No TDS applicable on Race Promotion Contract Fees Taxable at the hands of Payee: ITAT quashes Income Tax Disallowance [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal ( ITAT )has recently quashed the disallowance for payment done in lieu of race promotion contract expenses as the same was taxable at the hands of the payee and not the assessee.

The assessee-Jaiprakash Associates Ltd has raised the argument that the Commissioner of Income Tax (Appeals) has erred in upholding the disallowance, under clause (i) of Section 40(a) of the Income Tax Act, 1961, of business expenditure being the race-promotion fee paid by the appellant-assessee to Formula One World Championship Ltd of UK (FOWC) without deduction of tax.

Ashwani Kumar Garg represented the assessee and submitted that the disallowance upheld is to the extent of the chargeable sum, comprised within the race-promotion fee, attributable to the PE of Formula One World Championship Ltd in India.

It was further contended that in upholding the above disallowance, the CIT (Appeals) has not appreciated that the appellant-assessee had a reasonable cause for non deduction of tax from the race-promotion fee paid to the FOWC and that the FOWC had been assessed in respect of its PE in India and had paid the tax on its chargeable income within the aforesaid race-promotion fee.

It was also submitted that the appellant-assessee was not the payer of the said broadcasting revenue and had not claimed any such expenditure. It was thus contended that the disallowance in the hands of the appellant-assessee cannot exceed the chargeable sum paid to the FOWC.

In another significant ruling, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the Race Promotion Contract (RPC) fee is an additional income by Formula One and is taxable.

The Bench of Judicial Member Yogesh Kumar U S and Accountant Member N K Billaiya observed that, “no part of the RPC fee paid by the assessee is liable to be disallowed under clause (i) of s. 40(a) because the second proviso clause (i) of Section 40(a) has been inserted w.e.f. 1.4.2020.”

It was further observed that “The said proviso essentially provides that where the relevant income has been declared by the payee and tax thereon has been paid by him then no disallowance shall be made in the hands of the payer. “

Resultantly, the disallowance was set aside in favour of the assessee.

To Read the full text of the Order CLICK HERE

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