TDS on Dope Testing Charges: ITAT revert Back to AO due to Non-Availability of Relevant Facts

The Bangalore Bench of Income Tax Appellate Tribunal ( ITAT ) has reverted back to Assessing Officer (AO) on the issue of Tax Deduction at source (TDS) on Dope testing charges, due to the non-availability of relevant facts

The appellant M/s. Mysore Race Club Limited is engaged in the activity of conducting horse racing and on and off course betting. The public at large could place bets on horses either at the race course or through the counters placed outside the race course. The person who places a bet on horses are called “Punters” and if the horse on which he has placed a bet wins the race securing particular rank, 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 assessee has accounted for only commission amount including totalizator tax in its books of account.

The AO noticed that the assessee has made certain payments on which it has not deducted tax at source. Accordingly, AO disallowed Contribution to Turf authorities-Rs.20,00,000/- and Dope testing charges u/s 40(a)(ia) of the Act. Aggrieved assesse filed appeal before ITAT.

The appellant 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 Hong Kong. The above payment was actually made to Bangalore Turf Club in the form of reimbursement. Further submitted by the appellant that even if it is considered appellant himself made the payment directly to Hong Kong company, yet no TDS is required to be deducted since the payment was made to a non-resident for services rendered outside India, whose income is not chargeable to tax in India.

If the AO had accepted in the hands of the Bangalore Turf club that the dope test charges are not liable to tax deduction at source or if the Bangalore Turf club has already deducted TDS, then, the tribunal observed that, there is no requirement for the assessee to deduct TDS on such kinds of reimbursements. The relevant fact that whether the Bangalore Turf club was liable to deduct tax at source from the payments made to the laboratories is not been brought on record.

The Coram of Sri N.V. Vasudevan, Vice President and Sri B.R. Baskaran, Accountant Member has held that “in view of non-availability of relevant facts, we are of the view that this issue requires fresh examination at the end of AO. Accordingly, we restore the issue of disallowance made u/s 40(a)(ia) of the Act in respect of Dope Testing Charges to the file of the AO for examining it afresh after affording adequate opportunity of being heard to the assessee.”.

To Read the full text of the Order CLICK HERE

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