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Facts
The assessee's appeals were filed belatedly by 393 days. The assessee is engaged in promoting horse racing and had assessment orders passed for AY 2014-15 and 2017-18. The AO disallowed cash payments and subsidies under sections 40A(3) and 40(a)(ia) of the Act.
Held
The Tribunal condoned the delay in filing the appeal. The Tribunal directed the AO to delete the disallowance made under section 40(a)(ia) concerning subsidy payments, stating that these payments did not attract TDS provisions. The issue of disallowance under section 40A(3) was remitted back to the AO.
Key Issues
1. Whether the delay in filing the appeal can be condoned? 2. Whether disallowances under sections 40A(3) and 40(a)(ia) for cash payments and subsidies were justified?
Sections Cited
143(3), 40A(3), 40(a)(ia), 250, 271(1)(c), 192, 195, 197
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI. LAXMI PRASAD SAHU & SHRI. SOUNDARARAJAN K
Per Laxmi Prasad Sahu, Accountant Member :
1. These 2 appeals are filed by the assessee against separate Orders passed by the CIT(A), for the Assessment Years 2014-15, 2017-18 respectively.
At the outset of hearing, we noticed that the assessee has filed appeals before the Tribunal belatedly by 393 days against the Order passed by the learned CIT(A). In this regard, assessee has filed condonation petition which is placed at Paper Book Page No.1 to 12 in which it has been stated as under:
The appellant named above is engaged in conducting & promoting horse racing. An order of assessment was passed under section , 695/Bang/2025 Page 2 of 8 143(3) of the Act on 27.12.2019 wherein disallowances were made under section 40A(3) and section 40(a)(ia).
2. The appellant being aggrieved filed an appeal before the learned CIT(A) and the order under section 250 of the Act was passed 11.12.2023 dismissing the appeal filed.
The appellant submits that it has created multiple mail id’s over a period of time, such as secmysore@dataone.in, mrcacct@gmail.com, mysoreraces@gmail.com, accounts@mysoreraceclub.com for the purposes of its various activities carried on by it and accessed by different employees who have ignored the email on the premise that the respective department would do the needful.
4. It is submitted that owing to multiple mail id’s and large number of incoming e-mails from various authorities such as the Income Tax Department, GST Department, ESI & PF authority and e-mail from members and other race club across the country, the employees of the appellant have missed the CIT(A) order due to oversight.
The appellant submits that it has almost 70 proceedings alone in Income Tax in the form of assessment proceedings, appeal proceedings, penalty proceedings, rectification proceedings, outstanding demand notices, order giving effect proceedings, 143(1) adjustment proceedings etc., which substantiates that the e filing account was constantly flooded with communication from various authorities.
The appellant submits that the Senior Accounts Assistant, Mr. ThejusUrs P who was conversant with the income tax proceedings resigned with effect from 30.06.2022 and other staff who were newly appointed were unaware of the proceedings.
7. Further, Smt. Sumithra who was Accounts Superintendent and was responsible for coordinating with the professional handling of the tax matters of the appellant was placed under suspension from 16.11.2023 and was eventually suspended on 23.09.2024 on account of dereliction of duty, misappropriation of funds, thus, the appellant was not aware of the hearing notices, order passed under section 250 of the Act by the learned CIT(A).
It is submitted that Mr. N H S Mani who was the secretary & CEO of the appellant was also relieved from the service from 31.12.2023 and he was not aware of the order passed under section 250 of the Act as the personnel entrusted with the work, Mr. ThejusUrs P &Smt Sumithra were no longer associated with the appellant.
The appellant submits that it has a high attrition rate and the personnel who were entrusted with the regulatory and compliance work were relieved from work as a result of which the appellant was unaware of the order passed under section 250 of the Act. , 695/Bang/2025 Page 3 of 8 10. The appellant submits that an order of penalty under section 271(1)(c) was passed on 13.03.2025 for the assessment year 2014- 15 and the staff of the appellant informed the committee regarding receipt of the said order.
The committee approached the Chartered Accountant and sought for further course of action. The Chartered Accountant logged into the e filing portal and informed that the appeal filed against the order of assessment was disposed and suggested to file an appeal before the Hon’ble Income Tax Appellate Tribunal, Bangalore Bench.
The appellant was referred to the present counsel in Bangalore for filing the appeal against the order of the learned CIT. The counsel sought for documents/records, earlier years Tribunal orders and accordingly the appeal came to be filed before your Honours on 28.03.2025 though the due date was 29.02.2024, resulting in a delay of 393 days.
The appellant humbly prays that this Hon’ble Tribunal considering the facts of the present case takes lenient and compassionate view and condone the delay in filing the present appeal against the order passed by the learned Commissioner of Income-tax (Appeals), NFAC.
The appellant places reliance on the decision of the Hon’ble Jurisdictional High Court in the case of CIT & Another Vs. ISRO Satellite Center, in of 2008 and other batch of appeal order dated 28/10/2011 has condoned the delay of 5 years in filing the appeal before the CIT[A], the relevant observation is at para 28 page 72 of the order.
The appellant places reliance on the decision of this Hon’ble Tribunal in the case of Smt. Shakuntala Hegde, Legal Heir of Mr. Ramakrishna Hegde Vs. ACIT, in order dated 25/04/2006 wherein the Hon’ble Tribunal has condoned the delay of 1,331 days i.e. 3 Years, 8 Months and 22 days in filing the appeal by the assessee.
The appellant places reliance on the decision of the Hon’ble High Court of Madras in the case of Commissioner of Income-tax Vs. K.S.P.Shanmugavel Nadar (1987) 30 Taxmann 133 (Madras).
The appellant places reliance on the decision of the Hon’ble Tribunal in the case of M/s. Midas Polymer Compounds Pvt Ltd Vs. ACIT in dated 25.06.2018.
The appellant places reliance on the decision of the Hon’ble High Court of Bombay in the case of Anatek Services Pvt Ltd Vs. Asst.Commissioner of Income-tax-10(1) in of 2018 dated 11.02.2022.
It is humbly submitted that if this application for condonation of delay in filing the appeal is not allowed, the Appellant would be put to great hardship and irreparable injury per contra no hardship or , 695/Bang/2025 Page 4 of 8 injury would be caused to the Respondent if this application of Condonation of delay is allowed. Reliance is placed on the decision of the Hon’ble Apex Court in the case of Collector, Land Acquisition Vs. MST.Katiji and Others (1987) 167 ITR 471 and also in the case of Concord of India Insurance Co. Ltd., Vs Smt. Nirmala Devi and Others 118 ITR 507. Further the Appellant relies on another decision of the Hon’ble Apex Court in the case of Radha Krishna Rai Vs. Allahabad Bank & Others [2000] 9 Supreme Court Cases 733 and Commissioner of Income-tax Vs. West Bengal Infrastructure Development Finance Corporation limited (2011) 334 ITR 269 (SC).
The appellant craves leave of this Hon’ble Tribunal to file additional submission at the time of hearing of this appeal.
It is humbly prayed that this Hon’ble Tribunal takes a lenient and compassionate view and condone the delay of 393 days in filing the present appeal against the order of the learned Commissioner of Income-tax (Appeals), NFAC dated 11.12.2023 before this Hon’ble Tribunal and hear the same on merits for the advancement of substantial cause of justice.
3. On going through the explanation submitted by the learned Counsel and by relying on the judgment of the Hon’ble Supreme Court in the case of Collector of Land Acquisition Vs. MST Katiji and Others, (1987) 2 SCC 107 : 1987 (2) SC, the delay in filing the appeal is condoned.
Briefly stated the facts of the case are that Mysore Race Club Ltd., derives income from organizing races, filed its return of income on 25.10.2017 declaring taxable income of Rs.4,41,27,350/-. Later on the case was selected for complete scrutiny under CASS. Accordingly, notice under section 143(2) of the Act dated 21.09.2021 was issued and served to the assessee. Subsequently, other statutory notices were issued to the assessee. From the verification of the details submitted, it was noticed that assessee has made cash payments to various punters to the tune of Rs.61,851/- which is more than the specified limit of Rs.20,000/- as per section 40A(3) of the Act. Assessee furnished details but the AO did not accept and it was added back to the total income of the assessee. Further, on verification of records furnished, it was , 695/Bang/2025 Page 5 of 8 noted that assessee has made payments of fodder subsidy, horse owners for various purposes as under:
i. Owners Subsidy - Rs.9,21,000/- ii. Fodder subsidy - Rs.65,92,005/- iii. Incentive - Rs.70,89,967/- iv. Transport Subsidy - Rs.22,20,000/-
5. The AO observed that on the above payments, assessee was required to deduct TDS on such payments as per Chapter XVII but assessee did not deduct TDS. Therefore, on such payments, the AO as per section 40(a)(ia) of the Act disallowed 30% on such payments amounting to Rs.52,63,379/-. Resultantly, assessee’s income was determined at Rs.4,94,52,580/-.
6. Aggrieved from the above Order, assessee filed appeal before the CIT(A). The learned CIT(A), after considering the submissions of the assessee, dismissed appeal of the assessee.
Aggrieved from the above Order, assessee filed appeal before the Tribunal. The learned Counsel reiterated the statement of facts and written submissions filed before the CIT(A) as well as the AO and he further submitted that the issue raised by the AO is covered by its own judgment in for Assessment Year 2009-10, in for Assessment Year 2013-14, Order dated 21.04.2022 and submitted that similar issued has been decided by the Co-ordinate Bench and above same order may be followed.
8. On the other hand, learned DR relied on the Order of AO and submitted that assessee has violated the provisions of section 40A(3) of the Act. Therefore, the AO has correctly disallowed for not deducting TDS. Further, , 695/Bang/2025 Page 6 of 8 with respect to other payments, assessee has failed to deduct TDS on such payments whereas the assessee is liable to deduct TDS as per Chapter XVII. Therefore, AO has rightly invoked section 40(a)(ia) of the Act.
9. Considering the rival submissions, we noted that AO has raised 2 issues (i) disallowance under section 40A(3) and disallowance under section 40(a)(ia) of the Act. During the course of hearing, learned Counsel relied on the judgment in assessee’s own case in which similar issue has been decided. The relevant part of the judgment is as under: 6.The next common issue relates to disallowance made u/s 40A(3) of the Act. This issue also requires to be restored to the file of the A.O. as the applicability of provisions of section 40A(3) of the Act would depend upon the decision taken by the A.O. with regard to the first issue discussed above, viz., whether there is diversion of income or not. The question of application of provisions of sec.40A(3) will not apply, if the assessing officer accepts the contention of the assessee that there is diversion of income and expenditure. Accordingly, we restore this issue in both the years to the file of the A.O. 7. Let us take the individual issues urged 9.1. The Income Tax Act prescribes deduction of tax at source u/s 192 to 195 of the Act. The assessee would be liable to deduct tax at source only in respect of payments which are covered by above said sections. The case of the assessee is that it has paid subsidy which is in the form of either reimbursement of part of expenses or absorption of certain expenses in maintenance of horses, transportation and contribution to welfare funds. None of these payments would fall under sec. 192 to 195 of the Act requiring deduction of tax at source. We notice that the A.O., without pointing out the section under which the assessee would be liable to deduct tax at source in respect of above said payments, has simply disallowed the subsidy payments by invoking the provisions of section 40(a)(ia) of the Act. We notice that the Ld. CIT(A) also confirmed the addition by observing that the assessee should have obtained no deduction certificate u/s 197 of the Act, meaning thereby, the Ld. CIT(A) has also not pointed out the section under which the above said payments would attract TDS liability. “9.2 A perusal of the explanation furnished by the assessee would show that (a) the assessee is absorbing part of cost of fodder purchased for feeding horses. The payment made for purchase of fodder does not attract any of the TDS provisions. In this case, the assessee is charging the cost of fodder , 695/Bang/2025 Page 7 of 8 at lower rate. Thus, this does not amount to payment to anyone, which would attract TDS provisions under any of the sections. (b) in respect of transport subsidy also, we notice that the assessee has met part of transportation expenses incurred by the horse owners in the form of reimbursement made to them. The primary liability to deduct TDS would lie upon the horse owners, since they have incurred the cost of transportation. The assessee has only reimbursed part of transportation cost to the horse owners. Accordingly, in our 1232/Bang/2018 M/s. Mysore Race Club Limited, Mysuru view, this payment will also not liable for deduction of tax at source. (c) the two-year old subsidy is also a kind of reimbursement to groom horses and the same, in our view, would also not attract provisions of TDS. (d) payment to jockeys and trainers fund and employees welfare society is a kind of contribution connected with the business activities of the assessee and the said payments are also not covered by any of the TDS provisions. (e) the last item "Syces subsidy" is the money paid to the owners of horses from out of stake money and it would also be not covered by any of the TDS provisions. Accordingly, we are of the view that the disallowance made by A.O. u/s 40(a)(ia) of the Act in respect of subsidy expenditure is not in accordance with law and the Ld. CIT(A) was not justified in confirming the said addition. Accordingly, we set aside the order passed by the Ld. CIT(A) on this issue and direct the A.O. to delete the disallowance.”
Respectfully following the above judgment, we remit the issue of disallowance of cash payment under section 40(A)(3) of the Act to the AO as per above terms, as per para No.6 of the Order in assessee’s own case noted supra and with regard to issue No.2 regarding disallowance under section 40(a)(ia) of the Act, respectfully following the above para No. 9.1 & 9.2 of the above judgement in assessee’s own case, we direct the Ao to delete the addition. Since the issues are similar for both the Assessment Years, therefore, we have decided the in above terms. Therefore, the decision taken for Assessment Year 2017-18 shall apply mutatis mutandis for for Assessment Year 2014-15.
, 695/Bang/2025 Page 8 of 8 11. In the result, appeals filed by the assessee are partly allowed for statistical purposes. A common order passed shall be kept in the respective case files.
Pronounced in the court on the date mentioned on the caption page.