2015 (9) TMI 1551 - AT - Income Tax

TDS u/s 194B - payments made to horse owners as stake money - assessee in default - Held that - AO 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 (12) TMI 843 - KARNATAKA HIGH COURT has dealt with this issue at length and has held that the amended provision of section 194B do not apply to horse racing. 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 . - Decided in favour of assessee Deletion of the demand raised by the AO u/s 201 (1) and 201(1A) of the Act by applying the threshold limit of 2500 on each payment for making TDS u/s 194BB - grievance of the Revenue is that the basic limit is on the aggregate payment made in a year and not on each payment - Held that - CIT (A) had followed the order of this Tribunal in assessee s own case for A.Ys 2002-03 to 2008-09 in granting relief to the assessee. Since the CIT (A) had followed the precedent on the issue and the Revenue has not been able to rebut this finding with any evidence or decision to the contrary we see no reason to interfere with the same. Therefore ground No.3 of the Revenue is also rejected. We find that in the A.Ys 2011-12 to 2013-14 the only issue is about the applicability of section 194B of the Act to the assessee. For the detailed reasoning given for the A.Y 2009-10 and 2010-11 respectively as above the sole ground of appeal in all these years is rejected.- Decided against revenue

Summary

Issues:
- Appeal by Revenue against CIT (A) orders deleting demands under sections 201(1) and 201(1A) of the I.T. Act for A.Ys 2009-10 to 2013-14.
- Application of TDS provisions u/s 194B, 194BB, and 194H of the I.T. Act on payments related to horse racing income.
- Dispute regarding the applicability of TDS on stake money disbursed to winning horse owners.
- Dispute regarding TDS on winnings from horse races and payments to other race clubs.
- Interpretation of section 194B in the context of horse racing income.
- Application of the threshold limit of Rs. 2500 for TDS u/s 194BB.

Detailed Analysis:

1. TDS Provisions Application:
The AO applied TDS provisions u/s 194B, 194BB, and 194H to payments related to horse racing income. The AO held the assessee as "an assessee in default" for not deducting TDS on stake money disbursed to winning horse owners and winnings from horse races. The AO also raised demands u/s 201(1) and 201(1A) of the I.T. Act based on these findings.

2. Dispute on TDS Applicability - Stake Money:
The AO insisted that TDS should have been deducted on stake money paid to winning horse owners under section 194B. However, the CIT (A) followed a High Court judgment stating that horse racing income does not fall under the purview of section 194B. Consequently, the demand raised by the AO was deleted by the CIT (A) for A.Ys 2009-10 and 2010-11.

3. Dispute on TDS Applicability - Winnings and Other Payments:
The AO also questioned the non-deduction of TDS on winnings from horse races and payments to other race clubs under section 194BB and 194H. The AO raised demands based on this non-compliance; however, the CIT (A) ruled in favor of the assessee, citing past judgments and the absence of a legal basis for the demands.

4. Interpretation of Section 194B:
The controversy revolved around the interpretation of section 194B concerning horse racing income. The Hon'ble Karnataka High Court clarified that horse racing income does not fall under the category of "other game of any sort" as per the TDS provisions. The CIT (A) relied on this judgment to reject the Revenue's appeal against the deletion of demands under sections 201(1) and 201(1A).

5. Threshold Limit for TDS u/s 194BB:
The Revenue challenged the application of the Rs. 2500 threshold limit for TDS under section 194BB on each payment, arguing it should apply to the aggregate annual payments. The CIT (A) upheld the assessee's position based on precedent and rejected the Revenue's contention, leading to the dismissal of the Revenue's appeal for A.Ys 2011-12 to 2013-14.

In conclusion, the ITAT Hyderabad upheld the CIT (A) orders, dismissing the Revenue's appeals for all the assessment years involved based on the detailed analysis and interpretation of the relevant TDS provisions and legal precedents.