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KAHC010028192013_1

High Court: Karnataka High Court Bench: BENGALURU
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2026-09-15 17:27:39
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Issue of Consideration

Whether stake money paid by Turf Clubs to race horse owners is 'winnings from races' under Section 194B of the Income Tax Act, 1961, thereby requiring deduction of tax at source; whether circulars issued by CBDT are binding; and whether notices are barred by limitation.

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Case Details

2014 LawText (KAR) (09) 26

W.P. Nos. 6565-6568/2013 and 6651-6652/2013 c/w 18696-18697/2013 & 6674/2013

2014-09-26

Justice Aravind Kumar

S.S. Naganand, S. Sriranga, K.P. Kumar, T. Suryanarayana, A. Shankar, M. Lava, K.V. Aravind

Bangalore Turf Club Limited

Union of India and others

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Nature of Litigation

Writ petitions challenging notices issued by Income Tax Department demanding deduction of tax under Section 194B on stake money paid to horse owners.

Remedy Sought

Quashing of notices and declarations that stake money is not winnings under Section 194B, circulars are binding, and clubs are not assessees in default.

Filing Reason

Income Tax Officer (TDS) issued notices to the Turf Clubs for not deducting TDS on stake money, treating them as defaulters.

Issues

Whether stake money paid to horse owners falls within the ambit of 'winnings' under Section 194B of the Income Tax Act. Whether Circular No.467 dated 21.08.1986 is binding on the income tax authorities. Whether the notices are barred by limitation for certain years. Whether the Turf Clubs can be treated as assessees in default under Section 201.

Submissions/Arguments

Stake money is not 'winnings from races' as defined under Section 2(24)(ix) which covers entertainment programmes on TV/electronic media. Circular No.467 dated 21.08.1986 distinguishes between winnings from races and stake money earnings. Income from owning and maintaining race horses is excluded from the flat 40% tax under Section 115BB as per Finance Minister's speech. Stake money is specifically taxed under Section 74A, not under Section 194B. Income from horse racing is business income, not taxable under 'other sources'. If tax has already been paid by recipients, deduction would result in double taxation violating Article 265.

Judgment Excerpts

Stake money being a prize money given by a Club to the race horse owner, there is no element of a winnings as defined under the Act. when the owner of winning horse is paid money, if it comes within the purview of Section 194B, then the petitioners are bound to deduct tax.

Procedural History

Writ petitions filed under Articles 226 and 227 of the Constitution challenging notices issued under Section 194B of the Income Tax Act, 1961 for not deducting TDS on stake money. Petitions heard and reserved for orders.

Acts & Sections

  • Income Tax Act, 1961: Section 2(24)(ix), Section 56(2)(ib), Section 74A, Section 194B, Section 194BB, Section 58(4)
  • Constitution of India: Article 226, Article 227, Article 265
  • Companies Act, 1956:
  • Karnataka Societies Registration Act, 1960:
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stake money TDS Section 194B horse racing winnings race horse owners income tax circular assessee in default

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