Wp/12821/2013 Of M/S. Hyderabad Race Club v. The Dy. Commissioner Of Income Tax

THE HON’BLE Ms. JUSTICE G. ROHINIANDTHE HON’BLE SRI JUSTICE P. NAVEEN RAO WRIT PETITION No.12817 OF2013WRIT PETITION No.12818 OF2013WRIT PETITION No.12819 OF2013WRIT PETITION No.12820 OF2013ANDWRIT PETITION No.12821 OF2013 Date:26.04.2013 Between M/s. Hyderabad Race Club, 16-10-1/A/1,Malakpet, Hyderabad, rep. by its Secretary(Finance & Admn.) Sri P.V. ReddyS/o. P. Sadasiva Reddy. …. Petitioner And Deputy Commissioner of Income-tax,Circle 14 (2), I.T. Towers, Hyderabad. … Respondent THE HON’BLE Ms. JUSTICE G. ROHINIANDTHE HON’BLE SRI JUSTICE P. NAVEEN RAO WRIT PETITION No.12817 OF2013 WRIT PETITION No.12818 OF2013WRIT PETITION No.12819 OF2013WRIT PETITION No.12820 OF2013ANDWRIT PETITION No.12821 OF2013 COMMON ORDER:(Per G. Rohini, J) The petitioner in all these writ petitions is M/s. Hyderabad RaceClub which is a company registered under the Companies Act, 1956and carries on the business of horse racing. The respondent - Deputy Commissioner of Income-Tax, Circle-14 (2), Hyderabad, passed separate orders dated 28.03.2013 underSections 201 (1) & 201 (1A) of the Income-tax Act, 1961 treating thepetitioner as an assessee in default in respect of the financial years2007-08 to 2012-13 and aggrieved by the same, these five writpetitions are filed. We have heard Sri A.V. Krishna Koundinya, the learned Senior Counsel appearing for the petitioners and Sri J.V. Prasad, the learnedStanding Counsel for the Income-tax Department. As could be seen from the material available on record, a show-cause notice dated 11.2.2013 was issued by the respondent informingthat the petitioner failed to comply with the TDS provisions on thepayments made on stake money as mentioned therein and thereforecalling upon the petitioner to show-cause as to why an order underSections 201 (1) & 201 (1A) should not be passed raising a demandunder Section 156 for non-compliance of Section 194-B of the Act. Afurther notice was issued on 13.2.2013 by the respondent requiring thepetitioner to furnish the details of the amount of stake money creditedto the horse owners both Resident and Non-Resident and also toexplain whether tax is deduced at source while crediting the same tothe horse owners for the last six years. The petitioner gave a replydated 19.2.2013 stating that they are in the process of ascertaining thetax paid on stake money by the horse owners. Thereafter a detailedreply dated 28.2.2013 was submitted furnishing year-wise stakemoney credited to the respective owner’s account. It was alsoexplained that stake money is an income from the activity of owningand maintaining race horses but not winning from horse races andthus the petitioner is not liable to deduct tax at source on payment ofstake money to the owners of horses. It was also specificallycontended that Section 194B is not at all applicable to stake moneypayments made by the petitioner. However the impugned orders dated 28.3.2013 came to bepassed negativing the contentions of the petitioner and treating thepetitioner as an assessee in default under Section 201 (1) for notmaking TDS under Section 194B of the Income-tax Act in respect ofthe payments made as stake money to the horse owners. The said orders are assailed in these writ petitions contendinginter aliathat the very action of the respondents in declaring thepetitioner as a defaulter assessee is illegal and without jurisdictionsince there is no provision under the Income-tax Act for making TDS However the impugned orders dated 28.3.2013 came to bepassed negativing the contentions of the petitioner and treating thepetitioner as an assessee in default under Section 201 (1) for notmaking TDS under Section 194B of the Income-tax Act in respect ofthe payments made as stake money to the horse owners. The said orders are assailed in these writ petitions contendinginter aliathat the very action of the respondents in declaring thepetitioner as a defaulter assessee is illegal and without jurisdictionsince there is no provision under the Income-tax Act for making TDS with regard to the payments made towards stake money. According tothe petitioner, the horse owners are liable to file their returns and therevenue is entitled to assess the same in accordance with law but thepetitioner cannot be made liable for the same. It is also contended thatSection 194B has no application at all with regard to payment made tohorse owners by way of stake money or prize money which are paidfrom the own funds of the petitioner to the owners of winning horses. Even with regard to applicability of Section 194BB of the Income-taxAct, it is contended by the petitioner that the respondents themselvesgranted exemptions on payment of winnings from horse races for theearlier years and therefore the contra decision now taken in theimpugned orders is arbitrary and illegal. However, it is contended by the learned Standing Counsel forthe respondents that a remedy of appeal is available against theimpugned orders under Section 246A (1) (ha) before theCommissioner (Appeals) and therefore the present writ petitions whichare filed without exhausting the alternative statutory remedy are notmaintainable at all. The said objection is sought to be refuted by the learned SeniorCounsel appearing for the petitioner contending that the veryinvocation of Section 194B against the petitioner being erroneous, theimpugned orders declaring the petitioner as a defaulter assessee arewithout jurisdiction and therefore notwithstanding the availability of thealternative remedy the writ petitions are maintainable. At the outset, it may be pointed out that it is not a case wherethe respondent lacks power or authority to pass the impugned orders,but the contention of the petitioners is that the statutory power hasbeen erroneously exercised. In the explanations submitted in response to the show-causenotice itself it was specifically contended by the petitioner that Section194B was not applicable and therefore the petitioner cannot be madeliable to comply with TDS provisions on the payments made on stakemoney. The said contention was considered in detail and negatived bythe respondent in the impugned orders assigning reasons therefor. A perusal of the impugned orders shows that the respondentarrived at the said conclusion on appreciation of various factualaspects relating to petitioner’s business activity and the documentsfurnished along with its explanation. Therefore, it is only for theappellate authority to determine on examination of the record and onappreciation of the documents produced by the petitioner, whether therespondent has exceeded its jurisdiction in holding the petitioner as adefaulter assessee. That being so, the error of jurisdiction which therespondent has allegedly committed in passing the impugned orders isnot a mere error apparent on the face of the record which can becorrected under Article 226 of the Constitution of India. Hence, if aggrieved, the petitioner has to pursue the remedy ofappeal available under the Statute, but they cannot straightawayinvoke the jurisdiction of this Court under Article 226 of theConstitution of India. Hence, if aggrieved, the petitioner has to pursue the remedy ofappeal available under the Statute, but they cannot straightawayinvoke the jurisdiction of this Court under Article 226 of theConstitution of India. It is also relevant to note that pending an appeal under Section246A of the Income-tax Act, the assessing officer in exercise of powersconferred under Section 220 (6) of the Income-tax Act may treat theassessee as not being in default even though the time for payment hasexpired as long as such appeal remains undisposed of. Thusefficacious provisions are available under the Income-tax Act tosafeguard the interest of the assessee even during the pendency of theappeal against an order made under Sections 201 (1) & 201 (1A) ofthe Income-tax Act. In case the petitioner’s request for such protectionis not considered or rejected by the assessing officer, probably a writpetition can be maintained by the petitioner for redressal of theirgrievance. However, such a stage has not yet come. For the aforesaid reasons, we are not inclined to entertain thewrit petitions at this stage. Accordingly, all the Writ Petitions are dismissed at the stage ofadmission leaving it open to the petitioner to pursue the remedy ofappeal available under the statute. No costs. Consequently the Miscellaneous Petitions, if any, pending in these writ petitions shall stand closed. No costs. __________________ Justice G. Rohini Date: 26.04.2013 GBS _____________________Justice P. Naveen Rao