TaxTMI 
TaxTMI 
TaxTMI 
2015 (1) TMI 439
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....ice under Section 143(2) of the Act was issued to the assessee. The details furnished by the assessee and objections raised were considered by the Assessing Officer. On the issue of "Winnings from Betting", the Assessing Officer noticed that the assessee has shown betting income of Rs. 31,24,28,980/- and while computing the total income, the assessee has adjusted the losses suffered under the head "business" against the income earned under other heads, including betting income, and after setting off such losses, betting income of Rs. 28,52,18,347/- was brought to tax by the assessee at the flat rate of 40% as prescribed under Section 115BB of the Act, as against the total betting income of Rs. 31,24,28,980/-. 2.3. The Assessing Officer refused to accept the manner in which betting income was computed by the assessee and held that the total winnings are to be taxed under Section 115BB of the Act and losses cannot be set off against such income. Accordingly, the total winnings from betting were brought to tax at the rate of 40% as envisaged under Section 115BB of the Act. 2.4. Aggrieved by the said order, the assessee appealed to the Commissioner of Income Tax (Appeals). The Commis....
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....1 dated 13.09.1995 fortify the action of the Commissioner (Appeals) and we see no justification to interfere with the orders of the Commissioner (Appeals) on this issue. Therefore, we decide this ground against the Revenue and in favour of the assessee." 2.6. Challenging the above said order passed by the Tribunal, the Revenue is before this Court by filing the present appeal. 3. Heard Mr.T.Ravikumar, learned Senior Standing Counsel appearing for the Revenue and Mr.S.Sridhar, learned counsel appearing for the respondent/assessee. 4. The contention of the Revenue is that Section 115BB of the Act makes it clear that in respect of the total income of the assessee, including income by way of winning from lottery or crossword puzzle or race including horse race or card game and other game of any sort or from gambling or betting in any form or nature whatsoever, income tax is payable at the aggregate in the manner provided under clauses (i) and (ii) of the said provision and not otherwise, and, therefore, the Tribunal erred in confirming the order of the Commissioner of Income Tax (Appeals) directing levy of tax at the rate of 40% on the net betting receipts, as against the total winn....
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.... the purport of the said amendment is to disallow any expenditure from winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort, or from gambling or betting of any form or nature, whatsoever which are deemed as income for the purposes of levy of income tax under Section 2(24)(ix) of the Act. 8. By the Finance Act, 1986, with effect from 1.4.1987, the legislature while inserting Section 115BB of the Act, thought it fit to delete Sections 74A(1) and 74A(2) of the Act. The scope and effect of these amendments was explained by the Board in Circular No.461, dated 9.7.1986. The relevant portion of the said circular reads as under: Section 115BB of the Act: "Provision of a flat rate of tax on winnings from lotteries, crossword puzzles, races, including horse races, etc. 31.1. Under the existing provisions, any income by way of winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever is chargeable to tax under the head 'Income from other sources' along with the other income of an assessee. By inserting a new s....
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....etc., sub-sections (1) and (2) of section 74A of the Act have been deleted. Sub-section (3) has been amended to provide that in the case of a taxpayer, being the owner of horses maintained by him for running in horse races the amount of loss incurred in the activity of owning or maintaining such race horses in any assessment year shall not be set off against income, if any, from any other source and shall be allowed to be carried forward to the four assessment years next following the assessment year for which such loss was first computed for being set off against income, if any, from the same activity. 32.2. These amendments will apply in relation to the assessment year 1987-88 and subsequent years." (emphasis supplied) 9. A bare reading of the above circular and the provisions makes it clear that Section 115BB of the Act envisages taxation at the flat rate of 40% on the total amount of winnings from betting etc., and the losses from the same source also cannot be set off against such income. 10. The above view is fortified by the Board Circular No.14 of 2001, dated 12.12.2001 explaining the intent of the legislature in amending Section 115BB of the Act by reducing the rate of....
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.... earned from owning and maintaining the horses. Therefore, in our considered opinion, the provisions of Section 58(4) of the Act will not come into play. 13. The methodology of computing tax on Long Term Capital Gain vis-a-vis Section 112 of the Act for which the assessee relied on the CBDT Circular No.721 dated 13.9.95, though found favour with the Commissioner of Income Tax (Appeals), this Court is not inclined to accept the same for the simple reason that whenever tax is levied based on special provisions envisaged under the Act, the method of calculating tax has to be strictly in accordance with such provisions and not otherwise. If the circular relied on by the assessee is taken into consideration, then what is envisaged by the statute would be given a go-by and the purport and intent of the Parliament in enacting that special provision in the statute would become a futile exercise. Therefore, the reliance placed on the said circular by the Commissioner of Income Tax (Appeals) as also by the Tribunal is misconceived and does not stand legal scrutiny. 14. Further, it is curious to note that the Tribunal, in the penultimate paragraph of its order, while observing that "Section....