The Bangalore Bench of Income Tax Appellate Tribunal ( ITAT ) has held that Tax Deduction at Source (TDS) not applicable to contribution made to conduct horse racing.
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 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 the source. Accordingly, AO disallowed Contribution to Turf authorities-Rs.20,00,000/- and Dope testing charges u/s 40(a)(ia) of the Act. The aggrieved assessee filed an appeal before ITAT.
The appellant with respect to disallowed u/s 40(a)(ia) of the Act is the contribution of Rs.20 lakhs made to the turf authority, submitted that the payment is made before the event to meet the expenses. It is not an item on which TDS is applicable as it is only a contribution (pooling resources) to conduct an event.
The Coram of Sri N.V. Vasudevan, Vice President and Sri B.R. Baskaran, Accountant Member has held that “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 CIT(A) on this issue and direct the A.O. to delete this disallowance”.
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