TMI Blog2000 (1) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of wrong allowance of investment from winnings from horse races for the purpose of TDS; (ii) Rs. 4,93,120 on account of allowing of Rs. 5,000 as exempt under section 10(3) on second and subsequent payments to the punters ; (iii) Rs. 81,435 on account of applying low rate of surcharge even after increase in the rate of surcharge having been made effective from 15-1-1991 in respect of payments made after that date. 3. The assessee took various grounds before the ITO, to which we shall advert at appropriate places, against treating it to be in default in respect of the amounts of tax considered by the ITO to be deductible at source. The contention of the assessee was that it was not at all liable to deduct tax at source in respect of the first two amounts, as mentioned above. So far as, however, the third amount was concerned, the assessee admitted its liability but stated that the mistake of applying the old rate of surcharge in the matter of deduction of tax at source had occurred most probably due to the negligence of the earlier Financial Controller who had to resign under pressure from stewards of the assessee-club on 31-3-1991. 4. The ITO, however, did not acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der sections 201(1) and 201(1A) are concerned, the assessee challenges the levies in respect of first mentioned two items of Rs. 3,06,808 and Rs. 4,93,120 as well as interest corresponding to the said items. It is thus evident that the assessee neither challenges the levy of tax under section 201 (1) in respect of the amount of Rs. 81,435 on account of low rate of surcharge in the matter of deduction of tax at source after 15-1-1991. Similarly, the levy of interest under section 201 (1A) corresponding to this amount has also not been challenged by the assessee. 10. So far as the first amount is concerned, the departmental contention seems to be that tax is deductible at source from the winnings from horse races in accordance with the provisions of section 194BB by taking into consideration the gross amount of winnings. In this connection, the ld. counsel for the assessee draws our attention to Circular No. 240 issued by the CBDT on 17-5-1978 supplying Explanatory Notes on the provisions of the Finance Act, 1971 states as follows : "(c) The term 'winnings', in common parlance, means the amount received by the punter in excess of the bet laid by him on the horse or horses which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner on this issue. In this connection we have got to say that if a very high authority of the Income-tax Department like Chief Commissioner comes out with an open commitment on any particular angle relating to administration of the Income-tax Act and if his instructions be not clearly contrary to the provisions of law, enough respect is required to be given to such clarification issued by the Chief Commissioner and the lower authorities should not disregard and disobey such public assurances given by the Chief Commissioner. 11. The matter requires examination from legal angle also. For this purpose, we shall extract the provisions of section 194BB as below : "194BB. Any person, being a bookmaker or a person to whom a licence has been granted by the Government under any law for the time being in force for horse racing in any race course or for arranging for wagering or betting in any race course, who is responsible for paying to any person any income by way of winnings from any horse race in an amount exceeding five thousand rupees shall, at the time of payment thereof, deduct income-tax thereon at the rates in force :" It is firstly required to be noted in this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 5,000 once in a financial year or in respect of each race. The departmental contention in this regard is that inasmuch as the expression "winnings" is used herein, it means the total winnings of the punter over the year. We are, however, unable to agree with this contention of the department. Herein also, it may be noted that the expression "winnings" has been followed by the further expression "from any horse race" in an amount exceeding Rs. 5,000." Thus, it is clear that the winnings must relate to a particular horse race and the floor limit of Rs. 5,000 should apply to that particular horse race alone. In this connection, it may not be out of place to mention that the departmental contention seems to have arisen out of a consideration of the provisions of section 10(3) in accordance with which, in the income-tax assessment of the punter, he will be allowed the basic exemption of Rs. 5,000 only once during the year. Be that the position with regard to the assessment of the punter. But so far as the provisions of deduction of tax at source are concerned, we are required to be guided by section 194BB alone. The ld. counsel for the assessee has relied on a judgment of the Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption that section 194BB takes within its campus, the entire winnings made by a punter throughout a year. Accordingly, we are of the opinion that the assessee cannot be held to be in default in respect of the two amounts of Rs. 3,06,808 and Rs. 4,93,120. The levies of tax under section 201(1) in respect of these two amounts are thus being deleted. Similarly, the levies of corresponding interest amounts of Rs. 97,497 and Rs. 1,58,439 under section 201(1A) are also being deleted. 15. So far as the question of levy of penalty under section 271C is concerned, since the original amounts, on which the penalty is required to be computed, stand deleted by us, as above, there cannot be any doubt about the fact that the penalty amounts, corresponding to the above mentioned two main amounts, are also required to be deleted. The ld. counsel for the assessee furthermore argues in this connection that levy of penalty is not mandatory but merely discretionary in nature and while levying a penalty of quasi-criminal nature, with regard to matters like this, the mens rea of the assessee as well as the consideration of bona fide is to be taken into consideration. In this connection, reliance has be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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