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Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SHRI. B.R. BASKARAN & SMT. BEENA PILLAI
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by assessee against the order dated 28/10/2016 passed by Ld.CIT(A), Mysore for assessment year 2011- 12 on following grounds of appeal: “1. The order of the learned Commissioner of Income-tax [Appeals] in so far as they are against the appellant is opposed to law, equity and weight of evidence, probabilities, facts and circumstance of the case.
2. The appellant denies itself liable to be assessed over and above the returned income by it on the facts and circumstances of the case.
3. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the amount collected from punters for disbursement as dividend to punters stands diverted at source by virtue of overriding title on the facts and circumstances of the case. [i]. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the totalizator collection from the punters stands diverted at source for disbursement to dividend to punters on the facts and circumstances of the case. [ii]. The learned Commissioner of Income-tax [Appeals] failed to appreciate that method of accounting adopted by the appellant were accepted by the revenue from past Page 2 of Assessing Officer has deviated from the stand taken consistently and accepted for earlier years on the facts and circumstances of the case. [iii]. The authorities below erred in observing that the gross receipts received in the totalizator would be the amount of revenue receipts aggregated with all other receipts on the facts and circumstances of the case. [iv]. The learned Commissioner of Income-tax [Appeals] failed to appreciate that as per the betting rules what the appellant is entitled to is only the commission and and the clauses in the betting rules clearly indicates that the disbursement of dividends to the punters are not the receipt of the appellant and hence there is a diversion of receipt by virtue of overriding title on the facts and circumstances of the case.
The learned Commissioner of Income-tax [Appeals] was not justified in confirming the disallowance made by the learned assessing officer by invoking the provisions of section 40A[3] of the Act amounting to Rs. 37,88,922/- on the facts and circumstances of the case. [i]. The learned Commissioner of Income-tax [Appeals] is not justified in law in holding that gross receipts are to be taken as income and the dividends paid are expenses subjected to provisions of section 40A[3] of the Act, on the facts and circumstances of the case. [ii]. The learned Commissioner of Income-tax [Appeals] failed to appreciate and give any finding, that the action of the learned assessing officer in recasting the income and expenditure account without rejecting the books of accounts is not in accordance with law and without jurisdiction and against the principles of taxation and consequently no additions to the income returned could have been added in the impugned order of assessment on the facts and circumstances of the case. [iii]. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the learned Assessing Officer has not issued the show cause notice in respect of the disallowance of payment to punters and further the additions made in the impugned order of assessment is without any reasoning and consequently the assessment is passed in violation of the principles of natural justice and non application of mind and the order is liable to be set aside on the facts and circumstances of the case. [iv]. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the provisions of section 40A [3] of the Act are not applicable on the ground that the disbursement of the dividend is not an expenditure on the facts and circumstances of the case. [v]. Without prejudice the learned authorities below failed to appreciate that if at all any disallowance is to be made Page 3 of 40 A [3] of the Act though not warranted in the instant case, the learned authorities ought to have considered such amounts for quantification after allowing the basic exemption of Rs. 20,000/- on payments the balance amounts alone could have been considered for the purposes of disallowance under section 40A[3] of the Act on the facts and circumstances of the case.
5. The learned Commissioner of Income-tax [Appeals] is not justified in law in setting aside the issue of disallowance of a sum of Rs. 9,51,580/-representing expenditure disallowed in the earlier assessment year and was claimed by the appellant in the return of income as an allowance deduction on actual payment as per the provisions of section 43B of the Act on the facts and circumstances of the case.
6. The learned Commissioner of Income-tax [Appeals] is not justified in law in setting aside the issue of disallowance of bad debts written off in the books of the appellant of Rs.6,19,000/- to the learned assessing officer without jurisdiction on the facts and circumstances of the case.
7. The learned Commissioner of Income-tax [Appeals] is not justified in law in setting aside the issue of a sum of Rs.70,618/- being prior-period expenses claimed by the appellant in the return of income, to the assessing officer without jurisdiction on the facts and circumstances of the case.
8. The learned Commissioner of Income-tax [Appeals] is not justified in law in setting aside the issue of brought forward unabsorbed business loss of Rs. 1,09,03,707/- and brought forward unabsorbed deprecation of Rs.72,05,633/-, which the appellant is entitled for such claim in the return of income to file of the learned assessing officer without jurisdiction on the facts and circumstances of the case.
The learned Commissioner of Income-tax [Appeals] failed to appreciate that the additions and disallowances made by the learned assessing officer in the order of assessment is without assailing any reasons and non application of mind and requires to be cancelled on the facts and circumstances of the case.
The appellant denies itself liable to pay interest under section 234B of the Act on the facts and circumstances of the case. Further, the calculation of interest under section 234B of the Act is not in accordance with law since the rate, method of calculation, quantum is not discernable from the order of assessment on the facts and circumstance of the case.
The appellant craves leave to add, alter, amend, substitute or delete any of the grounds as urged above at the time of hearing of appeal.
For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered.” 2. Brief facts of the case are as under: The assessee is engaged in activity of conducting horseracing. It has been carrying out this activity since the last 120 years. For your consideration it filed its return of income declaring total income at rupees will and pay taxes of ₹ 23, 30, 475/-under 115 JB of the act. This case was selected for scrutiny and notice under section 143 (2) of the was issued to assessee in response to which representative of Assessee appeared before the ld.AO and filed details as called for. On perusal of the details filed, Ld.AO observed that assessee had not offered income being commission on from totalizators, commission from bookmakers’ field money, entry money, sponsorship and cups admission tickets, bookmakers’ stall fee, receipts from catering and cycle stand contracts and also from downlinking centres amounting to ₹ 28,40,17,298/-. On enquiry being raised by the Ld.AO regarding not offering the gross receipts tax, assessee’s representative submitted that, the gross receipts does not constitute income of the race club because income of other race clubs are transferred by way of overriding title. 3. Disagreeing with the submissions of assessee, the Ld.AO re-casted the income and expenditure account and computer the taxable income in the hands of assessee at ₹ 1,87,65,803/-. Agreed by the additions/this allowances made, as it would appeal for the Ld.CIT(A). 4. The Ld.CIT(A) partly allowed the claim of assessee by considering the amount paid to the punters on winning as application of income as against diversion by overriding titles and submitted by assessee’s however upholding the disallowance of the amount paid other than by way of a county checks that exceeded the limits prescribed under section 40A(3) of the Act. The Ld.CIT(A) also allowed the claim Page 5 of pertaining to expenditure disallowed in earlier years for which provision was made and was also not considered by assessing officer in the assessment order. The Ld.CIT(A) also had directed the lower deal to consider the claim of brought forward unabsorbed depreciation and unabsorbed losses for the year under consideration and to recompute the interest payable under section 234B as per law. Aggrieved by the order of the Ld.CIT(A) a season appeal before us now.
At the outset, the Ld.AR submitted that the ground number 1-2 are general in nature and therefore do not require adjudication. He submitted that the ground number 5-6 has been not pressed by assessee. Accordingly these grounds are not adjudicated here in and are dismissed as not pressed. The only effective grounds that need to be adjudicated are the ground number 3 and ground number 4.
Ground nos. 3-4: This issue has been raised challenging the decision of the Ld.CIT(A) in treating the total receipts to be application of money as against diversion at source by overriding title as considered by the assessee. The Ld.AR submitted that identical issue on similar facts was remanded by the Circuit Bench of this Tribunal for assessment year 2010-11 in by order dated 23.03.2017. This Tribunal observed as under:
Respectfully following the same, we remand these issues back to the Ld.AO to consider the submissions of assessee de novo in light of the Rules of Betting and the principles laid down by various Hon’ble Courts.
Ground nos. 7-8: It is submitted by the Ld.AR that there is no speaking order on these issues. Accordingly, at the request of both sides, these grounds are remanded to the Ld.AO to pass a speaking order after considering the evidences / documents filed by assessee. Needless to say that proper opportunity must be granted to assessee in accordance with law. In the result, the appeal filed by assessee stands allowed for statistical purposes. Order pronounced in the open court on 14th March, 2022.