The Bangalore Bench of Income Tax Appellate Tribunal ( ITAT ) has held that subsidy expenditure not attracts TDS provision and set asides the order disallowing subsidy u/s 40(a)(ia).
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 racecourse or through the counters placed outside the racecourse. The person who places bet on horses are called “Punters” and if the horse on which he has placed 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 the 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, he disallowed Subsidy amount-Rs.2,69,94,732/-, Contribution to Turf authorities-Rs.20,00,000/- and Dope testing charges u/s 40(a)(ia) of the Act.
The Tribunal with respect to disallowed subsidy, observed that the assessee is absorbing part of cost of fodder purchased for feeding horses. The payment made for purchase of fodder does not attract any of the TDS provisions and in respect of transport subsidy also, the Tribunal observed that the assessee has met part of transportation expenses incurred by the horse owners in the form of reimbursement made to them. The primary liability to deduct TDS would lie upon the horse owners, since they have incurred the cost of transportation. The assessee has only reimbursed part of the transportation cost to the horse owners. Hence this payment will also not be liable for deduction of tax at source.
Further observed by the Tribunal that the two-year old subsidy is also a kind of reimbursement to groom horses and does not attract provisions of TDS. The payment to jockeys and trainers fund and employees welfare society is a kind of contribution connected with the business activities of the assessee and the said payments are also not covered by any of the TDS provisions. The last item “Syces subsidy” is the money paid to the owners of horses from out of stake money and it would also be not covered by any of the TDS provisions.
The Coram of Sri N.V. Vasudevan, Vice President, and Sri B.R. Baskaran, Accountant Member has held that “we are of the view that the disallowance made by A.O. u/s 40(a)(ia) of the Act in respect of subsidy expenditure is not in accordance with law and the Ld. CIT(A) was not justified in confirming the said addition. Accordingly, we set aside the order passed by the Ld. CIT(A) on this issue and direct the A.O. to delete the disallowance”.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.
