Stake Money Received by Horse Owners Not Subject to TDS u/s 194B or 194BB: ITAT
Since the law was not amended to include stake money under these provisions and the owners had already paid tax on such amounts, the assessee could not be treated as an “assessee-in-default” under Section 201.
The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that stake money received by horse owners is not subject to Tax Deducted at Source ( TDS ) under Sections 194B or 194BB of Income Tax Act,1961. Royal Western India Turf Club Limited, appellant- assessee, was engaged in conducting horse races and providing hospitality services at its racecourses in Mumbai and Pune. It...
The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that stake money received by horse owners is not subject to Tax Deducted at Source ( TDS ) under Sections 194B or 194BB of Income Tax Act,1961.
Royal Western India Turf Club Limited, appellant- assessee, was engaged in conducting horse races and providing hospitality services at its racecourses in Mumbai and Pune. It also accepted bids at its betting centers.
The main issue was whether TDS under Section 194B applied to stake money paid to horse owners of winning horses. The assessee argued that such payments were not liable for TDS and referred to Central Board of Direct Taxes (CBDT) Circular No. 240 of 1978, which excluded stake money from TDS under Section 194BB.
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The Assessing Officer(AO) disagreed and held that after the 2001 amendment to Section 194B, the section covered winnings from “any other game of any sort,” which included horse racing. He treated the stake money of ₹34.49 crore as liable for TDS under Section 194B. Since TDS was not deducted, the appellant was treated as an "assessee-in-default” under Section 201(1), with a TDS liability of ₹10.34 crore and interest of ₹9.12 crore.
The Commissioner of Income Tax(Appeals) [CIT(A)] upheld the AO’s view and confirmed the demand.
The two member bench comprising Amit Shukla (Judicial Member) and Girish Agrawal (Accountant Member) held that the issue of TDS on 'stake money' paid to horse owners had already been decided in an earlier case. It noted that there were two types of payments ,one to people placing bets (covered under Section 194BB) and the other as 'stake money' to horse owners, which was the matter in question.
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The AO argued that after the 2001 amendment to Section 194B, stake money became taxable. However, the tribunal rejected this, stating that Section 194BB specifically dealt with horse race winnings and that the CBDT Circular clearly excluded stake money from TDS. Since the law was not amended to include stake money under Section 194BB, and the Circular was still in force, the tribunal held that no TDS was required.
The appellate tribunal also accepted that since the horse owners had already paid tax on the stake money, the assessee could not be treated as an “assessee-in-default” under Section 201(1), following the Supreme Court ruling in Hindustan Coca Cola.
The ITAT held that it had already addressed all points raised by the Assessing Officer in an earlier decision. Following that, it concluded that the assessee was not required to deduct TDS on stake money under Section 194B or 194BB. Therefore, the assessee could not be treated as a defaulter under Section 201 and was not liable for interest under Section 201(1A) of the Act.
The appeal was allowed.
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