.