Ill-advised or brilliant strategy?
By Sharan Kumar
The Government of India recently introduced in its financial bill the
clause that all earnings on betting when it exceeds Rs 10000 are subject to TDS
(Tax Deducted at Source) of 30 per cent. The amendment was in respect of 194 BB
in respect of the Rs 10000 allowance for a year as against the clubs’
practising the allowance per transaction. The amendment has wider
implications for the sport, including crippling it in the long run. The new
rule entails the clubs keep the KYC of all punters so that the earnings from
betting are to be taxed when it exceeds Rs 10000 under Rule 194 BB.
Almost all the turf clubs in India have fallen in line and implemented
the new rule. A punter must have KYC if he has to encash his winning ticket or
otherwise a TDS of 30 per cent is deducted. The clubs did not take up the issue
when the bill was introduced and woke up to its implications when it was too
late. The Bangalore Turf Club mandarins met the finance minister of India in an
unscheduled meeting in Bangalore in the month of April. The finance minister
reportedly told them that they were meeting the minister when the finance bill
had already been in parliament and had become law. The clubs did not raise
their concerns when the bill was introduced. Incidentally, the Bangalore Turf
Club Chairman was also the Chairman of Turf Authorities of India when the bill
was introduced and hence had the responsibility of reacting to the emerging
situation.
However, the BTC authorities have decided to take a big risk by not
implementing the KYC and deducting TDS except by putting up boards. The club
mandarins reportedly have taken the stand they would not implement the new rule
on the doctrine of impossibility. This is a specious argument because if the
club is incapable of handling the KYC of about five to six thousand people
attending races, is it fit enough to run racing is the question that will have
to be answered. Also, all the other turf clubs in the country have fallen in
line. The club not long ago had about Rs 2000 crores go through its turnstiles
in a year. The tax consultants that the club consulted reportedly were
unanimous in their view that the KYC of punters was inevitable. The doctrine of
impossibility is an agreement where the contract to be valid must be capable of
being performed
However, the club has perhaps decided to ignore the saner counsel and
bank on the wisdom of the so-called in-house legal luminaries who have no
history of any achievement in the legal domain to their credit except
rabble-rousing which is good enough to keep the other committee members keep
quiet in awe of them.
When queried, the executive head of the other turf clubs in India said
that they had already implemented the new TDS regime insulating themselves from
any future problem with the authorities.
In an interesting development, the Chief Finance Officer of Bangalore
Turf Club who had worked in the club for less than a year resigned from his
job. According to sources, he resigned because he was apprehensive of the
implications that it would have on him for not following the law. He is
supposed of cited health reasons for his resignation.
One is not sure whether the strategy adopted by the Bangalore Turf Club
is a brilliant one or an ill-advised one. The club has been advised to take
legal recourse to get redress. The general rule that must be followed is to
adhere to the law, question it, and dispute it but not break it. The BTC
mandarins who want to enforce their writ on the hapless professionals and
others are averse to following due process of law when it comes to adhering to
what is mandated by the government.
In the past when such a situation arose, the club mandarins called a
special body meeting of the members and brief them about the issues and also
took the acceptance of the general body. Interestingly, when the income
tax limit was Rs 5000 about 20 years ago, the club used to maintain the records
of punters who had availed of the Rs 5000 allowance in a year already. The club
had the PAN number of such punters who had encashed tickets after paying the
TDS.
The turf club could be placing itself in a serious predicament if the
income tax authorities come calling. There are many unresolved issues that
threaten the existence of the club thanks to the foolhardy behaviour of the
power-drunk authorities. The club owes a huge amount of money as lease
arrears to the government. The turf club collected 28 per cent GST but started
paying it only after an amendment to the way it was worded in the original law.
The money that was collected remained with the club though rightfully it
belongs to the public.
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