TaxTMI 
TaxTMI 
2019 (8) TMI 402
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....201(1)/201(1A) and upheld by the CIT(A) is illegal, bad in law, unjust, arbitrary and without jurisdiction. 3. That the AO has in view of the facts and circumstances of the case, erred in law and on facts in treating the Appellant as 'Assessee in default' in view of the provisions of section 201(1) r.w.s 191 of I.T Act as there is no finding by the AO as to the failure of deductor appellant to pay the tax liability. 4. The CIT(A) has, in view of the facts and circumstances and in law, grossly erred on facts and in law, in upholding that the payment made to owners of race horse (i.e stake money) is subject to TDS under the provisions of the Income Tax Act, 1961. 5. The CIT(A) has, in view of the facts and circumstances and in law, grossly erred on facts and in law, in not accepting that the payment made to owners of race horse is winning from horse race in view of Circular No.240 dated 17th May, 1978 and such payments are not subjected to TDS under the provisions of the Income Tax Act, 1961. 6. That in view of the first proviso to Sec 201(1) which is retrospective in nature, the AO has erred on facts and in law in holding that the appellan....
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....913 and is engaged in the business of organizing races at Mumbai and Pune and prepares lands for running of horse races, steeple chases or races of any other kind and allowed to accept bets at its race course betting centres. The issue here pertains to deduction of tax at source (TDS) u/s 194B of the Act on the 'stake money' paid by the assessee to the horse owners on winning of races organized by the assessee. The assessee took the stand that the stake money paid to the horse owners is not liable to TDS u/s 194B of the Act whereas the Assessing Officer has treated the stake money liable to TDS u/s 194B of the Act. Accordingly, the Assessing Officer passed an order u/s 201(1) /201(1A) of the Act treating the assessee as an "assessee in default" for non-deduction of TDS on stake money and also levied interest u/s 201(1A) of the Act on the TDS ought to have been deducted by the assessee u/s 194B of the Act. On appeal, CIT(A) confirmed the action of the Assessing Officer. Aggrieved by the same, assessee is in appeal before us. 5. Before us, the first argument put forth by the learned representative for the assessee was that Section 194BB of the Act was brought in the statute by ....
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....ded both the provisions operate in the same field. In this regard, reliance was placed on the decision of CIT vs. Shahzada Nand & Sons 60 ITR 392 (SC) and Kirloskar Pneumatic Co. Ltd. vs. Commissioner of Sur Tax (Appeals) 210 ITR 484 (Bom) and Forbes Forbes Campbell & Co. Ltd. vs. CIT 206 ITR 495 (Bom.). Thus, as per him, the Assessing Officer erred in applying Section 194B of the Act, which is a general provision applicable to 'card game or other game of any sort', which would not cover stake money on horse races; and, for the latter income, Section 194BB of the Act is the specific provision. It was further brought to our notice that even CBDT accepts that specific enactment prevails over the general enactment. In Circular No. 8 of 2005, the CBDT itself has stated that specific provision of law will override general provisions of law. When a specific section in Chapter XVII is provided for by the Legislature to deal specifically with horse races, the Revenue cannot invoke a general section, such as 194B of the Act, to hold the assessee in default. In this regard, reliance was also placed on decision of Hon'ble Supreme Court in the case of U.P. State Electricity Board and Anr.v....
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....uring a position in the race. Hence, income from "stake money" is different from income from "winnings" and Section 194B of the Act only applies to income from "winnings". It is because of this difference that the CBDT issued a Circular in 1978 (supra) wherein it was held that Section 194BB applies to "winnings", and because "stake money" is different from "winnings"; and since Section 194BB uses the word "winnings from horse races", hence it will not apply to "stake money" as per the CBDT Circular. Circular No. 240 dated 15.05.1978 which explains the provisions inserted by the Finance Act, 1978, whose relevant extract is as under: "3. The term "winnings", in common parlance, means the amount received by the punter in excess of the bet laid by him on the horse or horses which have won in the particular race. Where a punter places bets on more than one horse in a particular race, the expression winnings" will connote the amount won by the punter in that horse race reduced by the amount invested by way of bet on the particular horse or horses which won the race, and not by the amount invested on the horse or horses which lost in that race. Hence, where a punter invests Rs. 1....
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....r game of any sort" is to be read and understood in this background and a 'horse race' cannot be put in this category since this definition talks about other games on television or electronic mode, in which people compete to win prizes. It refers to a platform wherein people compete and participate, which cannot be equated with a horse race. Thus, the Legislative intent at the time of introducing the amendment in Section 194B of the Act was to bring within its scope, money earned through games on television or electronic mode, in which people compete. In the above background, the learned representative for the assessee asserted the principle of 'ejusdem generis' and 'noscitur a sociis' are applicable in the instant situation. It was canvassed that as per the aforesaid principles, any word or a phrase takes its colour from the context in which same are used. Hence, the phrase 'or other game of any sort' in the instant situation refers to games akin to the games which are specifically mentioned in the text of Section 194B of the Act. The other principle is that of 'noscitur a sociis', which means that a word is to be judged by the company it keeps. In other words, in case of ....
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....ntion of the Legislature from the very beginning has been to treat 'Income by way of stake money' as different from 'Income from winnings'. Further, Section 115BB of the Act, which was introduced via Finance Act, 1986, prescribed a flat rate of tax on Winnings from such games and states that income from any lottery or crossword puzzle or race including horse race (not being income from the activity of owning and maintaining race horses) or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, shall be taxed in accordance with the provisions of that Section. Hence, Section 115BB of the Act itself distinguishes between other games and income earned through the activity of owning and maintaining race horses and excludes the latter. Notably, with the introduction of Section 115BB, sub-section (1) and (2) of Section 74A of the Act, which provided for set-off of losses with respect to lotteries etc., were omitted, but Sub-section (3), as discussed above, continued. Thus, as per the appellant, the Legislature has always treated lotteries and such other games differently from the activity of maintaining and owning horses. 13. It was f....
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....of the 'stake money', alongwith their details/documents and confirmations stating that this amount has been included by them in their respective Returns of income were filed before the lower authorities, a copy of the said list has also been submitted in the Paper Book filed before us. Countering the allegation of the Assessing Officer that certificate was incomplete, it has been asserted that complete details, including PAN numbers and addresses of all recipients were provided. Furthermore, proviso to Section 201(1) of the Act is a beneficial provision, which has been introduced to avoid undue hardships and is retrospective in its applicability and is thus applicable for the instant year. In this regard, reliance was placed on the following judgments :- Gujarat Pipavav Port Ltd. vs. DCIT- [2014] 149 ITD 23- Rajkot Radeus Advertising (P.) Ltd. vs. ACIT [2017] 80 taxmann.com 353 (Mumbai - Trib.) 16. The Ld. DR, on the other hand has merely placed reliance on the orders of the authorities below, and reiterated the reasoning contained in the respective orders, which we have already noted in the earlier part of the order, and is not being repeated for the sake of brevity. 1....
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....e had also raised an alternate plea that the recipients of 'stake money' have already paid the taxes on the 'stake money' received from the assessee and thus, assessee should not be treated as "assessee in default" in view of the decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola (supra) and provisions of Section 201(1) of the Act. 18. At the outset, we find that heading of Section 194B of the Act is "Winning from lottery or crossword puzzle". It is a well settled principle of interpretation that the heading of a section should also be assigned meaning while interpreting the section. From the heading of the Section 194B of the Act it is amply clear that there is no whisper that Section 194B of the Act was intended to cover within its purview winnings from horse races. Now coming to the heading of Section 194BB of the Act, which reads as "Winning from horse race". Going by the heading of the two sections, it can be seen that Section 194BB of the Act is a specific section dealing with TDS on the winnings from horse races. Though the CBDT has specifically excluded "stake money" from the ambit of section 194BB of the Act by way of Circular No. 240 dated 19.05.1....
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....t the Department has tried to indirectly tax what cannot be taxed by virtue of Circular issued by the CBDT, a situation which is impermissible in law. Thus, on this aspect also, we hold that 'stake money' is not liable to TDS u/s 194B of the Act. 21. The next contention of the learned representative for the assessee was that the horse owners have duly reported the income received from the assessee and evidence in this regard was filed by the assessee before the Assessing Officer. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Hindustan Coca Cola (supra) and as per the proviso of Section 201(1) of the Act, which provides that if the recipient of the income has paid taxes on the income received from the assessee and has filed the return of income, assessee should not be treated as an 'assessee in default'. We find enough substance in the said stand of the appellant. The TDS provisions are in place to keep track on the payment of taxes on the income received by the recipient and recover part of the tax in advance at the time of receipt of income by the recipient. In case the payer fails to deduct the TDS and the recipient has directly paid th....