ITAT Holds Only Real Net Online Gaming Winnings Taxable Under Section 115BB

Srither Vs CIT (ITAT Chennai)

Gaming Wallet Turnover Is Not a Jackpot—Only Real Net Winnings, Not Recycled Credits, Taxable u/s 115BB: Chennai ITAT

The Chennai ITAT has held that, even before the introduction of ss.115BBJ & 194BA, only real net winnings from online games could be taxed u/s 115BB. The cumulative credits appearing in an online gaming wallet cannot be treated as income without considering the corresponding buy-ins, repeated circulation of funds & redeployment of earlier winnings in subsequent games.

Where the gaming platform’s own statement established that the assessee’s total buy-ins exceeded his gross winnings, there was no real income liable to tax. The Tribunal therefore deleted an addition of ₹2,44,50,134.

Facts of the Case

The assessee, an individual, filed his original return for AY 2022-23 declaring income of ₹12,80,020. He subsequently filed a revised return declaring income of ₹7,74,220.

The case was selected for scrutiny after the AO received information that the assessee had won approximately ₹2.44 crore through online games operated by Gameskraft Technologies Pvt. Ltd. but had not disclosed the amount in his return.

The assessee explained that the figure represented cumulative winning entries in his gaming account & not his real income. According to the statement furnished by Gameskraft, his gross winnings were ₹2,44,50,134, whereas his total buy-ins were ₹2,74,96,660. The overall gaming activity therefore resulted in a net loss of ₹30,56,491.

The AO rejected the explanation. He held that no expenditure was deductible against gaming winnings & added the entire gross winnings under the head “Income from other sources”.

The CIT(A) confirmed the addition.

Were Online Skill Games Outside Section 115BB?

The assessee’s primary argument was that online games involving skill did not fall within the expression “card game and other game of any sort” appearing in s.2(24)(ix) & were therefore outside s.115BB.

Reliance was placed upon the Madras High Court’s decision in CIT v. G.R. Karthikeyan, which had distinguished skill-based prizes from chance winnings or windfalls.

The Tribunal rejected this argument because the Madras High Court’s ruling had been reversed by the Supreme Court in CIT v. G.R. Karthikeyan [1993] 201 ITR 866.

The Supreme Court had held that prize money received through a skill-based competition also constituted income & that “winnings” u/s 2(24)(ix) were not confined to chance winnings.

Thus, online gaming income was not exempt merely because the game involved skill.

Gross Credits Versus Real Winnings

The assessee’s alternative argument was that only the real net winnings, if any, could be brought to tax.

The Tribunal found merit in this contention. Every credit arising during multiple rounds of gameplay could not automatically acquire the character of taxable income.

Online gaming involves continuous deposits, withdrawals, buy-ins, winnings & redeployment of the same funds. A winning from one round may immediately become the buy-in for another. Adding all intermediate winning entries ignores the economic reality that the same amount may circulate repeatedly within the wallet.

The Income-tax Act taxes real income or actual accretion, not gross transactional movement or repeated recycling of a player’s funds.

Expression “Income by Way of Winnings” Is Significant

Section 115BB, as applicable to AY 2022-23, used the expression “income by way of winnings”. Section 194B similarly contemplated TDS from income by way of winnings.

The word “income” required the AO first to determine whether the assessee had actually realised a gain. Only the winnings component exceeding the corresponding stake or buy-in could possess the character of income.

The Tribunal drew support from decisions relating to horse-race winnings in Royal Calcutta Turf Club & Delhi Race Club. Those decisions recognised that the amount invested by the punter in the relevant race had to be reduced while determining income by way of winnings.

The same underlying principle applied to online gaming transactions, provided the buy-ins could be reliably linked & verified through the gaming platform’s records.

Sections 115BBJ & 194BA Clarified the Existing Principle

The Finance Act, 2023 introduced a specific framework for online gaming through ss.115BBJ & 194BA, providing for taxation and TDS on net winnings.

Rule 133 subsequently prescribed a computational mechanism considering the opening balance, deposits, withdrawals & closing balance in the user account. CBDT Circular No. 5/2023 also explained the methodology.

The Tribunal held that these provisions did not introduce the concept of net winnings for the first time. They clarified & codified the pre-existing principle that only actual winnings, rather than gross wallet credits, constitute taxable income.

The new framework was required because the earlier provisions did not contain a specific computational mechanism suited to the distinctive nature of online gaming.

Therefore, although ss.115BBJ & 194BA applied prospectively, the principles embedded in them threw considerable light on the proper interpretation of s.115BB for AY 2022-23.

Section 58(4) Did Not Authorise Taxing Player’s Own Money

The CIT(A) had relied upon s.58(4), which prohibits deduction of expenditure or allowance against income by way of winnings.

The Tribunal held that the restriction operates only after the existence of income by way of winnings is established. It does not authorise the Department to treat gross wallet movements or the player’s own recycled buy-ins as income.

Reducing the verifiable buy-in while determining whether any winning exists is conceptually different from allowing a separate expenditure against an already ascertained winning.

ITAT’s Decision

The statement obtained from Gameskraft itself showed gross winnings of ₹2.44 crore against buy-ins of ₹2.75 crore, resulting in a net loss of ₹30.56 lakh.

Following the Bangalore ITAT decision in Arakere Chennappa Vishwanath v. ITO & Hyderabad ITAT’s decision in Emdarapu Kumaraswamy v. ITO, the Tribunal held that no taxable winning arose.

The entire addition of ₹2,44,50,134 was deleted & the appeal was allowed.

Author’s Comments

The order does not hold online gaming income to be exempt. It holds that income must first exist before the special rate can be applied.

Section 58(4) can deny expenditure against winnings, but it cannot convert the assessee’s own stake into winnings. Otherwise, a player suffering an overall loss could face tax exceeding his actual financial capacity merely because the same money appeared as multiple intermediate credits.

In short, the taxman may take 30% of the jackpot—but cannot call every coin rotating inside the gaming wallet a fresh jackpot.

Cases Discussed

• CIT v. G.R. Karthikeyan [1980] 124 ITR 85 (Mad.)
• CIT v. G.R. Karthikeyan [1993] 201 ITR 866 (SC)
• Arakere Chennappa Vishwanath v. ITO, ITA No.3016/Bang/2025, dated 23.07.2026
• Royal Calcutta Turf Club v. Dy. CIT
• Delhi Race Club (1940) Ltd. v. Dy. CIT [2007] 17 SOT 39 (Delhi)
• Union of India v. Paras Laminates (P.) Ltd. [1990] 186 ITR 722 (SC)
• Emdarapu Kumaraswamy v. ITO [2026] 187 taxmann.com 1006 (Hyderabad – Trib.)

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, CHENNAI

This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short “CIT(A)”) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) dated 25.11.2025 for Assessment Year (AY) 2022-23.

2. The assessee is an individual and filed the return of income for AY 2022-23 on 31.07.2022 declaring total income of Rs.12,80,020/-. The assessee filed a revised return on 24.08.2022 declaring total income of Rs.7,74,220/-. The case was selected for scrutiny, and the statutory notices were duly served on the assessee. The AO received information that the assessee has won Rs. 2,44,64,534/- from Gameskraft Technologies Pvt. Ltd. during FY 2021-22 and that the same has not been included as income in the ITR. The AO called on the assessee to furnish details pertaining to the same. The assessee submitted before the AO that he has actually incurred loss of Rs. 30,56,491/- from playing online games and hence the same is not declared in the return of income. The A.O however held that the is not entitled to claim any expenditure against the winning from playing online games and accordingly made an addition under the head “income from other sources” towards the gross winning of Rs. 2,44,50,134/-. On further appeal, the CIT(A) confirmed the addition by holding that:

“5.2 During the appellate proceedings, the appellant’s primary contention was that online gaming is not covered by Section 2(24)(ix) and therefore Section 115BB should not apply. He argued that the term “other game of any sort” must be interpreted ejusdem generis with “card games” and “television shows” as per Explanation (ii) to Section 2(24)(ix), and that online games are technologically different from the games contemplated when the provision was originally enacted. He submitted that the subsequent introduction of Section 115BBJ through Finance Act 2023, which specifically taxes online gaming from AY 2024-25, shows that prior to that year, online gaming was not intended to be taxed under Section 115BB. The appellant further submitted, relying upon the statement provided by Gameskraft Technologies Pvt. Ltd dated 05.02.2024, that although his gross winnings were Rs. 2,44,50,134/-, his total buy-in cost was Rs. 2,74,96,660, resulting in a net loss of Rs. 30,56,491/-. According to him, only the “net” winnings should be taxed because earlier Section 74A had permitted set-off of losses from one game against income from another, and Section 58(4) only disallows “expenditure”, not set-off of losses from other similar gaming transactions. The appellant also submitted that gross winnings have been misunderstood by the department because Gameskraft reports only winning transactions and does not explicitly report losses, thereby leading to an inflated figure of taxable income.

5.3 After considering the assessment order as well as submission filed during appellate proceedings, I find no merit in the appellant’s arguments. The AO has correctly relied on the statutory scheme. Section 2(24)(ix) uses the expression “card game and other game of any sort”, which is deliberately wide. The phrase “any sort” cannot be read down artificially to exclude online card games merely because technology has changed. The dominant character of the activity—i.e., participation in a game of cards for stake—remains unchanged whether it is played physically or through an electronic medium. The argument that Section 115BBJ introduced prospectively implies that Section 115BB did not apply earlier is incorrect because Section 115BBJ is only a specific provision to streamline TDS and reporting compliance for online gaming companies; it does not imply that income from online games was earlier exempt

3. The Ld. Authorized Representative (AR) of the assessee at the outset submitted that the winnings form playing online games cannot be brought to tax u/s. 115BB of the Act. The Ld. AR in this regard placed the reliance on the relied on the decision of the Hon’ble Madras High Court in the case of CIT vs. GR Karthikeyan [1980] 124 ITR 85 (Mad.), where it is held that:

“Prior to this amendment, the persons who had this kind of windfall from lotteries, races, card games, etc., were completely free from having to pay any tax, while the persons who earned by the sweat of their brow had to pay the tax levied under the Act. This was an anomaly especially in an egalitarian society. This is also inconsistent with the cardinal doctrine of taxation based on ability to pay. Bearing these aspects in mind, Parliament has brought in the relevant provisions so as to tax receipts by chance winnings or windfalls. In doing so, Parliament virtually introduced a statutory fiction so as to enlarge the concept of taxable income by including the winnings in races, etc., which are not ordinarily regarded as income. In the context of this legislative intent and in the light of the meaning given in the dictionary to the word “winnings”, it would be clear that what was intended to be taxed was only a windfall that reached persons without any effort on their part, without any skill being exhibited by them. This is a case, as we have already seen, where there was an exhibition of skill and there was an element of effort in getting the prize and, therefore, there is no scope for such receipt being considered as falling under the above provision. Thus considered in the light of the above background, we are satisfied that the word “winnings” should be assigned the meaning of chance winning and not winning a prize.”

4. Without prejudice to the above submissions, the Ld. AR argued that the real income earned by the assessee is a loss and in this regard drew our attention to the following statements received from M/s. Gameskraft Technologies Pvt. Ltd.:

Company

Calculation of Winning / Loss: Difference between Buy-in Amount vs Winning

5. The Ld. AR also placed reliance on the decision of the Bengaluru Bench of the Tribunal in the case of Arakere Chennappa Vishwanath vs. ITO [ITA No.3016/Bang/2025 dated 23.07.2026], where it is held that it is the real income that needs to be taxed. The Ld. AR accordingly submitted that the AO is not correctly bringing the gross winning to tax in the hands of the assessee.

6. The Ld. Departmental Representative (DR), on the other hand, relied on the orders of the lower authorities.

7. We have heard the parties and perused the material available on record. The Ld. AR’s primary submission is that winnings from online games, being games involving skill, fall outside the scope of Section 2(24)(ix) of the Act, relying on the decision of the Hon’ble Madras High Court in G.R. Karthikeyan (supra). We notice that this decision was reversed by the Hon’ble Supreme Court in CIT vs. G.R. Karthikeyan [1993] 201 ITR 866 (SC), wherein it was held that prize money received through a skill-based competition constitutes “income” exigible to tax, and that the expression “winnings” in Section 2(24)(ix) is not confined to chance winnings alone. We are therefore of the view that the Ld. AR’s primary submission cannot be accepted. We will now proceed to decide the without prejudice submission raised by the Ld. AR, that only the real net winnings, and not the gross wallet credits, are exigible to tax u/s. 115BB of the Act. In this regard we notice that an identical has been considered by the Bengaluru Bench of the Tribunal in the case of Arakere Chennappa Vishwanath (supra), where it is held that:

14.1 At the outset, we note that the entire addition made by the AO proceeds on the assumption that every amount credited in the gaming wallet during the course of gameplay constitutes taxable income in the hands of the assessee. The AO has proceeded to tax the cumulative gross winnings figure furnished by M/s Gameskraft Technologies Pvt. Ltd. without examining the corresponding buy-in amounts, repeated circulation of funds, redeployment of w innings in subsequent games and the ultimate net result of the gaming activity. From the materials placed on record, it is evident that the assessee had total buy-in amounts aggregating to Rs. 2,61,51,624/- as against gross winnings of Rs. 2,33,52,271/- resulting into a net loss of Rs. 27,99,353/-only. The revenue authorities have not disputed these figures emerging from the very same information obtained from Gameskraft u/s 133(6) of the Act. However, the authorities below selectively adopted only the gross winnings figure while completely ignoring the corresponding participation costs and buyin amounts embedded in the same transaction stream.

14.2 In our considered opinion, such an approach is contrary to the fundamental concept of “income” under the Act. The Income Tax Act taxes real income and not mere gross transactional movements or recycling of funds within a gaming wallet. Merely because amounts are repeatedly credited and debited during multiple rounds of online gameplay, the same cannot automatically assume the character of taxable income. Unless there is a real gain or accretion to the assessee, no income can be said to arise.

14.3 We further note that the provisions of section 115BB as applicable for the year under consideration used the expression “income by way of winnings”. Similarly, section 194B also contemplated deduction of tax from “income by way of winnings”. Thus, even under the pre-amended scheme, the legislature always intended to tax only the real winnings component and not the gross turnover or gross circulation of money during gameplay. We further note new section being section 115BBJ and section 194BA was inserted vide Finance Act 2023 with respect to wining from online game. These provision uses the phrase “net wining” rather income by way of “wining”. At this junction it is relevant to reproduce the memorandum explaining the provisions of Finance Act, 2023 introducing section 194BA and section 115BBJ which reads as under:

TDS and taxability on net winnings from online games Section 194B of the Act provides that the person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort in an amount exceeding ten thousand rupees shall, at the time of payment thereof, deduct income-tax thereon at the rates in force.

2. Section 194BB of the Act provides for similar provisions for deduction of tax at source for horse racing in any race course or for arranging for wagering or betting in any race course.

3. Section 115BB of the Act provides the rate of tax on 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.

4. It is seen that deductors are deducting tax under section 194B and 194BB of the Act by applying the threshold of Rs 10,000/- per transaction and avoiding tax deduction by splitting a winning into multiple transactions each below Rs 10,000/-. This is against the intention of legislature.

5. It is also seen that in recent times, there has been a rise in the users of online games. There is a need to bring in specific provisions regarding TDS and taxability of online games due to its different nature, being easily accessible vide the Internet and computer resources with a variety of playing options and payment options.

6. Accordingly, it is proposed to:––

(i) amend section 194B and 194BB of the Act to provide that deduction of tax under these sections shall be on the amount or aggregate of the amounts exceeding ten thousand rupees during the financial year;

(ii) amend section 194B of the Act to include “gambling or betting of any form or nature whatsoever” within its scope;

(iii) amend section 194B of the Act to exclude online games from the purview of the said section from the 1st day of July, 2023, since a new section 194BA is proposed to be introduced for deduction of tax at source on winnings from online games from that date;

(iv) insert a new section 194BA in the Act, with effect from 1st July 2023, to provide for deduction of tax at source on net winnings in the user account at the end of the financial year. In case there is withdrawal from user account during the financial year, the incometax shall be deducted at the time of such withdrawal on net winnings comprised in such withdrawal. In addition, income-tax shall also be deducted on the remaining amount of net winnings in the user account at the end of the financial year. Net winnings shall be computed in the prescribed manner.

(v) to provide in the proposed section 194BA that in a case where the net winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the net winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the net winnings;

(vi) to provide that if any difficulty arises in giving effect to the provisions of new section 194BA, the Board may, with the prior approval of the Central Government, issue Board shall be laid before each House of Parliament, and shall be binding on the income tax authorities and on the person responsible for deduction of income-tax on any income by way of winnings from online game;

(vii) to provide the definition of “computer resource”, “internet”, “online game”, “online gaming intermediary”, “user”, “user account” in the proposed section 194BA;

(viii) to amend section 115BB of the Act to exclude income from winnings from online games from the purview of the said section from the assessment year 2024-25, since it is proposed to introduce section 115BBJ to tax winnings from online games from that assessment year;

(ix) to insert a new section 115BBJ in the Act with regard to tax on winnings from online games to provide that where the total income of an assessee includes any income by way of winnings from any online game, the income-tax payable shall be the aggregate of—

• • • • the amount of income-tax calculated on net winnings from such online games during the previous year, computed in the prescribed manner, at the rate of thirty per cent; and
      • the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the net winnings referred to above;

(x) to provide the definition of “computer resource”, “internet”, “online game” in the proposed section 115BBJ.

14.4 A careful reading of the above memorandum clearly shows that the legislature itself noticed practical difficulties in taxing online gaming transactions under the old framework. The memorandum specifically recognised the distinct nature of online gaming and therefore introduced a special mechanism for taxation and TDS on “net winnings” from online games. The newly inserted provisions expressly provide that tax is to be deducted and levied only on “net winnings” computed in the prescribed manner.

14.5 Further, Rule 133 framed pursuant to section 194BA provides a complete computational mechanism for determination of net winnings by considering opening balance, deposits, withdrawals and closing balance in the user account. The CBDT Circular No. 05/2023 dated 22.05.2023 also elaborately explains the methodology for determination of net winnings from online games.

14.6 The circular further clarifies that transfers within user accounts, deposits made by users and repeated circulation of amounts cannot themselves constitute taxable winnings unless there is net accretion in the user account. The mechanism prescribed in Rule 133 proceeds entirely on the principle that only net winnings are taxable and not gross wallet credits.

14.7 In our considered opinion, the subsequent insertion of section 194BA and section 115BBJ does not introduce any fundamentally new principle of taxation. Rather, the amendment merely clarifies and codifies the already existing legislative intent that only real net winnings from online games are chargeable to tax. The amendment was necessitated because the earlier provisions contained no specific computational mechanism for online gaming activities involving continuous deposits, withdrawals, buy-ins, bonus credits and repeated circulation of funds within electronic gaming wallets.

14.8 It is a settled principle of law that a subsequent amendment introduced to remove ambiguity and explain the true legislative intent is clarificatory in nature. In the present case, the newly inserted framework only explains how winnings from online games are to be computed and taxed. Therefore, in our considered view, the principles embedded in section 115BBJ, section 194BA and Rule 133 are clarificatory and declaratory in nature and therefore throw considerable light on the correct interpretation of section 115BB even for the year under consideration i.e. A.Y. 2022-23.

14.9 We further notice that similar principles have already been recognised by the coordinate benches of the Tribunal in the context of horse race winnings while interpreting section 194BB and the expression “winnings”. In the case of Royal Calcutta Turf Club reported in 114 taxman 82, the Kolkata Bench of the Tribunal held that only net winnings after adjusting the investments made by the punter can be considered for the purposes of deduction of tax at source. The Tribunal specifically recognised that “winnings” in common parlance means the amount received in excess of the amount invested by the punter. The relevant observations of the Kolkata Bench are reproduced as under: 11. The matter requires examination from legal angle also. For this purpose, we shall extract the provisions of section 194BB as below : “194BB. Any person, being a bookmaker or a person to whom a licence has been granted by the Government under any law for the time being in force for horse racing in any race course or for arranging for wagering or betting in any race course, who is responsible for paying to any person any income by way of winnings from any horse race in an amount exceeding five thousand rupees shall, at the time of payment thereof, deduct income-tax thereon at the rates in force :” It is firstly required to be noted in this connection that the expression used in this section is “income by way of winnings”. The connotation of “income” necessarily implies the net income after deducting the expense incurred for earning the gross income. There cannot to any doubt about the fact that the cost of purchasing tickets for race which fetches the prize money, must necessarily be deducted to arrive at the net income. Further- more, the legislation has also used the expression “from any horse race” and not “horse races” in plural. It thus means that the income by way of winnings from any particular horse race is required to be taken into consideration. So, one horse race is required to be taken as a unit and the entire money received by way of winnings from the said horse race is first to be considered as the gross income from that horse race, therefrom is required to be deducted the investment made by the punter towards acquiring the tickets, may be more than one, but pertaining to the same horse race. In principle, we, therefore, do not find any hesitation in directing that tax is required to be deducted only from the net income arising out of the horse race to the punter from any particular race after deducting the investments made by the punter in purchasing all the tickets relating to such horse race. The CBDT also accepted the said proposition mostly in its Circular No. 240 as mentioned above. The CBDT, however, directed that investment in such tickets alone which fetched the winnings money should be deducted, we are, however, of the opinion that if all the tickets purchased by a punter in a particular horse race can be linked up together and if there be regular machinery with the Turf Club authorities to take into consideration all the tickets purchased in connection with one horse race, then the entire amount of investment on all the horses irrespective of whether the horse won or lost in that race, should be treated as investment made by the punter in that horse race. However, a note of caution is being recorded in this connection. A claim made by the punter that he had purchased a large number of tickets separately in respect of the same horse race should not be accepted unless such claim can be verified by a process existing in the procedural mechanism of the Turf Club.

14.10 Similarly, the Delhi Bench of the Tribunal in the case of Delhi Race Club reported in 17 SOT 39 also followed the above principle and held that the amount invested by the punter in horse races is required to be reduced while computing winnings for TDS purposes u/s 194BB of the Act. The relevant observations of the Delhi Bench are reproduced as under:

11. With regard to the second contention of the learned Authorised Representative regarding deduction of investment made by punters in the horse races, we found that issue stands squarely covered by the decision of Tribunal Calcutta Bench in the case of Royal Calcutta Turf Club (supra), as follows : “The expression used in section 194BB is income by way of winnings. The connotation of income necessarily implies the net income after deducting the expenses incurred for earning the gross income. There could not be any doubt about the fact that the cost of purchasing tickets for race which fetched the prize money, must necessarily be deducted to arrive at the net income. Furthermore, the legislation has also used the expression ‘from any horse race’ and not ‘horse races’ in plural. It, thus, meant that the income by way of winnings, from any particular horse race is required to be taken, into consideration. So, one horse race is required to be taken as a unit and the entire money received by way of winnings from the said horse race is first to be considered as the gross income from that horse race. Therefrom one is required to deduct the investment made by the punter towards acquiring the tickets, may be more than one, but pertaining to the same horse race. Therefore, tax is required to be deducted only from the net income arising out of the horse race to the punter; from any particular race after deducting the investment made by the punter in purchasing all the tickets relating to such horse race. The CBDT has also accepted the said proposition in its Circular No. 240, but has directed that investment in such tickets alone which fetched the winnings money should be deducted. However, if all the tickets purchased by a punter in a particular horse race club be linked up together and if there be regular machinery with the turf club authorities to take into consideration all the tickets purchased in connection with one horse race, then the entire amount of investment on all the.horses.irrespective of whether the horse won or lost in that race, should be treated as investment made by the punter in that horse race. A claim made by the punter: that he has purchased a large number of tickets separately in respect of the same horse race, should not be accepted unless such claim could be verified by a process existing in the procedural mechanism of the turf club.”

12. No decision to the contrary was brought to our notice by learned Departmental Representative during the course of hearing. We are well aware of the judicial precedent that an order passed by the co-ordinate Bench should not be lightly disregarded. In taking this view, we are supported by the decision of Hon’ble Supreme Court in the case of Union of India v. Paras Laminates (P.) Ltd. [1990] 186 ITR 722 wherein Hon’ble Supreme Court has observed that it is true that a Bench of two Members must not lightly disregard the decision of another Bench of the same Tribunal on an identical question. The rationale of this rule is the. need for continuity, certainty and predictability in the administration of justice. As the facts and circumstances of the instant case are in pari materia, respectfully following the proposition laid down by the co-ordinate Bench, the Assessing Officer is directed to reduce the amount of tickets purchased by the punter relating to such horse race.

14.11 Although the above decisions were rendered in the context of horse race winnings, the underlying principle equally applies to online gaming transactions. The common thread running through section 194BB, section 194B, section 194BA, section 115BB and section 115BBJ is that only the real winnings component is intended to be taxed and not the gross circulation of funds.

14.12 The authorities below, in our considered opinion, committed a fundamental error in treating the entire gross wallet credits as taxable income without determining whether the assessee had any real net winnings at all. Once the very information received from Gameskraft itself disclosed that the assessee’s buy-in amounts exceeded the gross winnings, the addition made by the AO becomes wholly unsustainable. We also find considerable force in the assessee’s argument that had there been actual net winnings of Rs. 2,33,52,271/-, the online gaming intermediary itself would have deducted tax at source on such winnings. The absence of TDS itself probabilises the assessee’s contention that there were no net winnings chargeable to tax.

14.13 The reliance placed by the learned CIT(A) on section 58(4) is also misplaced. Section 58(4) merely prohibits deduction of expenditure or allowance while computing income from winnings. However, before invoking section 58(4) of the Act, the authorities must first determine whether there exists any real “income by way of winnings”. The provision does not authorise the department to artificially treat gross transactional entries or recycled gaming funds as income. Accordingly, considering thetotality of facts and circumstances of the case, the legislative framework introduced by Finance Act 2023, Rule 133, CBDT Circular No. 05/2023 and the judicial principles laid down in Royal Calcutta Turf Club and Delhi Race Club, we hold that only real net winnings from online gaming activities can be subjected to tax and not the gross wallet credits or gross winnings reflected during intermediate stages of gameplay.

14.14 Since the material available on record itself demonstrates that the assessee had incurred net loss in the gaming activity after considering the buy-in amounts, there remained no taxable income liable to be assessed u/s 115BB of the Act. The addition of Rs .2,33,52,271/- made by the AO and sustained by the learned CIT(A) is therefore directed to be deleted. Accordingly, the grounds raised by the assessee are allowed.

8. We further notice that an identical view has been taken by the Hyderabad Bench of the Tribunal in the case of Emdarapu Kumaraswamy vs. ITO [2026] 187 taxmann.com 1006 (Hyderabad – Trib.) involving the same online gaming platform for the same assessment year, wherein it was held that “winnings” must be computed as the difference between the amount invested by the player and the amount received, and that the bar of the Act against deduction of expenditure does not justify treating the player’s own buy-in as income. We notice that no other decision taking a contrary view, was brought to our notice by either side. Therefore, respectfully following the above views taken by the coordinate Benches at Bangalore and Hyderabad, we hold that the addition of Rs. Rs. 2,44,50,134/- made by the AO is to be deleted

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

Order pronounced on 10th day of September, 2026 at Chennai.