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Income Tax Appellate Tribunal, MUMBAI BENCH “J”, MUMBAI
Before: SHRI G.S. PANNU & SHRI RAM LAL NEGI
PER G.S. PANNU, VICE PRESIDENT
The captioned appeal filed by the assessee is directed against an order passed by the CIT(A)-60, Mumbai dated 31.10.2017, which in turn, arises out of an order passed by the Assessing Officer under section 201(1) / 201(1A) of the Income Tax Act, 1961 (in short ‘the Act’) dated 13.03.2014 pertaining to the Assessment Year 2012-13.
The Grounds of appeal raised by the assessee read as under :-
2 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. 1. That the CIT(A) has erred in upholding the order passed by the AO under section 201(1)/201(1A) dated 13th March, 2014 in regarding to the addition of Rs.11,76,63,242/- including interest u/s 201(1A) of Rs. 2,61,91,661/-.
The order passed by the AO u/s 201(1)/201(1A) and upheld by the CIT(A) is illegal, bad in law, unjust, arbitrary and without jurisdiction.
That the AO has in view of the facts and circumstances of the case, erred in law and on facts in treating the Appellant as 'Assessee in default' in view of the provisions of section 201(1) r.w.s 191 of I.T Act as there is no finding by the AO as to the failure of deductor appellant to pay the tax liability.
The CIT(A) has, in view of the facts and circumstances and in law, grossly erred on facts and in law, in upholding that the payment made to owners of race horse (i.e stake money) is subject to TDS under the provisions of the Income Tax Act, 1961.
The CIT(A) has, in view of the facts and circumstances and in law, grossly erred on facts and in law, in not accepting that the payment made to owners of race horse is winning from horse race in view of Circular No.240 dated 17th May, 1978 and such payments are not subjected to TDS under the provisions of the Income Tax Act, 1961.
That in view of the first proviso to Sec 201(1) which is retrospective in nature, the AO has erred on facts and in law in holding that the appellant is assessee in default and the CIT(A) has erred in not deleting the illegal demand raised by the AO.
That, without prejudice the AO and CIT(A) erred in law and on facts in not considering the evidences/material filled by the appellant in respect of owners of race horse verifying that the stake money earned by them has been considered in return of income and taxes has been paid accordingly. Hence the appellant has been wrongly and illegal treated as assessee in default U/s 201.
That without prejudice, the AO erred in law and on facts in not verifying from the respective owners in respect of which the appellant had submitted their PAN numbers about the payment of income tax by respective owners on payment of stake money and
3 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. has wrongly and illegally raised demand on your appellant . This has resulted in double tax on same income.
That without prejudice, the Rule 31ACB and Form 26A are only directory in nature and non submission of information by the horse owners in this form cannot result in assessee being held liable U/s 201.
The submissions and evidences placed on record by the appellant have not been properly considered and judiciously interpreted, while treating the appellant as an appellant in default.
The information filed and available on record has not been properly considered and judicially interpreted. The demand raised by AO is unjust, illegal, and arbitrary and are against the facts of the case and are not justified by any material on record.
That the interest under section 201(1A) has been wrongly and illegally charged and the same is highly excessive. The appellant was not liable to deduct tax on payment of stake money.
That without prejudice, the interest charged by AO is illegal, bad in law and highly excessive and the same could be charged till the date taxes are paid by the deductees.
Although the assessee has raised multiple Grounds of appeal, but the substantive dispute arises from the action of income-tax authorities in treating the assessee as an ‘assessee in default’ within the meaning of Section 201(1) of the Act for non-deduction of tax as per Section 194B of the Act and interest thereon under Section 201(1A) of the Act.
Briefly put, the relevant facts are that the assessee is a company incorporated under the erstwhile Companies Act, 1913 and is engaged in the business of organizing races at Mumbai and Pune and prepares lands for running
4 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. of horse races, steeple chases or races of any other kind and allowed to accept bets at its race course betting centres. The issue here pertains to deduction of tax at source (TDS) u/s 194B of the Act on the ‘stake money’ paid by the assessee to the horse owners on winning of races organized by the assessee. The assessee took the stand that the stake money paid to the horse owners is not liable to TDS u/s 194B of the Act whereas the Assessing Officer has treated the stake money liable to TDS u/s 194B of the Act. Accordingly, the Assessing Officer passed an order u/s 201(1) /201(1A) of the Act treating the assessee as an “assessee in default” for non-deduction of TDS on stake money and also levied interest u/s 201(1A) of the Act on the TDS ought to have been deducted by the assessee u/s 194B of the Act. On appeal, CIT(A) confirmed the action of the Assessing Officer. Aggrieved by the same, assessee is in appeal before us.
Before us, the first argument put forth by the learned representative for the assessee was that Section 194BB of the Act was brought in the statute by Finance Act, 1978 w.e.f. 01.04.1978, and it applies to a person who has license for horse racing and who is responsible for paying to any person any income by way of winning from horse races. A Circular was issued by the CBDT explaining the provisions of the Finance Act, 1978 i.e. Circular No. 240 dated 17.05.1978. In para 25.1.6 of the said Circular, it is specifically provided that the provisions of TDS shall not apply to income by way of ‘Stake Money’ as the term ‘Stake Money’ constitute the prize money received by the owners of the horse on account of the fact that the horse wins the race or comes second or third, as the case may be. It was contended that the CBDT Circulars are binding on the Departmental authorities, as held by the Hon'ble Supreme Court in the cases of K.P.Verghese vs.
5 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. ITO (1981) 131 ITR 597 and Ellerman Lines Ltd. vs. CIT (1971) 82 ITR 913. In fact, the very same Circular No. 240 dated 17.05.1978 came up for consideration before the Madras High Court in the case of CIT vs. Investment Trust of India Ltd. (2003) 264 ITR 506 (Mad) and it was held to be binding on the Departmental authorities. Accordingly, it has been explained that in view of the Circular of CBDT dated 17.05.1978 (supra), which specifically provides that no TDS is required to be made in respect of payment of stake money, the Assessing Officer is not right in treating the assessee as an ‘assessee in default’ for the purposes of Sec. 201(1) of the Act. It was further pointed out that what cannot be done directly, cannot be done indirectly. The Assessing Officer, being bound by the CBDT Circular, cannot hold the assessee liable to TDS by bringing the assessee within the domain of Section 194B of the Act, which is not permitted in law. In V.M.Salgaocar & Bros vs. CIT 243 ITR 383 (SC), the Hon’ble Supreme Court has held that the Circulars of the CBDT provide as to how the Revenue itself understands the enactment/amendment. Hence, the language of the Circular is very clear that Revenue accepts that "stake money" is outside the purview of TDS.
The next argument put-forth by the learned representative was that specific provisions prevail over general provisions. As per the learned representative, Section 194BB of the Act is a specific provision applicable in case of winnings from horse races. It is contended that a specific provision overrules a general provision, provided both the provisions operate in the same field. In this regard, reliance was placed on the decision of CIT vs. Shahzada Nand & Sons 60 ITR 392 (SC) and Kirloskar Pneumatic Co. Ltd. vs. Commissioner of Sur Tax (Appeals) 210 ITR 484 (Bom) and Forbes Forbes Campbell & Co. Ltd. vs. CIT 206 ITR
6 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. 495 (Bom.). Thus, as per him, the Assessing Officer erred in applying Section 194B of the Act, which is a general provision applicable to 'card game or other game of any sort’, which would not cover stake money on horse races; and, for the latter income, Section 194BB of the Act is the specific provision. It was further brought to our notice that even CBDT accepts that specific enactment prevails over the general enactment. In Circular No. 8 of 2005, the CBDT itself has stated that specific provision of law will override general provisions of law. When a specific section in Chapter XVII is provided for by the Legislature to deal specifically with horse races, the Revenue cannot invoke a general section, such as 194B of the Act, to hold the assessee in default. In this regard, reliance was also placed on decision of Hon’ble Supreme Court in the case of U.P. State Electricity Board and Anr.vs. Hari Shankar Jain and Ors. (AIR 1979 SC 65, (1978) 4 SCC 16) and LIC vs. D.J. Bahadur and Ors. (AIR 1980 SC 2181, (1981) 1 SCC 315).
Thereafter, the learned representative for the assessee explained why the provisions of Section 194B of the Act are not applicable. It was pointed out that when Section 194B of the Act was amended in 2001 to insert the words 'card game or other game of any sort’, the intention was to cover TV shows and quiz shows. Correspondingly, another amendment was brought in Section 2(24)(ix) of the Act w.e.f. from 01.04.2002 and an Explanation was added explaining that the words 'card game or other game of any sort’ shall include any game show, an entertainment program on TV or any electronic mode in which people compete or any other similar game. A combined reading of Sections 194B and 2(24)(ix) Explanation (ii) makes it clear that the said amendment would not apply to winning from horse races. This fact is also clear from the Memorandum explaining
7 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. the provisions of Finance Bill, 2001 which makes it clear that the intention of the Legislature was to cover various kinds of quiz shows which are launched on TV and shows of similar kind. Our attention was also drawn to the Budget speech of the Finance Minister on 28.02.2001 wherein he 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." Hence, it is submitted that it would be incorrect to say that the aforestated amendment in Section 194B of the Act brings within its fold the ‘Stake Money’ received by the owners of the winning horses; and, that in any case, Section 194BB of the Act is the relevant section, which anyway excludes the aforesaid receipts from its purview. Thus, a subsequent amendment in a general enactment cannot be said to override earlier special enactment. It has also been asserted that the amendment to Section 194B of the Act came in 2001 and, it was an admitted position that in all earlier years, this provision was never made applicable on the assessee.
The learned representative thereafter explained the difference between the term “winnings” and “stake money”. “Winnings” is the amount received by people who bet in horse races. Income by way of “stake money” is the gross amount received by the owner on account of horse securing a position in the race. Hence, income from “stake money” is different from income from “winnings” and Section 194B of the Act only applies to income from “winnings”. It is because of this difference that the CBDT issued a Circular in 1978 (supra) wherein it was held that Section 194BB applies to "winnings", and because "stake money" is different from "winnings"; and since Section 194BB uses the word
8 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. "winnings from horse races", hence it will not apply to "stake money" as per the CBDT Circular. Circular No. 240 dated 15.05.1978 which explains the provisions inserted by the Finance Act, 1978, whose relevant extract is as under:
“3. The term "winnings", in common parlance, means the amount received by the punter in excess of the bet laid by him on the horse or horses which have won in the particular race. Where a punter places bets on more than one horse in a particular race, the expression winnings" will connote the amount won by the punter in that horse race reduced by the amount invested by way of bet on the particular horse or horses which won the race, and not by the amount invested on the horse or horses which lost in that race. Hence, where a punter invests Rs. 100 each on two horses - horse "A" and horse "B”– in a particular horse race, and he wins Rs. 500 on the bet placed on horse "A" but loses the bet on horse "B”, the winnings of the punter from this horse race would be Rs. 400 (Rs. 500 Rs. 100) and not Rs. 300 (Rs. 500-Rs. 200).
The provisions for deduction of tax at source will, however, not apply to income by way of stake money. This is because "stake money" in common parlance is not regarded as winnings from horse race, but really constitutes the "prize money" received on a horse race by the owner thereof on account of the fact that the horse wins the race or stands second or in any lower position."
(underlined for emphasis by us)
It has also been emphasized that even the Legislature accepts the aforesaid understanding of "stake money” inasmuch even Section 74A of the Act explains the meaning of "stake money" as contained in CBDT Circular dated 15.05.1978 (supra).
9 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. 9. The next argument advanced by the learned representative was that there is an inherent difference between Sections 194B and 194BB of the Act; that Section 194B of the Act was introduced in 1972 and Section 194BB of the Act was introduced in 1978. Had the Government been of the view that horse races are covered in Section 194B of the Act, there would have been no need to specially introduce a new Section altogether in 1978. This clearly shows that even the Legislative intent was never to include horse races within the domain of Section 194B of the Act. As per the learned representative, the Government could have amended Section 194B of the Act itself and introduced the words "income from horse races"; however, the legislature was conscious of the fact that Section 194B of the Act operates in an altogether different domain and largely refers to "luck based games" as opposed to "skill based games" and hence, did not include horse races within Section 194B of the Act.
It was further submitted that Section 194B of the Act was amended in 2001 and the words ‘card game or other game of any sort’ were inserted. An amendment was also brought about in Section 2(24)(ix) of the Act whereby it has been stated that "card game or other game of any sort" includes any game show, any entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar game. Hence, “card game or other game of any sort" is to be read and understood in this background and a ‘horse race’ cannot be put in this category since this definition talks about other games on television or electronic mode, in which people compete to win prizes. It refers to a platform wherein people compete and participate, which cannot be equated with a horse race. Thus, the Legislative intent at the time of introducing the
10 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. amendment in Section 194B of the Act was to bring within its scope, money earned through games on television or electronic mode, in which people compete. In the above background, the learned representative for the assessee asserted the principle of ‘ejusdem generis’ and ‘noscitur a sociis’ are applicable in the instant situation. It was canvassed that as per the aforesaid principles, any word or a phrase takes its colour from the context in which same are used. Hence, the phrase 'or other game of any sort' in the instant situation refers to games akin to the games which are specifically mentioned in the text of Section 194B of the Act. The other principle is that of ‘noscitur a sociis’, which means that a word is to be judged by the company it keeps. In other words, in case of doubt, meaning of a word can be ascertained with reference to the meaning of words associated with it. Reliance in this regard was placed on the decision of Hon'ble Supreme Court in the case of State of Bombay vs. Hospital Mazdoor Sabha AIR 1960 SC 610. Thus, when the words 'or other game of any sort' used in Section 194B of the Act are examined with reference to the preceding words and interpreted, it can be concluded that the activity of owning and maintaining horses cannot be equated with lotteries and card games. Moreover, words used in Section 194B of the Act are lottery, crossword-puzzle, and card games, which are essentially ‘luck oriented' as opposed to being ‘skill oriented' and hence, it would be wrong to equate a horse race, which is skill oriented with luck oriented games. It has also been explained that the Hon'ble Supreme Court in case of Dr. K.R. Lakshmanan vs. State of Tamil Nadu (1996) 2 SCC 226 held that horse racing is a game of skill.
It has also been explained that the Act itself distinguishes between income earned from lottery and such games vis-à-vis income of horse owners.
11 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. Elaborating further, it is explained that Section 58 of the Act refers to amounts not deductible and sub-section (4) states that no deduction in respect of any expenditure shall be allowed while computing the income by way of any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature, whatsoever. However, the proviso thereof clearly distinguishes the case of the horse owners. It states that “Provided that nothing contained in this sub-section shall apply in computing the income of an assessee, being the owner of horses maintained by him for running in horse races, from the activity of owning and maintaining such horses."
Section 74A of the Act is a specific section stating that loss arising to horse owners from the activity of maintaining and owning race horses shall not be set- off against other income. Even there are restrictions on carry forward. Hence, this restriction of no set-off against income from other 'winnings' and allowing certain benefits of carry forward of loss arising from the activity of maintaining and owning race horses, and not other 'winnings', makes it evident that the intention of the Legislature from the very beginning has been to treat 'Income by way of stake money' as different from ‘Income from winnings’. Further, Section 115BB of the Act, which was introduced via Finance Act, 1986, prescribed a flat rate of tax on Winnings from such games and states that income from any lottery or crossword puzzle or race including horse race (not being income from the activity of owning and maintaining race horses) or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, shall be taxed in accordance with the provisions of that Section. Hence, Section 115BB of the Act
12 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. itself distinguishes between other games and income earned through the activity of owning and maintaining race horses and excludes the latter. Notably, with the introduction of Section 115BB, sub-section (1) and (2) of Section 74A of the Act, which provided for set-off of losses with respect to lotteries etc., were omitted, but Sub-section (3), as discussed above, continued. Thus, as per the appellant, the Legislature has always treated lotteries and such other games differently from the activity of maintaining and owning horses.
It was further pointed out that identical issue was raised in the case of Bangalore Turf Club Ltd. vs. Union of India [2014] 52 taxmann.com 290, wherein Single Judge Bench of the Hon'ble Karnataka High Court has ruled this issue in favour of the assesse. It was held that prize money paid by the Race Course to the owners of the horses would not attract the provisions of Section 194B of the Act. Against this Single Bench ruling, the Department moved to the Division Bench, which has sent back the case to the file of the Assessing Officer to adjudicate the issue de novo. Furthermore, it has been mentioned that the Chennai Bench of the Tribunal in the case of Madras Club vs. DCIT ITA No. 646-657/Mds/2015 and Hyderabad Bench of the Tribunal in the case of Hyderabad Race Club ITA No. 319/323/Hyd/2015 has adjudicated similar issue in favor of the assessee.
An alternate plea has been raised to the effect that the Assessing Officer has not recorded a finding that the recipients of the stake money have not paid income-tax on the said income, and in the absence of such a finding, the assessee cannot be treated as an "assessee in default”, and reliance was placed on the judgment of the Hon'ble Allahabad High Court in the case of Jagran Prakashan
13 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. Ltd. vs. DCIT 345 ITR 288 (All.). Elaborating further, it is contended that the purpose of Chapter XVII of the Act is to provide for a mechanism of withholding tax. Explanation to Section 191 of the Act clearly states that a person can be held as an ‘assessee in default’ only when the recipient of income has also failed to pay such tax directly. In present case, however, the owners of the horses have declared such income in their tax returns. Hence, as per the provisions of Section 201 of the Act, the assessee cannot be treated as an ‘assessee in default’. Reliance was placed on decision of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages (P) Ltd., vs. CIT 293 ITR 226 (SC). Before us, it was explained that complete details of the horse owners were filed before the Assessing Officer showing that taxes have been duly paid by them. Thus, as the horse owners who have earned the stake money are liable for payment of taxes, any additional demand on the assessee would amount to double recovery, which is impermissible.
It has also been submitted that in the present case, full list of recipients of the ‘stake money’, alongwith their details/documents and confirmations stating that this amount has been included by them in their respective Returns of income were filed before the lower authorities, a copy of the said list has also been submitted in the Paper Book filed before us. Countering the allegation of the Assessing Officer that certificate was incomplete, it has been asserted that complete details, including PAN numbers and addresses of all recipients were provided. Furthermore, proviso to Section 201(1) of the Act is a beneficial provision, which has been introduced to avoid undue hardships and is
14 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. retrospective in its applicability and is thus applicable for the instant year. In this regard, reliance was placed on the following judgments :-
Gujarat Pipavav Port Ltd. vs. DCIT- [2014] 149 ITD 23- Rajkot Radeus Advertising (P.) Ltd. vs. ACIT [2017] 80 taxmann.com 353 (Mumbai - Trib.)
The Ld. DR, on the other hand has merely placed reliance on the orders of the authorities below, and reiterated the reasoning contained in the respective orders, which we have already noted in the earlier part of the order, and is not being repeated for the sake of brevity.
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
15 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. 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” 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
16 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. 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 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
17 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. 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
18 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. 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 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
19 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. 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’.
In the result, appeal of the assessee is allowed, as above.
Order pronounced in the open court on 28th June, 2019.
Sd/- Sd/- (RAM LAL NEGI) (G.S. PANNU) JUDICIAL MEMBER VICE PRESIDENT Mumbai, Date : 28th June, 2019 *SSL*
20 ITA No. 6625/Mum/2017 Royal Western India Turf Club Ltd. Copy to :
1) The Appellant 2) The Respondent 3) The CIT(A) concerned 4) The CIT concerned 5) The D.R, “J” Bench, Mumbai 6) Guard file By Order
Dy./Asstt. Registrar I.T.A.T, Mumbai