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TMI Blog2012 (10) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... viz., transactions should have taken place on Bank Holidays should be read down in the case of the Assessee. If the transaction took place beyond the normal Banking Hours on working days and transaction which took place on Sundays and Holidays, it would not attract the provisions of sec 40A(3). Hence in view of aforesaid, matter remitted back to file of AO to re-compute the disallowance u/s 40A(3) as per the above disallowance and the Assessee shall furnish the particulars about the timings of the payment of the winnings to punters Dis-allowance u/s 40(a)(ia) - commission - Held that:- Issue is covered by the order of the ITAT, in assessee’s own case for AY 2007-08 wherein matter was restored to file of AO to give another opportunity to the assessee to present its case and establish that there is no principal agent relation ship between the two Clubs and amount paid by the assessee to other Race Clubs is only sharing of the profit and not in the nature of collection. same direction given for current year - Decided in favor of assessee for statistical purposes - ITA No.120/HYD/2012, ITA No.498/Hyd/12 - - - Dated:- 16-7-2012 - Chandra Poojari, Asha Vijayaraghavan, JJ. For A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee is such that they have to deal daily with numerous individuals in a short span of time when the bettings are on. They accept bets and settle the winning amounts to the winning punters. It will be difficult to maintain complete details about all the persons. The entire payment was through computerized system. The payment was made to the person holding the winning ticket. The Department has not brought to our notice of any instance of payment when there was no winning ticket. In the circumstances, respectfully following the decision of the coordinate bench in the Assessee's own case we delete the ad hoc disallowance of 10% of the total payment for winning bets of less than 2500/- each. The Appeal of the Assessee on this issue is allowed. 6. Since the issue under consideration is identical to the one decided by the co-ordinate bench in assessee s own case for AY 2007-08(supra), respectfully following the same, we set aside the order of the CIT(A) and allow this ground of appeal of the assessee. 7. Ground No. 2 (a) to (e) is pertaining to the action of the CIT(A) in confirming the disallowance of Rs. 5,00,990/- u/s 40A(3) of the Act. 8. The AO noted that as per the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the second contention of the appellant that such payments fall under exemption laid down under Rule 6DD(j) of the Income Tax Rules 1962, it may be stated that, as per the provisions of Rule 6DD(j), no disallowance u/s 40A(3) of the Act shall be made, where a payment exceeding Rs. 20,000/-, was made to a person in cash on a day and where the payment was required to be made on that day on which the banks were closed either on account of holiday or strike. Thus, as per such provision, it is only in case of those cash payments, which were made under such circumstances, as stipulated under that Rule 6DD(j), that an assessee can be allowed exemption for the same from the purview of disallowance u/s 40A(3). However, in the instant case, as mentioned by the AO, the branch of ING Vysya Bank, which is located at Race Course premises and in which the appellant was having its account, was working on Sundays during the previous year. Further, I entirely agree with the observation of the AO, that the said bank, located at Race Course premises, would not deny services to the public including the customers of the appellant company, on its working days. Since on Sundays, the appellant had ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hours in the course of regular business will not fall within this exception. In those transactions, the payment is not required to be made when the banks are closed i.e. after banking hours. Further the purpose of the disallowance u/s 40A (3) is to dissuade transactions by cash. However, the activity of the Assessee is a peculiar one in which thousands of betters place their bet and on completion of the race/s, they are required to be paid their winnings on presentation of their winning ticket. Therefore the Assessee is required to make their payments immediately after the race/s are completed at the venue. It will be impossible for them to write out the cheques to the winners and give it to them on the completion of the race. And the betters will not accept cheques as they will be utilizing the same for betting in the next races. Having accepted Horse racing as a genuine acceptable line of activity, we have to appreciate the difficulties in disbursing the winnings at the venue of the race club to so many winners almost instantaneously. 19. Sec 40A(3) itself provides that the exceptions will have to be prescribed having regard to the nature and extent of banking facilities ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ground Nos. 3 to 6 are directed against the action of the CIT(A) in deleting the addition made by the AO u/s 40(a)(ia) amounting to Rs. 2,94,28,031/-. 17. The AO found that the assessee made an amount of Rs. 2,94,28,031/- as royalty to other clubs which is in the nature of commission without deduction of tax at source (TDS) u/s 194H of the Act. The AO noted that the TDS office by his order dated 06/04/2009 has treated the assessee, as an assessee in default for not deducting the tax at source and raised demand u/s 201(1) and 201(1A). The assessee however produced a copy of order of CIT(A)-II for AY 2006-07, where on similar issue the CIT(A) had allowed the assessee s appeal and argued that in view of CIT(A) s order, the assessee may not be treated as defaulter. The AO noted that it was the stand taken by the assessee before the TDS Officer and CIT(A)-II that the present transaction is an arrangement of mere sharing of income between Hyderabad Race Club and other Race clubs. He, therefore, held that I am in agreement with the finding of ACIT(OSD), Range-14(TDS Officer) holding that the amounts in question are subject to provisions of sec. 194H. In view of mandatory nature of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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