MADRAS RACE CLUB,CHENNAI vs. DCIT, CHENNAI

आदेश / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER These appeals by the assessee are directed against the common order of the Commissioner of Income-tax (Appeals)-17, Chennai dated 31.12.2014 for the above assessment years.

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The assessee has raised the followings grounds. 2.

The facts of the case are that the assessee is a company 3.

with limited Liability registered u/s 25 of the Companies Act. The

assessee has been conducting Horse Races in Chennai and the

hill station of Ootacamund and collecting the entry fee and

betting money from punters and keeps certain portion of the

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betting amount collected from punters and the same is utilized

for payment of stake money to horse owners, administrative cost

and other expenses The TDS inspection was carried out in the

office premises of the assessee on 14.02.2013. It was found that

tax was not deducted on payments of stake money disbursed

among the winning horse owners. According to the AO, horse

racing is a game and covered by sec.194B of the Act and hence

he issued a show cause notice to the assessee to explain why it

should not be held to be an assessee in default u/s 201(1) of the

Act for failure to deduct tax from stake money prizes paid to

horse owners u/s 194B of the Act pertaining to FYs 2006-07 to

2011-12. In response, the assessee stated that the stake money

is not liable to TDS u/s 194BB as per Board's circular No.240 of

17.05.1978. The assessee has also relied on the decision of

Supreme Court in the case of Hindustan Coca Cola Beverage (P)

Limited vs CIT (2007) 293 ITR 226 wherein it was held that if the

payee has already paid tax on the income, recovery of tax cannot

be made once again from the tax deductor. The assessee further

argued that the stake money will not be covered by sec.194B of

the Act also. Not convinced with the reply of the assessee, the

AO was of the view

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that the assessee's case was covered by sec. 194B of the Act in

view of the amended provision of sec.194B by Finance Act, 2001

with effect from 01.06.2001 and not by section 194BB read with

Circular No.240 dated 17.05.1978. Relying on the definition of

stake money as mentioned in sec.74A of the Act, the AO held

that though Sec. 194BB does not include in its scope the stake

money payments, it can hardly be argued that the same is

precluded from the wider ambit of winnings from game of any

sort in sec.194B. The Assessing Officer also held that it is a

settled principle of law that when two or more clauses appear to

deal with the same subject, the one with the latest amendment

prevails. This is without prejudice to hold that the activity of

breeding and owning differs from the activity of racing and

participating in a race for stake money. The activity of

participating in the race itself comes under the ambit of the

game. The activity of facing for the purpose of stake money

could make such stake money assume the character of wining

from the games. The Assessing Officer also relied on

explanation 2 to section 2(24)(ix) of the Act to hold 'that the

stake money is squarely covered by the definition of "games

and other games of any sort". Thus, the AO rejected the

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contention of the assessee that it is not liable to deduct tax on

the stake money paid. The AO also rejected the contention of

the assessee that tax cannot be recovered from the deductor

once the deductee paid the tax on the income as the assessee

did not furnish necessary proof in support of its claim. The AO

further rejected the contention of the assessee that the

reopening is not valid for financial years 2007 to 08 to 2009-10

after the expiry of two years from the end of. The financial

year in which the statement filed as referred to sec.200 of the

Act for the reason that the deductor has not filed the return in

respect of stake money. The AO held that the stake money

from horse races is in the nature of prize money received on

horse race by the owner thereof on account of the fact that the

horse winnings the race or stands in second or in any lower

position. Accordinq to Assessing Officer the stake money is

liable for TDS u/s 194B of the Act and by not deducting tax, the

assessee is to be treated as the assessee in default for not

deducting tax at source u/s 194B of the Act. Therefore the

Assessing Officer levied tax u/s 201(1) of the Act for the

Assessment Years 2007-08 to 2012-13. Aggrieved, the

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assessee preferred an appeal before the Commissioner of

Income Tax (Appeals).

confirmed the order of the Assessing Officer. Against this, the assessee

is in appeal before us.

on record. We find that the lower authorities has applied the

provisions of section 194B to the payments made to horse owners as

“stake money” on the ground that by insertion of words ‘or card game

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 find that this

issue had arisen in the case of Bangalore Turf Club Ltd. Vs. Union of

India and others (2014) 52 taxmann.com 290 and the Karnataka High

Court in the writ petition Nos. 6565 to 6568, 6651-6652, 6674, 18696

& 18697 of 2013 (T-IT) filed by the Bangalore Turf Club has dealt with

this issue at length and has held that the amended provision of section

194B do not apply to horse racing. The relevant portion of the

judgment of the High Court is reproduced hereunder for ready

reference:

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words associated in the text with more limited words are taken to be restricted by implication to matters of the same limited character. For this principle to apply there should be sufficient

indication of a category that can properly be described as a class or genus, even though not specified as such in the enactment. The nature of genus is gathered by implication from the express words which suggests it. 62. Now, turning my attention to the facts on hand and Explanation (ii) inserted by Finance Act, 2001 is perused and also read along with section 194B it can be easily inferred the legislature has intended to bring such income earned by the prize winning members who compete with each other and win prizes in any game show or entertainment programme on television or electronic media and games similar to it. Hence, "stake money" which is paid to race horse owners on their horses being placed 1, 2 or 3 onwards in a horse race cannot form the genus of the words found inExplanation II to section 2(24)(ix) nor it can be held that such winnings would fall within the 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 194B would have no bearing on the income earned from 'owning and maintaining horses'. In other words, the term 'any other similar game' found in Explanation (ii) to section 2(24)(ix) has to be held as inclusive definition and has to be read ejusdem generis and as such, activity of owning and maintaining horses cannot by any stretch of imagination fall in the definition of 'card game o other game of any sort' found in section 194B”.

by the judgment of Karnataka High Court (cited supra) and accordingly

we reverse the order of Commissioner of Income Tax (Appeals) and

decide the issue in favour of the assessee.

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In the result, the appeals of the assessee is ITA Nos.646 to 7. 657/Mds/2015 are allowed.

Order pronounced on Wednesday, the 28th day of October, 2015, at Chennai.

Sd/- Sd/- (चं� पूजार�) (एन.आर.एस. गणेशन)) (CHANDRA POOJARI) (N.R.S. GANESAN) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य /ACCOUNTANT MEMBER चे�नई/Chennai �दनांक/Dated:28.10.2015 KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF