Online Gaming ₹2.63-Crore Payout vs ₹2.94-Crore Buy-In Is Loss, Not Winnings U/s 115BB

Divyank Goyal Vs ITO (ITAT Agra)

Online Gaming Turnover Is Not a Jackpot—₹2.63-Crore Payout Against ₹2.94-Crore Buy-In Means Loss, Not Taxable Winnings u/s 115BB

Gaming Data Triggers Scrutiny

The Assessee filed his return declaring total income of ₹15,60,160, including online-gaming income of ₹4,44,717 from a platform operated by Gameskraft Technologies Pvt. Ltd.

The case was selected for scrutiny to verify online-gaming transactions. The AO issued notice u/s 133(6) to Gameskraft seeking complete details of the Assessee’s gaming activity.

Gameskraft reported that the Assessee’s total buy-in was ₹2,94,47,047, comprising ₹1,68,50,007 relating to games lost & ₹1,25,97,040 relating to games won. The total amount received as gross winnings was ₹2,62,68,314.

Thus, when the total buy-in was compared with the total amount received, the Assessee had suffered a net loss of ₹31,78,733.

AO Treats One Column as Income

Instead of considering the gaming account as a whole, the AO selected the figure of ₹1,25,97,040 described as the buy-in amount relating to games where the player won. After reducing the income of ₹4,44,717 already disclosed, he added the balance ₹1,21,53,323 as income from other sources taxable u/s 115BB.

The AO noted that although the Assessee claimed to have enclosed a ledger, the relevant attachment was not uploaded. He consequently inferred that the Assessee had nothing further to establish his case.

The CIT(A) confirmed the addition. According to him, winnings from card games & other games were taxable u/ss 2(24)(ix), 56(2)(ib) & 115BB at 30%. Section 58(4) prohibited deduction of expenditure connected with such winnings.

The CIT(A) observed that section 115BBJ, taxing net winnings from online games, became operative only from 01.04.2024. Since AY 2022-23 preceded that amendment, he concluded that gross winnings had to be taxed without setting off gaming losses.

Assessee Says Stakes Are Not Expenses

Before the ITAT, the Assessee argued that he was not claiming business expenditure against gaming winnings. His case was that positive & negative outcomes on the same gaming platform had to be combined to determine whether any winnings existed in the first place.

The Assessee relied upon the Hyderabad ITAT decision in Emdarapu Kumaraswamy v. ITO, ITA No. 1441/Hyd/2025, order dated 24.06.2026, which concerned the same AY & the same Gameskraft platform.

He also relied upon the Supreme Court’s observations in Directorate General of GST Intelligence v. Gameskraft Technologies Pvt. Ltd., distinguishing GST on the value of supply from income tax on profits or gains after appropriate netting.

The Platform’s Own Figures Showed a Loss

The Tribunal treated the Gameskraft information as undisputed. It showed total receipts of ₹2.62 crore against total buy-in of ₹2.94 crore, producing a negative result of ₹31.78 lakh.

The AO nevertheless ignored the total buy-in & treated one selected figure as taxable winnings. This approach effectively taxed the movement of funds on the gaming platform rather than any income earned by the Assessee.

A person repeatedly deploying the same money across games may display large cumulative buy-ins & payouts. Those aggregates do not independently represent income. The taxable winning can arise only after identifying the excess of amounts received over the corresponding amount staked.

Hyderabad ITAT Supplies the Winning Formula

In Emdarapu Kumaraswamy, Gameskraft had reported gross winnings of ₹3.54 crore against a buy-in of ₹3.84 crore, resulting in a net loss of ₹30.43 lakh. The AO nevertheless taxed the gross winnings u/s 115BB.

The Hyderabad ITAT held that “winnings” must be understood as the difference between the amount initially paid or invested in the games & the amount received. If the result is positive, the assessee has winnings; if negative, the assessee has suffered a loss.

The prohibition u/s 58(4) against deduction of expenditure does not justify treating the player’s own stake or buy-in as income. The buy-in is an essential computational component for determining whether any winning arose at all.

Gameskraft: GST Taxes Supply, Income Tax Taxes Income

The Agra ITAT also referred to the Supreme Court’s observations in the Gameskraft GST litigation. The Supreme Court explained that GST is imposed on supply & does not depend upon whether the supplier ultimately earns profits or suffers losses.

While rejecting netting for GST valuation, the Supreme Court observed that such netting of receipts, payouts & business outgoings may be relevant in income-tax jurisprudence, where profits & gains are subjected to tax.

The Tribunal applied this distinction to hold that the Assessee’s tax liability could not be determined by treating aggregate gaming receipts as income while ignoring the corresponding buy-ins.

The Final Verdict

Following the Hyderabad coordinate Bench & the Supreme Court’s observations, the ITAT held that the Assessee’s result had to be computed by comparing total gaming receipts with total buy-ins.

Since gross receipts of ₹2,62,68,314 were lower than the total buy-in of ₹2,94,47,047, the result was a loss of ₹31,78,733, not taxable winnings.

The addition of ₹1,21,53,323 was therefore deleted. The remaining grounds, including the retrospective relevance of section 115BBJ & interpretation of section 58(4), were left open as academic. The appeal was allowed.

An online-gaming wallet may spin crores through repeated play, but circulation is not celebration. When ₹2.94 crore goes into the game & only ₹2.63 crore comes out, the Income-tax Department cannot congratulate the player on imaginary winnings of ₹1.21 crore.

Cases Discussed

• Emdarapu Kumaraswamy vs. ITO ward -11(1) Hyderabad, ITA No. 1441/Hyd/2025, order dated 24.06.2026.
• Directorate General of Goods and Services Tax Intelligence (Hqs) & Ors. Versus Gameskraft Technologies Private Limited and Ors.
• M.K. Raghu v. ACIT [2009] 182 Taxman 362 (Kerala).

FULL TEXT OF THE JUDGMENT/ORDER OF INCOME TAX APPELLATE TRIBUNAL

This appeal is directed against the impugned order dated 07.10.2024 passed in appeal No NFAC/2021-22/10322675 by the Ld. Commissioner of Income Tax (Appeals)/NFAC(Delhi) (hereinafter referred to as the “CIT(A) u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2022-23, wherein Ld. CIT(A) has dismissed assessee’s appeal.

2. Brief facts of the case: The assessee is an Individual and filed his ITR for the year under consideration on 23.06.2022 declaring total income at Rs.15,60,160/-. The reason of the case under CASS selection is verification of Transaction – wherein the assessee won amounting Rs. 1,73,46,540/- from gaming on portal managed by M/s. Gameskraft Technologies Pvt. Ltd. In this regard, the AO issued a notice u/s 133(6) of the Act dated 05.10.2023 to M/s Gamescraft (P) Ltd (hereinafter referred to as M/s GPL) and the details of winning of the assessee during the F.Y. 2021-22 was sought. The AO noted that vide reply dated 15.11.2023 the company provided complete details which according to the AO showed that the total winning of the assessee during the financial year was Rs. 1,25,97,040/-. The AO took note of the fact for the assessee had shown income of Rs. 4,44,717/- from M/s GPL under the head ‘income from other sources’ and issued a show cause notice dated 20.11.2023 proposing addition of Rs. 1,21,53,323/- (1,25,97,040/- – 4,44,717/-) under the ‘head income from other sources’. The AO noted that the assessee stated that he had enclosed ledger copy for income from other sources (gross winning from M/s GPL) also but on perusal of the attachment of the reply by the assessee, it was found by the AO that the assessee had not uploaded ledger copy for income from other sources. On the basis of this fact, the AO noted that it was clear that the assessee had nothing to produce in his favour. Accordingly, the AO added the sum of Rs. 1,21,53,323/- as ‘income from other sources’ and charged the same to tax u/s 115BB of the Act.

3. Aggrieved with the said order the assessee filed an appeal before the Ld. CIT (A). The Ld. CIT (A) dismissed the appeal of the assessee and confirmed the above addition and the relevant extracts of the said order is reproduced as under:

“6. This case was selected for scrutiny in order to examine the income earned by the appellant from online gaming platform M/s Gamescraft Technologies (P) Ltd in the previous year. In the return of income filed, the disclosed Rs.4,44,717 as winning from M/s Games craft Technologies (P) Ltd. During assessment, the AO gathered details of amounts won by the appellant from M/s Games craft Technologies (P) Ltd under section 133(6).

6.1 The information received by the AO from Games craft Technology (P) Ltd is reproduced below:

6.2 While completing assessment, the AO took the difference between (B) in the above table (i.e. buy-in amount where player won) and income disclosed (Rs. 4,44,717) as the undisclosed income from online games. Thus an amount of Rs. 1,21,53,323 was added to the total income under section 115BB.

6.3 The appellant argues that the information received from M/s Gamescraft (P) Ltd regarding the winning of the appellant varies from information uploaded in 26AS and insight portal. The appellant also argues that only the net income should be taxed as per the section 155BBJ

6.4 Information uploaded in 26AS as the amount on which TDS is deducted u/s 194B is Rs. 4,44,717. Since this amount is shown by the deductor, it need not be regarded as sacrosanct. Taxable income from online games is to be determined as per the provisions of the Income Tax Act.

6.5 By virtue of Section 2(24)(ix) r.w.s 56(2)(ib), ‘winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever’ are taxable under the head of ‘Income from other sources’ Section 115BB of the Income Tax Act deals with ‘tax on winnings from lottery, crossword puzzles, races, including horse races, card games, and other games of any sort or game, gambling, or betting of any form or nature whatsoever’ . Income from winnings from online games would fall under the income covered in section 115BB and accordingly are to be taxed at the rate prescribed in the said section.

6.6 As contained in the provisions of section 115BB, the above mentioned winnings would be taxable at a flat rate of 30% which means that where the total income of a person includes winnings under this section, the income tax payable would be the aggregate of Winnings taxed @ 30% and other income taxed as per normal slab rates or relevant special rates as the case may be

6.7 There is no provision for setting off losses against winnings since the Finance Act, 1986, specifically deleted Section 74A and introduced Section 58(4) thereby prohibiting deduction of expenses that were related to such winnings.

Amounts not deductible.

58. (1) Notwithstanding anything to the contrary contained in section 57, the following amounts shall not be deductible in computing the income chargeable under the head “Income from other sources”, namely :—

(4) In the case of an assessee having income chargeable under the head “Income from other sources”, no deduction in respect of any expenditure or allowance in connection with such income shall be allowed under any provision of this Act in computing the income by way of any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature, whatsoever:

6.8 It follows that the gross winning from online games is taxable at a flat rate of 30%. It may be noted that with effect from 01.04.2024, a new section, viz. 115BBJ has been introduced to “tax winnings from online games”. In this provision, the tax is to be paid on “net winnings”. However in the year is question, this provision is not in operation and u/s 115BB, gross winning from games is taxable.

6.9 The appellant has referred to the decision of the Kerala High Court in M.K. Raghu v. ACIT [2009] 182 Taxman 362 (Kerala). The facts of this case vary form the present case. In the cited case, the appellant won a lottery run by Sikkim Government. The gross winning amount suffered TDS under the Sikkim Income Tax. That is to say, tax was not deducted u/s 194B. So for the deduction made, the appellant received no credit. Effectively, the appellant received winning amount less tax deducted under Sikkim Income Tax. Therefore the High Court held that only the net amount should be taxed under section 115BB. The present case is very different. Here the appellant is pleading the set off of losses suffered against winning. This is explicitly barred as per the provisions of Income Tax Act. Therefore the above cited case law does not come to the aid of the appellant. Ground 2 is dismissed.”

4. Aggrieved with the said order the assessee has filed an appeal before us on the following grounds of appeal:

“1. The assessment order passed in the present case is based on personal whims and fancies without ascertaining the facts and circumstances of the case. Hence liable to be quashed.

2. That having regards to facts and circumstances of the case, the Ld. CIT(A), NFAC erred in sustaining the addition made by the Ld. AO to tune of Rs. 1,21,53,323/- on account of ‘income from other sources’.

3. That having regards to the facts and circumstances of the case, the Ld. AO erred in making addition on the mases of response received against the notice u/s 133(6) of the Income Tax Act, 1961 as the amount of winning itself is debatable.

4. That having regards to the facts and circumstances of the case, the Ld. CIT(A) as well as AO erred in making addition without taking cognizance of the provision of section 115BBJ r.w. rule 133 of the Income Tax Rules, 1962, that the law maker has clarified the position of taxation of online gaming, which should be treated as retrospective in nature.

5. That having regards to facts and circumstances of the case, the Ld. CIT(A) as well as AO erred in making addition by stating that no expenses u/s 58(4) of the Act is allowed ignoring the fact that appellant has not claimed any expense rather than it claimed that positive and negative betting, from same gaming portal, both should be set off.

6. That the appellant craves leave to add, amend, modify, rescind, supplement or alter any of the grounds of appeal before the appeal is finally adjudicated upon.”

5. At the time of hearing the Ld. AR filed a written submission and relied upon the order dated 24.06.2026 of the Coordinate Bench Hyderabad Tribunal in the case of Emdarapu Kumaraswamy vs. ITO ward -11(1) Hyderabad in ITA No. 1441/Hyd/2025. Relying upon this order, the Ld. AR stated that the issue was squarely covered in favour of the assessee wherein for same assessment year i.e. A.Y. 2022-23 as in the case of the assessee from the same portal i.e. M/s GPL, the Tribunal held that the winnings from any games referred to u/s.115BB of the Act should be understood in the context of net winnings from any game by the assessee which is nothing but total amount paid by the assessee minus gross winnings and the result of which is positive, then it means that the assessee has gross winnings and difference of which is negative, the assessee has incurred loss.

6. Further, the Ld. AR also relied upon the decision on Hon’ble Supreme Court in the case Directorate General of Goods and Services Tax Intelligence (Hqs) & Ors. Versus Gameskraft Technologies Private Limited and Ors. – 2026 (5) TMI 1822 which according to the Ld. AR held that GST will be payable on total amount but for the purpose of taxation under the income tax Act winning will be taxable.

7. On the other hand, the Ld. Sr. DR supported the order of the authorities below.

8. We have heard both the parties and perused the material on record. In this case the undisputed facts are that as per the information received by the AO from M/s GPL the assessee had a gross winning of Rs. 2,62,68,314/- and gross purchases amounting to Rs. 2,94,47,047/- thereby resulting a loss of Rs. 31,78,733/-. The AO did not allow the gross purchases amounting to Rs. 2,94,47,047/- on the ground that the assessee stated that he had enclosed ledger copy for income from other sources (gross winning from M/s GPL) but on perusal of the attachment of the reply by the assessee, it was found by the AO that the assessee had not uploaded ledger copy for income from other sources. Accordingly, the AO noted that it was clear that the assessee had nothing to produce in his favour. The Ld. CIT (A) even though noting the fact that the assessee had incurred a loss of Rs. 31,78,733/- on account of ‘buy’ and ‘winning’ but did not allow the said loss on the ground that by virtue of Section 2(24)(ix) r.w.s 56(2)(ib), ‘winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever’ are taxable under the head of ‘Income from other sources’. The Ld. CIT (A) further observed that Section 115BB of the Income Tax Act deals with ‘tax on winnings from lottery, crossword puzzles, races, including horse races, card games, and other games of any sort or game, gambling, or betting of any form or nature whatsoever’ and income from winnings from online games would fall under the income covered in section 115BB and accordingly are to be taxed at the rate prescribed in the said section i.e. winnings would be taxable at a flat rate of 30% which means that where the total income of a person includes winnings under this section, the income tax payable would be the aggregate of winnings taxed @ 30% and other income taxed as per normal slab rates or relevant special rates as the case may be.

The Ld. CIT (A) observed that there is no provision for setting off losses against winnings since the Finance Act, 1986, specifically deleted Section 74A and introduced Section 58(4) thereby prohibiting deduction of expenses that were related to such winnings. The Ld. CIT (A) also noted that with effect from 01.04.2024, a new section, viz. 115BBJ has been introduced to “tax winnings from online games” wherein it is provided that the tax is to be paid on “net winnings”. However, noting that the amendment was with effect from 01.04.2024 and therefore in the year in question, this provision is not in operation and u/s 115BB, gross winning from games is taxable and accordingly upheld the order of the AO.

8.1 However, on similar facts the Coordinate Bench Hyderabad Tribunal in the case of Emdarapu Kumaraswamy vs. ITO ward -11(1) Hyderabad in ITA No. 1441/Hyd/2025 held that the winnings from any games referred to u/s.115BB of the Act should be understood in the context of net winnings from any game by the assessee which is nothing but total amount paid by the assessee minus gross winnings and the result of which is positive, then it means that the assessee has gross winnings and difference of which is negative, the assessee has incurred loss and the same will not be taxable. The relevant extracts of the order are reproduced as under:

“11. We have heard both the parties, perused the materials available on record and had gone through orders of the authorities below. The AO made addition of Rs.3,54,44,447/- towards winnings from online games platform owned by M/s. Gameskraft Technology Pvt. Ltd. According to the AO, as per u/s.115BB of the Act, gross winnings of any games is taxable without allowing any deduction towards expenditure. The AO further noted that Section 58(4) doesn’t allow deduction towards any expenditure. Therefore, the AO taxed gross winnings reported by the online platform for Rs.3,54,44,447/- and brought to tax u/s.115BB of the Act. We have gone through the relevant information furnished by the company which is available in Page No.5 of the assessement order. The company has submitted details of transactions of the assessee in two categories, i.e., one under the category calculation of winning/loss [difference between BuyIn & winning] and second category, the total payment and receipts by the assessee. As per calculations of winnings/loss, the company has reported loss of Rs.30,43,537/-. This has been further reiterated in the category of ledger accounts of the assessee for payment made for the year and amount received for the year which also shows loss incurred for Rs.30,43,537/-. From the details submitted by the company and considered by the AO, it is abundantly clear that the assessee has incurred loss of Rs.30,43,537/- for the year under consideration. Although, the information is very clear that the assessee has incurred loss but the AO has considered the gross winnings reported by the company for Rs.3,54,44,447/- without considering the amount of BuyIn at Rs.3,84,87,984/- and the net loss of Rs.30,43,537/-. In our considered view, the AO is completely erred in making additions, because, difference between the initial amount paid by the assessee or invested in the game and the gross winning represents the amount of money won by the assessee. The winnings from any games referred to u/s.115BB of the Act should be understood in the context of net winnings from any game by the assessee which is nothing but total amount paid by the assessee minus gross winnings and the result of which is positive, then it means that the assessee has gross winnings and difference of which is negative, the assessee has incurred loss. In the present case, the details submitted by the company clearly show that the assessee has incurred loss of Rs.30,43,537/-. This is further fortified from the fact that, if at all the assessee has any winnings from online games, then the company should have deducted TDS u/s.194B of the Act. But, fact remains that there is no TDS deduction on gross winnings from M/s. Gameskraft Technology Pvt. Ltd. Therefore, from the above facts, it is clear that the assessee has incurred loss of Rs.30,43,537/-, whereas the AO has erroneously considered gross winnings of Rs.3,54,44,447/- and made addition u/s.115BB of the Act. Further, if at all the AO was not clear about amount of gross winnings, then he should have obtained information from the company with regard to winnings/loss if any for the year under consideration. But, the AO has not obtained any information from the company and blindly made addition by taking into account gross winnings without considering the initial amount paid by the assessee. Therefore, we are of the considered view that, the AO is erred in making addition of Rs.3,54,44,447/- towards gross winnings form online games u/s.115BB of the Act. The Ld.CIT(A) without considering relevant facts, simply sustained the additions made by the AO. Therefore, we set aside the order of the Ld.CIT(A) and direct the AO to delete the addition of Rs.3,54,44,447/- made u/s.115BB of the Act.”

8.2 Further, the Hon’ble supreme Court in the case of Directorate General of Goods and Services Tax Intelligence (Hqs) & Ors. Versus Gameskraft Technologies Private Limited and Ors. (supra) relied upon by the assessee, observed that in income tax, tax liability is calculated after netting of business expenses and pay out against receipts which implies that in the given facts of the case, under the provision the income tax Act only the net income will be taxable even in the case of winning from game portal. The relevant extracts of the order of the Hon’ble supreme Court are reproduced as under:

I. Submissions

81. The Casinos contend that GST is liable to be discharged only on GGR, namely the net revenue retained after adjustment of winnings paid out to players against the value of chips or tokens purchased by them. According to the assessees, such retained amount alone constitutes the actual consideration received by the Casino and therefore represents the true transaction value under Section 15 of the CGST Act. The assessees submit that the Department’s attempt to levy GST on GBV, namely the aggregate value of bets placed during gaming transactions, is contrary to Section 15 and results in artificial and excessive valuation detached from the actual revenue retained by the Casinos. The assessees submit that the Department’s attempt to levy GST on GBV, namely the aggregate value of bets placed during gaming transactions, is contrary to Section 15 and results in artificial and excessive valuation detached from the actual revenue retained by the Casinos.

81.1. The Casinos further contend that no workable statutory machinery exists for determination of the “face value of the bet” in live casino environments involving continuous circulation of chips, repeated wagering transactions and multiple gaming tables. According to the assessees, Rule 31A(3) is inapplicable to casino transactions and the subsequent insertion of Rule 31C demonstrates that no prior statutory mechanism existed for valuation of casino gaming activities. The assessees additionally challenge the Department’s resort to Rule 31 and indirect reconstruction of GBV through extrapolation and house advantage methodologies. The Casinos also reiterate certain submissions urged in the context of online gaming regarding the existence of actionable claims.

81.2. Per contra, the Revenue contends that every bet placed by a player upon an uncertain outcome forms part of the taxable betting and gambling transaction undertaken within the casino ecosystem and that the amount staked by the player constitutes consideration for such activity. According to the Department, GST is attracted upon the taxable supply itself and not upon the ultimate profitability or net retained earnings of the Casino. The Revenue further submits that once the Casinos failed to maintain complete records of actual betting values, recourse to Rule 31 and indirect reconstruction methodologies based on available data and house advantage percentages became both permissible and necessary. According to the Department, Rule 31C merely introduced greater specificity in relation to casino valuation and does not imply absence of any earlier statutory valuation framework.

II. Supply and valuation pertaining to Casinos

Existence of Taxable Supply and Actionable Claims

82. The contention that no actionable claim arises in casino transactions cannot be accepted. As already discussed hereinabove, once a player stakes money upon an uncertain outcome, the participant acquires a contingent beneficial interest in movable property represented by the potential winnings. Such conditional right to claim winnings upon occurrence of an uncertain event squarely answers the description of an actionable claim within the meaning of Section 3 of the Transfer of Property Act.

82.1. The Casino provides the gaming infrastructure, controls and conducts the games, regulates participation, collects stakes, determines payouts and retains the house advantage. Similar to online gaming platforms, the actionable claim capable of participation and enforcement arises only within the gaming ecosystem operated by the Casino. The supply involving such actionable claims therefore constitutes the taxable event under the CGST framework.

82.2. The contention that no supply or actionable claim arises merely because casino transactions are conducted through chips or tokens also cannot be accepted. A player cannot participate in casino gaming without first placing bets through chips or tokens purchased within the casino ecosystem. The chips or tokens merely constitute the medium through which bets are placed within the casino environment. The taxable event arises when a player stakes such amount upon an uncertain outcome in the course of betting and gambling activities conducted by the Casino.

82.3. Indeed, the material placed on record demonstrates that the Casinos themselves treated their activities as taxable gambling transactions and discharged GST at the applicable rate, albeit upon a valuation methodology restricted to net retained revenue. The real dispute therefore concerns the determination of taxable value and the methodology adopted for its computation rather than the existence of taxable supply itself.

GST is a tax on supply and not on profits

82.4. At the first instance, the entire foundation of the GGR methodology proceeds on an erroneous understanding of the taxable event under the GST regime. GST is attracted upon a taxable supply and not upon the profitability of the supplier. The levy does not fluctuate depending upon whether the supplier ultimately earns profits or suffers losses in the course of business operations. Consideration arises the moment a player places a bet upon an uncertain outcome for participation in the gambling activity conducted by the Casino. The taxable event crystallises when the player is permitted to participate in the gambling activity upon placing bets through chips or tokens.

82.5. As already mentioned earlier, the subsequent distribution of winnings cannot alter the character of the original payment constituting consideration. The Casinos, however, seek to determine their tax liability based upon the net financial outcome at the end of a gaming cycle by adjusting winnings against losses. Such a methodology is fundamentally incompatible with the structure of GST and is not contemplated.

82.6. The illustrations furnished during the course of hearing clearly expose the fallacy underlying the GGR model. Where a player loses the amount staked by him, the Casinos themselves admit that the amount retained constitutes consideration. However, where another player succeeds and wins a larger amount, the Casinos contend that no consideration exists since the Casino has suffered a loss. The inevitable consequence of this submission is that the existence of consideration becomes contingent upon the outcome of the game. Such a proposition cannot be accepted in law.

82.7. The gambling activity conducted by the Casino remains identical irrespective of whether a player wins or loses. The subsequent adjustment of winnings or payouts therefore cannot obliterate the taxable supply already completed upon participation in the gambling activity.

82.8. This Court finds merit in the submission of the learned ASG that the GGR principle effectively amounts to netting off business expenses and payouts against receipts for the purpose of arriving at tax liability. Such an exercise may perhaps be relevant in the context of income tax jurisprudence where profits and gains are subjected to tax. GST, however, is not a tax on profits. The value of supply under Section 15 is not confined merely to the residual earnings retained after adjustment of payouts or losses.”

8.3 The facts in the case of the assessee similar to the facts in the case of order of the Coordinate Bench Hyderabad Tribunal in the case of Emdarapu Kumaraswamy vs. ITO ward -11(1) Hyderabad(supra). Therefore, following the same and in view of the ratio of the order of the Apex Court in the case of Directorate General of Goods and Services Tax Intelligence (Hqs) & Ors. Versus Gameskraft Technologies Private Limited and Ors., we hold that the winning of the assessee cannot be considered only by considering the gross winning of Rs. 1,21,53,323/- as considered by the AO and upheld by the Ld. CIT (A) but it will be the net of the gross winning and the total buy made by the assessee which in the case of the assessee amounts to loss of Rs. 31,78,733/-. Therefore, we hold that the addition of Rs. 1,21,53,323/- made by the AO and sustained by the Ld. CIT (A) is not justified and the same is deleted. Ground No. 2 of the appeal is allowed. In view of ground no. 2 of the appeal being allowed the others grounds of appeal become academic and are left open in this case.

9. In the result, the appeal of the assessee is allowed.

Order pronounced in the Open Court on- 02.09.2026