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2014 (12) TMI 843 - HC - Income TaxTDS u/s 194B - paying price money to the owners of winning horses - it is contended that due taxes have already been paid by the recipients of Stake Money and a payment of the same by the petitioner Club prior to the payment of Stake Money would have led to double taxation which would be ultra vires to the provisions of Article 265 of the Constitution. - Maintainability of petition - Whether writ petitions are liable to be dismissed on the ground that petitioners have an alternate remedy of appeal u/s 246A. Held that - When an alternate or efficacious remedy is available to a litigant same should be exhausted before invoking the extraordinary jurisdiction and when such jurisdiction is invoked the existence of adequate alternate remedy will be taken note of before issuing writ or exercising the extraordinary jurisdiction - where such alternate remedy is available it would be normal to refrain from exercising extraordinary jurisdiction unless there are good grounds - the exercise of extraordinary jurisdiction by the writ Court would depend upon variety of individual facts which is pre-eminently one of discretion - No inflexible rule can be laid down or in other words there cannot be any straight jacket formula in this regard. Where proceedings are taken before a Tribunal under a provision of law, which is ultra vires, it is open to a party aggrieved thereby to move the High Court under Article 226 for issuing appropriate writs for quashing them on the ground that they are incompetent, without his being obliged to wait until those proceedings run their full course assessee cannot be held to be deductor u/s 201 since according to the revenue, assessee is required to deduct tax at source u/s 194B - it cannot be gainsaid by the revenue that writ petitions are not maintainable and the contention raised by the revenue is rejected. TDS deduction on payment of stake money to the owners of horses u/s 194B - Whether order passed by 3rd respondent u/s 201(1) of the Act is liable to be set aside on the ground of stake money paid by the Turf Clubs to the race horse owners cannot be construed as winnings from games of any sort as defined u/s 2(24)(ix) and as such it would not fall within ambit of Section 194-B Held that - Assessee-clubs (hereinafter referred to as Turf Club ) in the course of its activities of organising and carrying on horse racing, has been offering and paying price money to the owners of winning horses - Price money is also referred to as stake money which is earned by the horse owners, whose horses win in a race - This money paid to the race horse owners would be in addition to the trophy that is given for some of the races - words namely, card game and other game of any sort which came to be inserted in Section 194B was already in existence in the definition clause namely, Section 2(24)(ix) with effect from 01.04.1972 and Section 115BB from the year 01.06.1987 introduced by Finance Act, 1986 itself - explanation (i) and (ii) also came to be inserted to Section 2 (24) (ix) of the Act by Finance Act, 2001 with effect from 01.06.2001 which is an inclusive definition. Harmonious reading of the statutory provisions would indicate that from the year 1972 itself, the term other game of any sort was taxable under the head income from other sources and TDS was not attracted on such income - insertion of the words card game or other game of any sort to Section 194B with effect from 2001 would have no bearing on payment of stake monies paid by the Turf Clubs to the race horse owners - Explanation (ii) to sub-section (ix) of Section 24 came to be inserted by Finance Act, 2001 - It is an inclusive definition - The term or any other similar game found in explanation (ii) will have to be ejusdem generis and so also the term any other similar game found in Section 2(24)(ix) of the Act - this position becomes clear from the budget speech of the Finance Minister which came to be rendered on the Floor of Parliament in the backdrop of amendment brought to Section 194B and Section 2(24)(ix). 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 in Explanation 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 - 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 or other game of any sort found in Section 194B - stake money or prize money paid by race clubs to horse owners would not attract the provisions of Section 194B of Income Tax Act, 1961 assessee cannot be treated as assessee in default u/s 201 of the Income Tax Act, 1961 revenue is directed not to demand TDS from the petitioners u/s 194B of the Income Tax Act, 1961 since stake money is outside the purview of Section 194B Decided in favour of assessee.
Issues Involved:
1. Whether the writ petitions are maintainable despite the availability of an alternate remedy under Section 246A of the Income Tax Act, 1961. 2. Whether the "stake money" paid by Turf Clubs to racehorse owners can be construed as winnings from "games of any sort" under Section 2(24)(ix) and thus fall under Section 194B of the Income Tax Act, 1961. 3. Whether the petitioners (Turf Clubs) are liable to be treated as "assessee in default" under Section 201 of the Income Tax Act, 1961 for not deducting tax at source on the stake money. Issue-wise Detailed Analysis: 1. Maintainability of Writ Petitions: The court examined whether the writ petitions are maintainable despite the availability of an alternate remedy. It was argued that when an alternate or efficacious remedy is available, it should be exhausted before invoking the extraordinary jurisdiction of the court. However, it was also noted that the existence of an alternate remedy does not bar the exercise of writ jurisdiction, especially in cases involving violation of principles of natural justice, lack of jurisdiction, or interpretation of statutory provisions. The court referred to several precedents, including the Supreme Court's rulings in Babu Ram Prakash Chandra Maheshwari v. Antarim Zila Parishat, Whirlpool Corporation v. Registrar of Trade Marks, and Harbanslal Sahnia v. Indian Oil Corporation Ltd., which support the maintainability of writ petitions in such circumstances. The court concluded that the writ petitions are maintainable as they involve issues of jurisdiction and interpretation of statutory provisions. 2. Interpretation of "Stake Money" under Section 194B: The court analyzed whether the "stake money" paid by Turf Clubs to racehorse owners falls under the definition of "winnings from games of any sort" as per Section 2(24)(ix) and consequently under Section 194B of the Income Tax Act, 1961. The court examined the statutory provisions, including Sections 2(24)(ix), 56, 58, 74A, 115BB, 194B, and 194BB of the Income Tax Act. It also considered the explanatory notes and circulars issued by the Central Board of Direct Taxes (CBDT), particularly Circular No. 240 dated 17.05.1978, which clarified that "stake money" is not regarded as winnings from a horse race but constitutes prize money received by the owner of a horse. The court noted that the term "stake money" is defined under Section 74A(3)(c) and is treated as income from the activity of owning and maintaining racehorses, which is distinct from "winnings" as defined in Section 194B. The court concluded that "stake money" does not fall under the definition of "winnings from games of any sort" and is outside the purview of Section 194B. 3. Liability as "Assessee in Default" under Section 201: The court examined whether the petitioners (Turf Clubs) are liable to be treated as "assessee in default" under Section 201 of the Income Tax Act, 1961 for not deducting tax at source on the stake money. The court referred to the CBDT's Circular No. 240 dated 17.05.1978, which clarified that the provisions for deduction of tax at source do not apply to "stake money." It also noted that the legislative intent, as evidenced by the Finance Minister's budget speech and the explanatory notes, was to exclude income from the activity of owning and maintaining racehorses from the scope of Section 194B. The court concluded that the petitioners cannot be treated as "assessee in default" under Section 201 for not deducting tax on the stake money, as it is outside the purview of Section 194B. Conclusion: The court allowed the writ petitions, declaring that "stake money" or "prize money" paid by Turf Clubs to horse owners does not attract the provisions of Section 194B of the Income Tax Act, 1961. The court quashed the notices and assessment orders issued by the Income Tax Department and issued a writ of mandamus directing the respondents not to demand TDS on the stake money from the petitioners.
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