Tribunal rules stake money to horse owners not subject to TDS, interest removal justified

The tribunal allowed the appeals for both assessment years 2012-13 and 2014-15, ruling that stake money paid to horse owners was not subject to TDS under sections 194B or 194BB. Therefore, no disallowance under section 40(a)(ia) was justified, and the interest imposed under sections 234B and 234C was to be removed. The tribunal's decision was rendered on 18th Dec, 2020.

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Issues Involved:

1. General Ground: Validity of the order under section 143(3) of the Income Tax Act, 1961.
2. Disallowance under section 40(a)(ia) concerning non-deduction of TDS on stake money under sections 194BB and 194B.
3. Applicability of a binding judgment which has been stayed.
4. Levy of Interest under sections 234B and 234C.

Issue-Wise Detailed Analysis:

1. General Ground:
The appellant contended that the order passed by the AO under section 143(3) and confirmed by the CIT(A) was erroneous and should be quashed. The tribunal noted that this ground was general in nature and did not require specific adjudication.

2. Disallowance under section 40(a)(ia):
The appellant challenged the disallowance of Rs. 34,15,30,436 under section 40(a)(ia) for non-deduction of TDS on stake money paid to horse owners. The appellant argued that sections 194BB and 194B did not apply to stake money, referencing CBDT Circular No. 240 and the Karnataka High Court's decision in Bangalore Turf Club v. UOI (2014). The tribunal observed that the AO disallowed the amount due to a pending review petition by the revenue. However, the tribunal, following the precedent set by the Mumbai Tribunal in Royal Western Turf Club Ltd vs ACIT, held that stake money is not liable to TDS under sections 194B or 194BB. Consequently, no disallowance under section 40(a)(ia) was warranted.

3. Applicability of a Binding Judgment which has been Stayed:
The appellant argued that the AO erred in disregarding the Karnataka High Court's binding decision, despite a stay on its operation. The tribunal noted that the Karnataka High Court had stayed the single judge's decision but had not overturned it. The tribunal emphasized that the stay did not nullify the decision's authority as a precedent. The tribunal also referenced the Mumbai Tribunal's detailed analysis, which concluded that the specific provisions of section 194BB, supported by CBDT Circular No. 240, excluded stake money from TDS applicability, thus reinforcing the appellant's position.

4. Levy of Interest under sections 234B and 234C:
The appellant contested the interest levied under sections 234B and 234C, asserting that it was not liable. The tribunal, having ruled in favor of the appellant on the primary issue of TDS applicability, implied that the consequential interest levied under these sections should also be deleted.

Conclusion:
The tribunal allowed the appeals for both assessment years 2012-13 and 2014-15, holding that stake money paid to horse owners was not liable to TDS under sections 194B or 194BB. Consequently, no disallowance under section 40(a)(ia) was warranted, and the interest levied under sections 234B and 234C was also to be deleted. The tribunal's decision was pronounced on 18th Dec, 2020.

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