Horse owners and racing professionals in the country in general, and Karnataka in particular, heaved a sigh of relief when the Karnataka High Court yesterday ruled that TDS (tax deducted at source) is not applicable to winnings earned by horse owners by way of stake money.
In an unprecedented and aggressive move last year, the Income Tax department had issued orders to the Bangalore turf club (BTC) that they must deduct tax at source before crediting the accounts of horse owners, trainers and jockeys with stake money earned as winnings.
The tax authority had argued that winnings in the form of stake money were ‘windfall’ income, and therefore, should attract TDS. The order had sent all horse owners, turf clubs and racing professionals associated with them into panic mode, fearing dues would be recovered from them retrospectively.
The Karnataka Racehorse Owners’ Association (KROA) had challenged the order, and the racing industry was eagerly waiting for the outcome even as the KROA were locked in a legal battle with the Income Tax department.
In an unambiguous verdict the Karnataka High Court however decided that the section 194 B applied here, which talks about games of any other sort, does not apply to horse racing.
“The honourable court quashed the order of the Income Tax department in this regard,” said Ashok Raghavan, chartered accountant and office bearer of the KROA, who played a key role in preparing the case for the KROA and the BTC.
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