By TIOL News Service

HYDERABAD, MAY 04, 2017: THE ISSUE BEFORE THE TRIBUNAL IS - Whether payments made by race club to the other turf clubs for merely utilizing their braodcasting facility to show live matches, would warrant application of Section 194H, when their was no principal agent relationship between the clubs. NO is the answer.

Facts of the case:

The Assessee is an organisation engaged in organsation of racing events. Assessee made payments to other race clubs in the nature of 'commission' attracting the provisions of Section 194H. Assessee submitted that there was a survey conducted at the assessee's premises and the ACIT, Range-14 did not raised the demand u/s. 201(1) but raised interest u/s. 201(1A). However, while raising the demand, he had concluded that the relationship between the HRC and other clubs was in the nature of 'agent' and 'principal' and provisions of Section 194H squarely apply. On appeal, the CIT(A) after examining the detailed submissions had concluded, for AYs. 2001-02 to 2008-09, vide his order that the nature of transaction on account of inter-venue betting between Assessee and other clubs was on 'principal' to 'principal' basis and hence, the demand u/s. 201(1A) did not survive.

On appeal, the ITAT held that,

++ the order of CIT(A) was in consonance with the orders of the CIT(A) on the issue upto AY. 2008-09 on which Revenue has not preferred any appeal and also in tune with the findings given by ITAT in AY. 2009-10, there is no need to interfere with the order of the CIT(A). Tribunal relied on the finding of the CIT(A) that the other turf clubs were providing facility to view live tele matches and the assessee utilizes this facility and get punters to bet on those matches. The matches were actually the property of the respective clubs but not that of the assessee. The assessee was getting revenue from punters for the matches conducted by other clubs. But as per the understanding between the turf clubs, the revenue was the right of the assessee and was parting with that revenue @ 23% of the revenue generated by punters who come to watch those live matches at its premises. The other clubs do not arrange the punters or the bets. They provide facility to watch those matches live by providing broadcasting facility. Here the other clubs have no agent relationship with the assessee. They are not acting on behalf of the assessee race club.

(See 2017-TIOL-596-ITAT-HYD)