2006 (12) TMI 178 - AT - Income Tax

Summary

Issues involved:
The appeal involves the interpretation of provisions under s. 201 and s. 201(1A) of the IT Act, 1961, specifically related to the deduction of tax at source on winnings from horse races and the treatment of investments made by punters.

Deduction of tax on winnings from horse races:
The AO observed that the assessee distributed winnings of Rs. 50,35,165 but only showed a taxable amount of Rs. 36,43,743, claiming deductions for investments made and rebates. Disagreement arose on the deduction of Rs. 2,500 on each winning for tax calculation, with the AO proposing short deduction on the claimed rebate amount. The CIT(A) upheld the short deduction, leading to the appeal.

Treatment of investments made by punters:
The assessee argued that the total amount invested by punters should be deducted from winnings to determine the taxable amount for TDS. However, the AO disagreed, stating that the deduction of tax at source is based on the gross winning amount, not considering the investments made by punters.

Judgment:
The ITAT Delhi-I considered the provisions of s. 194BB of the IT Act, which specify tax deduction on winnings from horse races exceeding Rs. 2,500. Referring to Circular No. 515 of CBDT, it clarified that tax should only be deducted on winnings exceeding Rs. 2,500, not on the initial exemption amount. The Tribunal cited a previous decision regarding the deduction of Rs. 2,500 from each winning, directing the AO to allow this deduction. Additionally, the Tribunal referred to a decision on the treatment of investments made by punters, directing the reduction of the amount of tickets purchased by punters relating to each horse race. As no contrary decisions were presented, the appeal of the assessee was allowed based on these interpretations.