TaxTMI 
TaxTMI 
2022 (4) TMI 1426
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....articular rank (1st or 2nd or 3rd etc.), he will get prize money according to the pre-determined rates, which is the combination of multiplying factor for each of the horse and the rank. The public can place their bets either at the totalizator or with the registered book makers who are licensed to bet in the race course. The assessee would be entitled to receive commission amount from totalizators and book makers. Accordingly, the assessee has accounted for only commission amount including totalizator tax in its books of account on the reasoning that its income consists of commission income only. Accordingly, the assessee did not account for betting amount paid by the punters and disbursement of prize money/dividend to them in its books of accounts on the reasoning that those transactions are diverted at source. It was also submitted that the punters who bet at the totalizators have not direct contact with the assessee and the betting tax payable on betting amount is collected and paid to the State Government under the Betting Tax Act. 3. The facts relating to AY 2009-10 are that the assessee filed its return of income for assessment year 2009-10 on 5.10.2009 declaring loss of ....
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....ed by Mysuru Circuit bench of the Tribunal in the assessee's own case in assessment year 2010-11 in ITA No.531/Bang/2014 and the Tribunal, vide its order dated 23.3.2017, has restored this issue to the file of the A.O. for examining it afresh in view of certain contentions made by the assessee. The Ld. A.R. submitted that the coordinate bench has restored the issue after considering the decision rendered by Hyderabad bench of Tribunal in the case of Hyderabad Race Club (supra). 5.2 We heard Ld. D.R. on this issue and perused the record. We notice that an identical issue has been examined by Hyderabad bench of Tribunal in the case of Hyderabad Race Club (supra) and the same has been decided against the assessee. However, the coordinate bench in the assessee's own case relating to assessment year 2010-11 has restored the issue to the file of the A.O, after considering the decision rendered by Hyderabad bench in the case ofHyderabad Race Club. The relevant discussions made by the coordinate bench in assessment year 2010-11 are extracted below:- 5.3 We notice that the decision rendered by the coordinate bench in the A.Y. 2010-11 has been followed in assessment year 2011-12 also i....
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....made by the A.O. u/s 40(a)(ia) of the Act, which consisted of various types of payments. The first item of this issue relates to subsidy amount of Rs.2,69,94,732/- disallowed by the A.O. u/s 40(a)(ia) of the Act. The assessee has provided different kinds of subsidies, which has been explained as under in its written submissions. The Ld A.R contended that none of these payments would be liable for deduction of tax at source under any of the provisions of the Act. 9.1 The Income Tax Act prescribes deduction of tax at source u/s 192 to 195 of the Act. The assessee would be liable to deduct tax at source only in respect of payments which are covered by above said sections. The case of the assessee is that it has paid subsidy which is in the form of either reimbursement of part of expenses or absorption of certain expenses in maintenance of horses, transportation and contribution to welfare funds. None of these payments would fall under sec. 192 to 195 of the Act requiring deduction of tax at source. We notice that the A.O., without pointing out the section under which the assessee would be liable to deduct tax at source in respect of above said payments, has simply disallowed the su....
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.... said explanation would show the above said amount represents contribution made by the assessee to conduct an event. Hence, there is merit in the contention of the assessee that the above said contribution would not attract any of the TDS provisions. Accordingly, we set aside the order passed by the Ld. CIT(A) on this issue and direct the A.O. to delete this disallowance. 9.5 The Last item disallowed u/s 40(a)(ia) of the Act is dope testing charges. The assessee has offered following explanation in this regard:- 9.6 The Ld. A.R. submitted that this payment was actually made to Bangalore Turf Club in the form of reimbursement. He submitted that the dope test is carried out in Hong Kong (Outside India). Since the assessee does not have direct contact with the lab carrying out Dope test outside India, it has sent the samples to Bangalore Turf Club, which in turn, has sent the samples to Hongkong. The Ld. A.R. submitted that there is no liability to deduct TDS from these kind of reimbursements. The Ld. A.R. also submitted that even if it is considered for a moment that the assessee should be presumed to have made the payment directly to Hongkong company, yet no TDS is required to....
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....Government of Karnataka u/s 4 of Mysore Betting Tax Act, 1932 to conduct horse races on day to day basis. It is undisputed that on account of inherent nature of its business, the assessee receives amounts from innumerable customers who are public at large by way of betting in respect of each racing event and immediately on completion of each race, the assessee is required to make payment on the winning tickets. It is assessee's claim that it has been following a consistent accounting policy which is in line with the accounting policy of other race clubs all over the country by which credits to the Profit and Loss account only the net collections and not the gross collections i.e. to say collections exclusive of winning payments and betting tax payable to the State Government. Thus, only the net collection/commission from totalizators alone is considered by assesseee as its tagable income. Totalizator is defined in section 2(6) of the Mysore Betting Tax Act, 1932 as "Totalisator" means a totalisator in an enclosure which the licensees have set apart in accordance with the provisions of the Mysore Race Courses Licencing Act, 1952 ....
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.... bettings from the punters, and as principle of overriding title does not hold good in respect of these payments made by the assessee. Consequently, in the case on hand, it is the gross t receipts by way of betting that constitutes the income of the assessee, and the winnings payments and Betting Tax payments merely arise out of the obligations that are undertaken by the assessee in the course of its business, and the payments made in the discharge of those obligations merely amount to application of income, viz. gross receipts. We dccordingly reject the contention of the assessee, based on the concept of overriding title, with regard to exclusion of the winning payments and Betting Tax from the gross income." On the contrary, the Ld. Authorised Representative has argued that the Order of the ITAT in the case of Hyderabad Race Club (supra) has not considered the judgment of the Hon'ble Apex Court in the case of CIT vs. Sitaldas Tirathdas 41 ITR 367 (S.C.) in its true intent. He also has argued that the ITAT Order has also not considered some other relevant decisions in the right perspective. A perusal of the judgment of th....
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....was a diversion of income overriding title and the amount was not assessable in the har of the assessee. However, this judgment of the Hon'ble Madi High Court does not shed any light on the aspect grossing/netting of income. ITAT's Order in the case Hyderabad Race Club has considered and adjudicated upon t issue of overriding title in the case of another Race Club and h held against the netting of receipts by the assessee and has al ruled against the assessee with respect to the provisions section 40A (3) and we are in agreement with the principle la down in the said order. However, we do note that various Ra Clubs formulate their own Rules regarding Betting, Totalizator Dividend, Refund of Tickets, Forfeiture of the Ticket amour carry-over of the Pool amount, Distribution of the Pool amou etc. The Ld. AR has filed a copy of the Betting Rules issued 1 the assessee and has sought to distinguish the case of th Hyderabad Race Club by contending that by virtue of the: Rules, the assessee's claim of overriding title stands affirme However, a perusal of Order of the ITAT in the case of Hyderabad Race Club (supra) shows that no refe....
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....loyees Welfare Society 6. Syces subsidy Total... 1,45,00,000 11,64,409 2,69,94,732 ii) Fodder Subsidy: Fodder in the form of oats is provided to the horses which are stabled at the appellant club, as specified in the prospectus under the Racing Rules. Fodder is purchased at a price of Rs.1,205/- per bag. Out of this, club bears Rs.348/- per bag and recovers Rs.857/- from the account of the Trainers and Horse Owners. This amount of Rs.348/- per bag is charged to the club expenses as 'Fodder Subsidy'. As an example, an invoice no. 777 dated 04/03/2013 from the fodder Supplier, Astadik Overseas Out of 130 bags of fodder, which has been purchased, the club subsidizes to the extent of Rs.45,240/- & charges the horse owners & trainers the balance of Rs.111,410/-. The learned AO has disallowed this subsidy amount on account of not deducting tax at source. The appellant submits that when materials are purchased there is no requirement of deduction of tax at source. The Supplier's invoice is paid in full for the supply of oats fodder. A portion is charged to the horse owners and balance is charged to club expenses as subsidy. iii) ....
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....stable employees working both in Bangalore and Mysore. Both Bangalore and Mysore Race Club contributed funds to the society for the benefit of the employees working in the racing industry. As per the agreement between BTC, My. RC and the Stable Employees' Welfare Fund, an amount of Rs.1.45 crores was paid to them. This amount was paid to enable the Stable Employees Welfare Society to meet the liability of the past years and as feed money to cater to the future requirements of the society, This is not one of the items which attract TDS in Chpt. XVII of the IT Act. There are specific items where TDS has been specified to be deducted such as salaries, interest, commission, dividends, etc. This item does not fall under any of these. vii) Syces Subsidy: This represents payment to Syces by the club under the Rules of Racing as part of the prospectus. This is at 1.5% of the stakes money paid to the owners, as such this does not attract TDS. The appellant submits that in view of above submissions no disallowance under section 40(a)(ia) is warranted and consequently the disallowance made is required to be deleted on the facts and circumstances of....