Why Horse Betting is not an Gambling in India as per Income Tax Act?

Horse betting is not an gambling while winning in casino is an gambling as per Income Tax Act. Why is it so? Is it difference of approach? Though both forms part of the gambling. Winning in casino are purely matter of chance, while betting on the horses can involve calculation and experience. People look the horse’s past race record, jockey’s past race record, diet of horses etc. which is provided in booklet at race course. As such people don’t do such calculations at the casino.

SUB BROKING COMMISSION ON SHARE TRADING IS EXEMPT FROM TDS…!!!

In My Opinion

“Any person paying commission (other than that referred to in Sec.194D of the Income Tax Act) or brokerage exceeding Rs. 5,000/- per annum to any resident person is liable to deduct tax at the rate of 10% at the time of credit or payment, whichever is earlier, as per Sec. 194H of the Income Tax Act. Commission or Brokerage includes any payment received directly or indirectly by a person acting on behalf of another person for non-professional services for buying or selling of goods or asset, valuable article or things that are not securities.

Securities have meaning as per the Securities Contract (Regulation) Act, 1956, and includes shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities in or any of any incorporated company or other body corporate; derivatives; units or any other instrument issued by any collective investment scheme to the investors in such schemes; security receipt as defined in Sec. 2(zg) of the Securitization And Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; government securities; such other instruments as may be declared by the Central Government to be securities; and rights or interests in securities.

As payment of brokerage to sub-brokers arises from brokerage received on securities, no TDS is deductible on payment of commission on securities to sub-broker.”

It is advisable

“The main broker to deduct TDS on payment to sub-broker to be on a safer side.”

AS-22 "DEFFERED TAX EFFECT IN CASE OF CHANGES IN TAX RATE & IN CASE IF BUDGET IS POSTPONE BEYOND 31ST MARCH"

DEFFERED TAX EFFECT IN CASE OF CHANGES IN TAX RATE : 

While current taxes will be created at current tax rate and deffered tax effect should be given at future tax rate announced in the budget. This is because the Deffered Tax Asset will realize OR Deffered Tax Liability  will settled in the future and the benefit OR obligation will be at future tax rate, therefore no point in creating Deffered Tax Asset and Deffered Tax Liability at current tax rate.

If the future tax rate is different compared to the current tax rate, than even after giving deffered tax effect, shareholder’s readability for matching concept will not be met. Therefore, additional explanatory disclosure must be given to enable user readability.

DEFFERED TAX EFFECT IN CASE IF BUDGET IS POSTPONE BEYOND 31^ST MARCH :

LOGICAL REASONING: The Company must create deffered tax effect only at old tax rate and ignore the new rates in the budget. The “ FRAMEWORK FOR PREPARATION AND PRESENTATION OF FINANCIAL STATEMENT” specifies that one of the important objectives of the Accounting Standards is to enable “COMPARABILITY” to the users of Financial Statements.

TECHINAL RESAONING: This issue comes under AS 4 “Events Occurring After The Balance Sheet Date”. The Budget  is a event occurring after the balance sheet date, but it does not substantiate a condition existing as on the balance sheet date i.e. 31^st March. Therefore, it is an non adjusting event and deffered tax effect will be at old rate.

Applicability of TDS Provision under Income Tax Act, 1961.

The TDS provision is only applicable in Current Year (Say F.Y. 2012-13) only if Turnover/Total Receipts of the Individual/HUF exceeded the monetary limit for audit u/s 44AB viz. Rs. 60,00,000 (Rupees Sixty Lakhs) in preceding year (F.Y.2011-12) .

Merely the audit under the provisions of the section 44 AD in the last year does not make assessee liable to deduct TDS in current year.

AS-16 "CAN INVESTMENT BE QUALIFYING ASSETS?"

“Borrowing Cost attributable to Qualifying Assets must be capitalized.”

“Qualifying Assets are assets that take a substantial period of time to become ready for their intended use or for sale.”

Say a Company borrow funds and pay share application money. However, shares are not allotted for a substantial period of time, is it possible to capitalize the borrowing costs to this account?

The intended is that of investments i.e. allotted shares. Therefore, technically under the definition of A.S. 16 capitalization should be allowed. However under IFRS, there is specific exclusion since until shares are allotted in legal form it is only an advance i.e. ready for call back. In A.S. 16, there is no such specific exclusion. However the ICAI has issued a Expert Opinion on this issue in line with International Practice treating this is not eligible for capitalization. The soon to come Ind. A.S. also has such specific exclusion, however, currently the issue is debatable. 

STCG ARISING FROM THE TRANSFER OF ANY LONG TERM CAPITAL ASSET WILL QUALIFY FOR EXEMPTION.

The provision of Section 50 on Income Tax Act, 1961 creates a legal fiction in defining the nature of gain on transfer of depreciable assets. Accordingly, the gain arising from the transfer of the depreciable asset is deemed to be Short Term Capital Gain/Loss. The legal fiction is for a limited purpose which defines the nature of gain and not the nature of Capital Asset. Therefore, depreciable asset being a long term capital asset on its transfer shall result into Short Term Capital Gain u/s 50 of Income Tax Act, 1961.

The roll back exemptions u/s 54 to 54 GB make an emphasizes on the exemption towards the gain of the qualifying capital asset which in major cases is long term capital asset. Therefore, thrust of the exemption is on the nature of capital asset and not on the nature of gain.

U/s 54EC Gain arising from the transfer of any long term capital asset will qualify for exemption under this section if the Net Sales Consideration is invested in the specified bonds within a stipulated time period. Therefore, Short Term Capital Gain on transfer of depreciable asset being a long term capital asset would qualify for the exemption u/s 54EC where the necessary investment is made.

ACE Builders Pvt. Ltd. (Bombay High Court).

EXPENDITURE INCURRED ON ANIMAL DURING THEIR PREGNANCY WILL BE TREATED AS COST OF ACQUISITION OF OFFSPRING OF ANIMAL.

The court held that the amount spent by the asseessee on the maintenance of the horse during the pregnancy period was really for protecting, preserving and keeping the horse in good health so that healthy offsprings are born. The maintenance expenses on horse during the pregnancy period are in fact to bring into existence offsprings and therefore can be regarded as cost of acquisition of offsprings. The court also held that these animals are superior and valuable than untrained animals. Therefore, the training expenses would constitute cost of improvement of capital assets.

Madras HC in CIT Vs Ramaswamy Mudaliar.