54 mins ago
Bengaluru Gamer Wins ITAT Ruling on Net Online Gaming Losses
A Bengaluru gamer played online rummy and poker using real money.
He put about ₹2.61 crore into the gaming platforms.
The platforms showed gross winnings of about ₹2.33 crore.
This meant he actually lost about ₹27.99 lakh overall.
Tax officials wanted to treat the ₹2.33 crore in gross winnings as taxable income.
The gamer argued that tax should apply only to money he really earned.
The first appeal rejected his argument.
The Bengaluru ITAT accepted the importance of considering both the money deposited and the winnings.
It ruled that taxation should be based on actual net winnings rather than gross wallet credits.
The Bengaluru ITAT ruled that online gaming tax should be based on actual net winnings, not gross wallet credits.
The gamer deposited or bought into games for ₹2.61 crore and recorded gross winnings of about ₹2.33 crore.
The figures resulted in a net loss of approximately ₹27.99 lakh, despite substantial money moving through the gaming accounts.
The Assessing Officer treated the ₹2.33 crore as income from other sources under Section 56(2)(ib) of the Income Tax Act.
The ITAT decision followed the taxpayer’s challenge after the Commissioner of Income Tax (Appeals) upheld the tax demand.
- Who
- A Bengaluru-based online gamer, the Income Tax Department, Gameskraft Technologies Pvt. Ltd., and the Income Tax Appellate Tribunal, Bengaluru.
- What
- The ITAT ruled that online real-money gaming taxation should consider actual net winnings instead of gross amounts credited to a gaming wallet.
- Where
- The case was decided by the Income Tax Appellate Tribunal in Bengaluru and involved gaming platforms operated by Gameskraft Technologies Pvt. Ltd.
- When
- The articles do not specify the date of the ITAT ruling.
- Why
- The gamer’s buy-ins of ₹2.61 crore exceeded gross winnings of ₹2.33 crore, producing an overall loss of approximately ₹27.99 lakh.
Tax Authorities’ Position
Gamer’s Position
What counts as taxable income
Tax Authorities’ Position
The Assessing Officer treated about ₹2.33 crore credited as gaming winnings, after the company’s commission, as income from other sources.
Gamer’s Position
The gamer argued that only genuine income should be taxed and that the full gaming activity resulted in a net loss.
Treatment of buy-ins
Tax Authorities’ Position
The tax authorities relied on the gross winnings figure without giving corresponding consideration to the buy-ins made in the same gaming transactions.
Gamer’s Position
The gamer said his ₹2.61 crore in buy-ins had to be considered alongside the ₹2.33 crore in gross winnings.
ITAT outcome
Tax Authorities’ Position
The Commissioner of Income Tax (Appeals) upheld the tax demand based on the gross-winnings approach.
Gamer’s Position
The ITAT accepted the net-outcome argument, with experts also pointing to the absence of tax deducted at source on net winnings.
Key facts
- Buy-ins
- ₹2.61 crore
- Gross winnings
- Approximately ₹2.33 crore
- Net outcome
- Loss of approximately ₹27.99 lakh
- Income declared in ITR
- ₹4.32 lakh from rental income, business income, and other sources
- Tax authority’s classification
- Income from other sources under Section 56(2)(ib) of the Income Tax Act
- Gaming platforms
- Rummyculture and Gamezy
- First appeal outcome
- The Commissioner of Income Tax (Appeals) upheld the Assessing Officer’s decision
Sources
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