ITAT Bangalore: Arakere Channappa Vishwanath v. ITO [ITA No. 3016/Bang/2025]
The Tribunal allowed the assessee’s appeal, holding that the Assessing Officer erred in taxing the entire gross gaming receipts of Rs 2.33 crore under Section 115BB. The assessment was initiated on the basis of information received from the Compliance Risk Information Unit and details furnished by Gameskraft Technologies Pvt. Ltd. under Section 133(6), which reflected gross gaming winnings credited to the assessee’s gaming wallet. The AO treated the entire gross receipts as taxable income under Section 115BB, and the CIT(A) affirmed the addition. Before the Tribunal, the assessee contended that the gross wallet credits merely represented intermediate transactions, including repeated circulation of funds and buy-in amounts, and that after adjusting the buy-in amounts of Rs 2.61 crore, the gaming activity had resulted in a net loss of Rs 27.99 lakh. The Tribunal held that the authorities had failed to examine the corresponding buy-in amounts and had erroneously taxed gross transactional movements instead of real income. Referring to the provisions introduced by the Finance Act, 2023, namely Sections 115BBJ and 194BA, Rule 133 of the Income-tax Rules and CBDT Circular No. 05/2023, the Tribunal observed that the legislative intent was to tax only net winnings from online games. Accordingly, it held that no income was chargeable to tax under Section 115BB on the facts of the case, deleted the addition of Rs 2.33 crore, and allowed the assessee’s appeal.
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