Andhra Pradesh H.C : An assessee in default under Section 201 (1) for not making TDS under Section 194B of the Income-tax Act in respect of the payments made as stake money to the horse owners.

High Court Of Andhra Pradesh

Hyderabad Race Club vs. DCIT, Circle – 14(2)

Assessment Years : 2007-08 To 2012-13

Section : 194B

Ms. G. Rohini And P. Naveen Rao, JJ.

Writ Petition Nos. 12817 To 12821 Of 2013

April 26, 2013

ORDER

G. Rohini, J. – The petitioner in all these writ petitions is M/s. Hyderabad Race Club which is a company registered under the Companies Act, 1956 and carries on the business of horse racing.

2. The respondent – Deputy Commissioner of Income-Tax, Circle-14 (2), Hyderabad, passed separate orders dated 28.03.2013 under Sections 201 (1) & 201 (1A) of the Income-tax Act, 1961 treating the petitioner as an assessee in default in respect of the financial years 2007-08 to 2012-13 and aggrieved by the same, these five writ petitions are filed.

3. We have heard Sri A.V. Krishna Koundinya, the learned Senior Counsel appearing for the petitioners and Sri J.V. Prasad, the learned Standing Counsel for the Income-tax Department.

4. As could be seen from the material available on record, a show-cause notice dated 11.2.2013 was issued by the respondent informing that the petitioner failed to comply with the TDS provisions on the payments made on stake money as mentioned therein and therefore calling upon the petitioner to show-cause as to why an order under Sections 201 (1) & 201 (1A) should not be passed raising a demand under Section 156 for non-compliance of Section 194-B of the Act. A further notice was issued on 13.2.2013 by the respondent requiring the petitioner to furnish the details of the amount of stake money credited to the horse owners both Resident and Non-Resident and also to explain whether tax is deduced at source while crediting the same to the horse owners for the last six years. The petitioner gave a reply dated 19.2.2013 stating that they are in the process of ascertaining the tax paid on stake money by the horse owners. Thereafter a detailed reply dated 28.2.2013 was submitted furnishing year-wise stake money credited to the respective owner’s account. It was also explained that stake money is an income from the activity of owning and maintaining race horses but not winning from horse races and thus the petitioner is not liable to deduct tax at source on payment of stake money to the owners of horses. It was also specifically contended that Section 194B is not at all applicable to stake money payments made by the petitioner.

5. However the impugned orders dated 28.3.2013 came to be passed negativing the contentions of the petitioner and treating the petitioner as an assessee in default under Section 201 (1) for not making TDS under Section 194B of the Income-tax Act in respect of the payments made as stake money to the horse owners.

6. The said orders are assailed in these writ petitions contending inter alia that the very action of the respondents in declaring the petitioner as a defaulter assessee is illegal and without jurisdiction since there is no provision under the Income-tax Act for making TDS with regard to the payments made towards stake money. According to the petitioner, the horse owners are liable to file their returns and the revenue is entitled to assess the same in accordance with law but the petitioner cannot be made liable for the same. It is also contended that Section 194B has no application at all with regard to payment made to horse owners by way of stake money or prize money which are paid from the own funds of the petitioner to the owners of winning horses. Even with regard to applicability of Section 194BB of the Income-tax Act, it is contended by the petitioner that the respondents themselves granted exemptions on payment of winnings from horse races for the earlier years and therefore the contra decision now taken in the impugned orders is arbitrary and illegal.

7. However, it is contended by the learned Standing Counsel for the respondents that a remedy of appeal is available against the impugned orders under Section 246A (1) (ha) before the Commissioner (Appeals) and therefore the present writ petitions which are filed without exhausting the alternative statutory remedy are not maintainable at all.

8. The said objection is sought to be refuted by the learned Senior Counsel appearing for the petitioner contending that the very invocation of Section 194B against the petitioner being erroneous, the impugned orders declaring the petitioner as a defaulter assessee are without jurisdiction and therefore notwithstanding the availability of the alternative remedy the writ petitions are maintainable.

9. At the outset, it may be pointed out that it is not a case where the respondent lacks power or authority to pass the impugned orders, but the contention of the petitioners is that the statutory power has been erroneously exercised.

10. In the explanations submitted in response to the show-cause notice itself it was specifically contended by the petitioner that Section 194B was not applicable and therefore the petitioner cannot be made liable to comply with TDS provisions on the payments made on stake money. The said contention was considered in detail and negatived by the respondent in the impugned orders assigning reasons therefor.

11. A perusal of the impugned orders shows that the respondent arrived at the said conclusion on appreciation of various factual aspects relating to petitioner’s business activity and the documents furnished along with its explanation. Therefore, it is only for the appellate authority to determine on examination of the record and on appreciation of the documents produced by the petitioner, whether the respondent has exceeded its jurisdiction in holding the petitioner as a defaulter assessee. That being so, the error of jurisdiction which the respondent has allegedly committed in passing the impugned orders is not a mere error apparent on the face of the record which can be corrected under Article 226 of the Constitution of India.

12. Hence, if aggrieved, the petitioner has to pursue the remedy of appeal available under the Statute, but they cannot straightaway invoke the jurisdiction of this Court under Article 226 of the Constitution of India.

13. It is also relevant to note that pending an appeal under Section 246A of the Income-tax Act, the assessing officer in exercise of powers conferred under Section 220 (6) of the Income-tax Act may treat the assessee as not being in default even though the time for payment has expired as long as such appeal remains undisposed of. Thus efficacious provisions are available under the Income-tax Act to safeguard the interest of the assessee even during the pendency of the appeal against an order made under Sections 201 (1) & 201 (1A) of the Income-tax Act. In case the petitioner’s request for such protection is not considered or rejected by the assessing officer, probably a writ petition can be maintained by the petitioner for redressal of their grievance. However, such a stage has not yet come.

14. For the aforesaid reasons, we are not inclined to entertain the writ petitions at this stage.

15. Accordingly, all the Writ Petitions are dismissed at the stage of admission leaving it open to the petitioner to pursue the remedy of appeal available under the statute. No costs.

16. Consequently the Miscellaneous Petitions, if any, pending in these writ petitions shall stand closed. No costs.

[Citation : 364 ITR 547]