DCIT Vs Play Games 24×7 Private Limited (ITAT Mumbai)
Player’s Wallet Is Not a Single Winning, and a Referral Bonus Is Not a Prize: ITAT Deletes Gaming Platform’s TDS Disallowances
Case Details
The four appeals covered player winnings, promotional bonuses, sponsored prizes, CSR donations and employee stock option expenditure. The largest question was whether separate gaming payouts could be aggregated in a player’s wallet to trigger tax deduction under section 194B as it stood in the years before the Tribunal.
AY 2015–16: ₹273.43 Crore Disallowance of Player Payouts
For Assessment Year 2015–16, the Assessing Officer disallowed ₹273,43,53,943 under section 40(a)(ia) for alleged failure to deduct tax under section 194B. The company argued that the then applicable ₹10,000 threshold had to be tested against each payment of winnings, rather than by adding all amounts won by a player during the year.
The Tribunal followed its earlier decision in the company’s own case for Assessment Year 2017–18. Under the section 194B wording relevant to these years, the obligation arose at the time of payment of an amount exceeding ₹10,000. That wording did not require separate payments to be aggregated across the financial year. The fact that amounts accumulated in an electronic wallet did not, by itself, turn them into one payment above the threshold.
There was a second, independent reason why the disallowance failed. The player-funded payouts in question had not been debited to the company’s profit and loss account or claimed as expenditure. Section 40(a)(ia) could not disallow an amount that had never been claimed as a deduction. The Tribunal therefore deleted the ₹273.43 crore disallowance. The principle that section 40(a)(ia) does not operate where the impugned amount has not been claimed as expenditure is also reflected in CIT v. Dedicated Healthcare Services (TPA) India Pvt. Ltd.
This finding concerns the statutory wording applicable to the assessment year before the Tribunal. It should not be read as a statement of the TDS rules for every later year.
Promotional Bonus Is Not Automatically a Winning
The officer had separately disallowed ₹2,45,68,166 relating to bonuses given to players. The company explained that these were deposit-linked and referral bonuses: players received them for making deposits or referring others to the platform, rather than for winning a game.
The Tribunal focused on why the payment became due. A person’s status as a player on a gaming platform did not make every amount credited to that person a “winning” under section 194B. On the facts presented, the disputed bonuses arose from specified promotional conditions and were not determined by the outcome of a game.
The Assessing Officer had accepted the company’s explanation for other promotional components, including tournament promotional expenditure. As to the disputed bonuses, the Tribunal held that the basic condition for applying section 194B had not been established. It deleted the ₹2.45 crore disallowance. The mere absence of player-level information in the form sought by the officer could not itself create a TDS obligation where the identified payments were promotional bonuses.
AY 2020–21: Sponsored Prizes and an Estimated Default
For Assessment Year 2020–21, the dispute concerned ₹29,20,84,360 of sponsored-prize expenditure. Unlike the player-funded payouts considered for Assessment Year 2015–16, this amount was routed through the company’s profit and loss account. The earlier finding about expenditure never claimed as a deduction therefore could not dispose of this issue.
The officer had not, however, identified an individual prize payment exceeding ₹10,000 on which tax should have been deducted but was not. Instead, he estimated a disallowance using a percentage of payout figures from Assessment Year 2017–18 and scaled it by reference to growth in returned income.
The Tribunal held that the section 194B threshold applicable to Assessment Year 2020–21 had to be examined payment by payment. An estimated figure derived from another year could not establish a TDS default on a particular payment. It accordingly deleted the ₹29.20 crore disallowance.
CSR Donation and ESOP Expenditure
The Revenue also challenged the allowance of ₹48,45,000 under section 80G, representing 50% of the company’s ₹96,90,000 CSR donation. The Tribunal held that Explanation 2 to section 37(1), which prevents a business expenditure deduction for CSR spending, does not create a general prohibition against an otherwise eligible deduction under section 80G. The donation receipt and the recipient’s eligibility had been verified and were not effectively disputed. The Revenue’s ground failed. The same distinction between section 37(1) and section 80G has been considered by the Mumbai Tribunal in Dalal And Broacha Stock Broking Pvt. Ltd. Vs PCIT-4.
The Revenue’s challenge to the allowance of ₹12,22,63,689 of ESOP expenditure also failed. The Tribunal followed decisions in the company’s own earlier years, including the approach based on Biocon Ltd. v. DCIT.
A separate Revenue ground for Assessment Year 2015–16 concerned the correct computation of income while giving effect to successive orders. That limited issue was restored to the Assessing Officer for verification after considering the subsisting assessment and appellate orders.
Author’s Comments
The order turns on identifying the payment, its source and the event that gave rise to it. A wallet balance accumulated from separate winnings was not treated as a single payment under the section 194B wording applicable to these years. A deposit or referral incentive was examined by its promotional condition, rather than labelled a winning simply because the recipient played games.
The outcomes also differ by issue. The company obtained direct deletion of the three TDS-related disallowances, while the Revenue’s CSR and ESOP challenges were dismissed. Only the limited computation issue for Assessment Year 2015–16 went back to the Assessing Officer.
Cases Discussed
- Play Games 24×7 Private Limited – assessee’s own case for AY 2017-18, ITA Nos. 8302/Mum/2025 & 7076/Mum/2025, dated 08.07.2026 — followed on interpretation of section 194B; separate payments below ₹10,000 were not required to be aggregated merely because accumulated winnings in a player’s wallet crossed the threshold.
- Royal Calcutta Turf Club v. Dy. CIT [2001] 76 ITD 237 (ITAT Calcutta) — referred to on the treatment of winnings. TaxGuru records the decision while discussing the taxation of gaming winnings.
- Delhi Race Club (1940) Ltd. v. Dy. CIT [2007] 17 SOT 39 (ITAT Delhi) — referred to for payment-wise application of the statutory threshold; the TaxGuru discussion records the ruling that the prescribed floor limit is applied to each winning.
- CIT v. Dedicated Healthcare Services (TPA) India Pvt. Ltd. — relied upon for the proposition that section 40(a)(ia) cannot be invoked where the amount sought to be disallowed was never claimed as expenditure.
- CIT v. Health India TPA Services (P.) Ltd. — relied upon on applicability of section 40(a)(ia) where the impugned payout was not claimed as deductible expenditure.
- Sampanna Kuries (P.) Ltd. v. CIT, (2004) 141 Taxman 615 (Kerala High Court) — relied upon regarding the essential elements required for a prize scheme to constitute a lottery.
- Dalal And Broacha Stock Broking Pvt. Ltd. v. PCIT-4 — referred to on deduction under section 80G for eligible CSR donations.
- American Express (India) Pvt. Ltd. v. PCIT, [2024] 166 taxmann.com 91 (ITAT Delhi) — referred to in support of section 80G deduction for otherwise eligible CSR donations.
- Gabriel India Ltd. v. DCIT, [2025] 173 taxmann.com 219 (ITAT Mumbai) — referred to in support of section 80G deduction claimed in respect of CSR expenditure.
- Biocon Ltd. v. DCIT (ITAT Bangalore Special Bench) — followed on deductibility of ESOP expenditure.
- CIT v. Biocon Ltd., ITA No. 653/2013 (Karnataka High Court) — referred to as affirming the Special Bench approach concerning ESOP expenditure.
- Play Games 24×7 Private Limited – assessee’s own case for AY 2013-14, order dated 31.05.2022 — followed on ESOP expenditure.
- Play Games 24×7 Private Limited – assessee’s own case for AY 2016-17 — followed on ESOP expenditure.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present cross-appeals are filed by the assessee as well as the Revenue is against the separate orders dated 28/08/2025 passed by the Ld.CIT(A), National Faceless Appeal Centre, Delhi, for A.Ys. 2015-16 and 2020-21.
2. The appeal filed by the assessee for assessment year 2020-21 is delayed by 32 days. The assessee has filed an application dated 15/09/2026 seeking condonation of the delay. It is stated that, being aggrieved by the impugned order dated 28/08/2025, the assessee approached Hon’ble Bombay High Court by way of a writ petition. The Hon’ble jurisdictional High Court, vide order dated 24/11/2025, granted liberty to the assessee to avail the alternate remedy before this Tribunal within four weeks and directed that, if filed within the said period, the appeal be entertained on merits without raising an issue of limitation. The assessee filed the appeals on 02/12/2025.
2.1. We have considered the reasons stated in the application and the specific liberty granted by Hon’ble Bombay High Court. It is noted that the appeal is filed within the period permitted by Hon’ble High Court. Accordingly as per the direction by Hon’ble Bombay High Court, the appeal is admitted for adjudication on merits.
We first take up Assessee’s appeal for A.Y. 2015-16 in ITA No.8300/Mum/2025
3. Brief facts are that, the assessee is engaged in the business of providing online gaming platform. Pursuant to proceedings arising from the order passed u/s. 263 of the Income-tax Act, 1961 (‘the Act’), the Ld.AO passed assessment order u/s. 143(3) r.w.s. 263 r.w.s. 254 of the Act on 23/03/2024. The Ld.AO, inter alia, made disallowance of Rs.273,43,53,943/- u/s. 40(a)(ia) for alleged non-deduction of tax u/s. 194B on payments towards winnings and a further disallowance of Rs.2,45,68,166/- in relation to online promotional expenditure.
3.1. On an appeal the Ld.CIT(A) sustained both disallowances. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal.
4. Grounds Nos.1 and 2 relates to the disallowance of Rs.273,43,53,943/- u/s. 40(a)(ia). The assessee’s case is that, during the relevant year, the threshold of Rs.10,000/- under section 194B was required to be examined with reference to each payment of winnings and not by aggregating all winnings of a player during the financial year. The assessee also contended that winnings funded out of the amounts contributed by the players were not debited to its Profit and Loss Account and were not claimed as expenditure.
4.1. The Ld.Sr.Counsel submitted that the issue is squarely covered in favour of the assessee by the order of the Co-ordinate Bench in the assessee’s own case for A.Y. 2017-18 in ITA Nos.8302/Mum/2025 and 7076/Mum/2025 dated 08/07/2026. He placed particular reliance on paragraphs 6 to 6.8 of the said order.
4.2. The Ld.DR on the contrary, relied upon the orders of the authorities below.
We have perused the submissions advanced by both sides in light of the record placed before us.
5. The relevant findings of the Co-ordinate Bench in the assessee’s own case for A.Y. 2017-18 are reproduced hereunder:
6. We have heard the rival submissions, perused the orders of the authorities below and carefully examined the material placed before us. The controversy before us lies in a narrow compass, namely, whether for the assessment year under consideration, the assessee was under an obligation to deduct tax at source under section 194B by aggregating the winnings credited to a player’s account or whether the threshold prescribed under the said section was required to be examined with reference to each individual payment made to the winner.
6.1. At the outset, we note that there is no dispute on facts that wherever the winnings payable to a player in a single payment exceeded the prescribed threshold of Rs.10,000/-, the assessee had duly deducted tax at source under section 194B of the Act. The dispute has arisen only in respect of those cases where individual payments did not exceed Rs.10,000/-, but the aggregate winnings accumulated in the player’s wallet exceeded the prescribed monetary limit.
6.2. We find considerable force in the submissions advanced by the Ld.Sr.Counsel that the provisions of section 194B, as applicable to the year under consideration under the Finance Act, 2016, required tax to be deducted only where the person responsible for paying any income by way of winnings paid ‘an amount exceeding ten thousand rupees’ and such deduction was to be made ‘at the time of payment thereof’. The provision, as it then stood, neither employed the expression ‘aggregate amount’ nor contained any deeming fiction requiring multiple payments made during the financial year to be clubbed together for determining the applicability of the threshold.
6.3. We also find merit in the submission that the legislative amendments subsequently introduced clearly demonstrate the evolution of the statutory scheme. By the Finance Act, 2023, the legislature consciously inserted the words ‘the amount or the aggregate of amounts exceeding ten thousand rupees during the financial year’ while dealing with winnings from gambling or betting. Thereafter, by the Finance Act, 2025, the legislature again substituted the said expression by providing that the threshold would apply ‘in respect of a single transaction.’ These successive amendments are significant. They clearly indicate that whenever Parliament intended the threshold to operate on an aggregate basis, it expressly enacted so, and when it intended otherwise, it specifically reverted to the concept of a single transaction. Such legislative changes reinforce the principle that the language applicable during the relevant assessment year cannot be expanded by importing concepts which were consciously introduced only by subsequent amendments.
6.4. It is a settled principle of interpretation that taxing statutes, particularly provisions creating withholding obligations, are required to be construed strictly and no words can be added or substituted by implication. We also find substance in the argument of the assessee that wherever the legislature intended aggregation for the purposes of TDS, it has expressly incorporated such language in the statute itself. Sections 194C and 194J, as they existed during the relevant assessment year, specifically referred to the aggregate amount credited or paid or likely to be credited or paid during the financial year. The conspicuous absence of any such expression in section 194B cannot be treated as accidental nor can the Tribunal rewrite the provision by reading into it an aggregation mechanism which the legislature consciously omitted.
6.5. The interpretation canvassed by the assessee also finds support from CBDT Circular No.240 dated 17/05/1978, as well as the decisions in Royal Calcutta Club v. DCIT and Delhi Race Club (1940) Ltd. v. DCIT, wherein the provisions of section 194B have been understood with reference to each payment of winnings and not on the basis of cumulative winnings over a period. The Revenue has not brought to our notice any binding judicial precedent taking a contrary view in the context of the unamended provisions applicable to the year under consideration.
6.6. Coming to the reasoning adopted by the Ld.CIT(A), we are unable to persuade ourselves to concur with the conclusion that since the winnings remained in the electronic wallet maintained on the assessee’s platform, the threshold under section 194B stood exceeded at all times. The chart referred to by the Ld.CIT(A) merely reflects the accumulation of winnings over different dates spread across multiple transactions. Such accumulation by itself cannot substitute the statutory requirement contained in section 194B as it stood during the relevant assessment year. The assessee has consistently maintained that the wallet merely provided a technological platform for holding the balance and that withdrawals could be initiated only by the concerned player. The Revenue has not brought any material to demonstrate that the assessee had unilateral dominion over the funds so as to treat the accumulated wallet balance as a single payment for the purposes of section 194B. In our considered opinion, the existence of a wallet mechanism cannot enlarge the scope of the charging provision beyond what is expressly provided by the statute.
6.7. Even otherwise, we find merit in the alternative contention advanced by the assessee regarding the applicability of section 40(a)(ia). The undisputed factual position emerging from the record is that the winnings paid to the players were not debited to the Profit and Loss Account and were never claimed as deductible expenditure while computing the business income of the assessee. Section 40(a)(ia) merely provides for disallowance of expenditure otherwise allowable under sections 30 to 38 of the Act in cases where tax deductible at source has not been deducted or, after deduction, has not been paid. Where no deduction of the impugned amount has at all been claimed in computing the income, the machinery provision contained in section 40(a)(ia) cannot be invoked. This legal position is duly supported by the decisions of the Hon’ble Bombay High Court in CIT v. Health India TPA Services (P.) Ltd., CIT v. Dedicated Healthcare Services (TPA) India Pvt. Ltd., as well as the other judicial precedents relied upon by the assessee. The Revenue has not disputed the factual assertion that the impugned payouts were not routed through the Profit and Loss Account.
6.8. In light of the foregoing discussion, we hold that for the assessment year under consideration, section 194B, as it then stood, required the threshold of Rs.10,000/- to be examined with reference to each individual payment made to the winner at the time of payment and not on the basis of aggregate winnings accumulated in the player’s wallet. Consequently, the foundation on which the Assessing Officer proceeded to invoke section 40(a)(ia) fails. Furthermore, since the impugned payouts were admittedly not claimed as expenditure by the assessee, the provisions of section 40(a)(ia) were, in any event, not attracted.
5.1. The facts and statutory provisions governing A.Y. 2015-16 are identical. No material distinction has been brought to our notice by the Revenue. Respectfully following the above decision, we hold that section 194B, as applicable to the year under consideration, did not require aggregation of separate payments made to a player during the financial year. We further note that the impugned payouts were not claimed as expenditure in the Profit and Loss Account. Consequently, the disallowance of Rs.273,43,53,943/- u/s.40(a)(ia) cannot be sustained and is directed to be deleted.
Grounds Nos.1 and 2 raised by the assessee are allowed.
6. Ground No.3 is directed against the disallowance of Rs.2,45,68,166/- made u/s. 40(a)(ia) on account of alleged non-compliance with Chapter XVII-B in respect of payments made to players towards online promotional games.
6.1. The assessee is engaged in the business of providing online gaming services through its platform. In the course of its business, the assessee incurs expenditure towards various promotional activities undertaken to attract players, increase their engagement with the platform and encourage them to participate in paid games. During the year under consideration, the assessee incurred total online promotional expenditure of Rs.12,81,47,623, comprising the following:
| Particulars | Amount (Rs.) | Nature of expenditure |
|---|---|---|
| Bonus expenses | 8,32,63,339 | Deposit-linked bonuses, referral bonuses |
| Tournament promotional expenses | 4,51,22,380 | Promotional tournament costs, including prize money |
| Other tournament expenses | (2,38,096) | Credits given to players, net of amounts recovered for certain violations |
| Total | 12,81,47,623 |
6.2. The assessee submitted that it incurred expenditure of Rs.4,51,22,380 towards promotional tournaments. It is submitted that for such tournaments, the assessee may sponsor the whole or part of the prize money and that, in certain cases, participation fee may also be charged. According to the assessee, the object of such tournaments was to encourage players to engage with the online games offered on its platform and to facilitate conversion of free players into paying customers. It is submitted that the assessee furnished details and nature of the said expenditure before the Ld.AO during the course of assessment proceedings and also explained its position regarding deduction of tax at source vide submission dated 06.03.2024.
6.3. It was submitted that the assessee did not deduct tax at source on the bonus payments and credits, contending that the payments were not liable to tax deduction under any provision of Chapter XVII-B of the Act. It was submitted that the bonuses were neither payments for advertisement nor payments for carrying out any work so as to attract section 194C, and that they were also not “winnings” falling within the ambit of section 194B. The assessee submitted that it withheld tax in respect of winnings paid in promotional games wherever the provisions of the Act were applicable.
6.4. The Ld.AO accepted the explanation offered by the assessee regarding reward points amounting to Rs.11,31,255 and tournament promotional expenses amounting to Rs.4,51,22,380. However, the Ld.AO did not accept the assessee’s explanation regarding bonus expenses. The Ld.AO, further observed that, the assessee had not furnished sufficient clarity regarding the types of games which made a player eligible for promotional incentives or promotional expenditure. The Ld.AO also observed that there was no basis to establish assessee’s contention for non-deduction of tax at source.
6.5. According to the Ld.AO, the assessee did not furnish information showing whether an individual player participated in a single game or multiple games on a particular day or on different dates, so as to enable verification of compliance with the provisions of section 194B. The Ld.AO also observed that the assessee had not furnished withholding-tax certificates or sufficient player-level information to demonstrate compliance with the TDS provisions. The Ld.AO was of the view that the assessee had not maintained or furnished individual player-level dashboard information and had, therefore, failed to demonstrate compliance with the applicable provisions relating to deduction of tax at source.
Aggrieved by the order of the Ld.AO, the assessee preferred appeal before the Ld.CIT(A).
7. On an appeal before the Ld.CIT(A) the disallowance was sustained by following the appellate order for A.Y. 2017-18. The relevant observations in paragraphs 5.7.1 to 5.7.4 of the impugned order read as under:
5.7.1 Ground No. 3 pertains to the disallowance of Rs.8,67,92,091/- u/s 40(a)(ia) of the Act for failure of TDS deduction on payment towards bonus and other promotional expenses. In this regard, the appellant has submitted that for the AY 2017-18, the Appellant has incurred bonus expenses amounting to INR 28,89,67,206 for the year. The said expenses form a part of online promotional expenses.
5.7.2 Apart from this, the Appellant has incurred expenses amount to INR 48,88,290 towards other tournament expenses. These expenses form a part of online tournament expenses. The other tournament expenses include payment towards credits given to players by the Appellant net of money taken from player on certain violations or credits given to player for issues at server end due to which player couldn’t complete the game.
5.7.3 In this regard, it is stated that any incentive over and above its dues is prize only as it is very much in the nature of giving some advantage and consideration paid for purchasing the chance. It is a kind of advertisement directly linked to the business. On the other hand, the AO has stated that the appellant did not furnish any withholding tax certificates. As per AO, the appellant did not provide any clarity in relation to the type of games which make a player eligible to promotional incentives or bonus. Here, it is pertinent to mention that bonuses, cashbacks and other promotional expenditure are a common fixture in India’s online gaming ecosystem, often credited to a user’s wallet as nonwithdrawable game credits. These credits can be used for gameplay, they form part of the consideration for the gaming service. Thus, these incentives significantly increase the chances of winning by allowing them to play more without spending additional money. This interpretation applies irrespective of whether the player directly spends out of pocket for these credits.
5.7.4 This view has been taken by the GST department who has issued notices to gaming firms over alleged non-payment of GST on cashbacks and bonuses offered to players. The department’s interpretation suggests that any bonus or cashback added to a user’s wallet, even if not paid out of the user’s pocket, qualifies as an amount paid on behalf of the player and should therefore be taxed. Since these credits are usable for game play, they are now being counted towards the taxable value. Once GST is payable on that, obviously, it is expenditure on which TDS is payable. In view of the above discussion, it is held that the AO has rightly made the disallowance of Rs.8,67,92,091/- and the same is hereby confirmed. Ground No.3 is dismissed.
7. Before this Tribunal, the Ld.Sr.Counsel submitted that, bonus payments in question were purely promotional incentives granted by the assessee to its players. It is submitted that the bonuses were granted, when players made deposits into their accounts or referred friends/relatives to the assessee’s platform. He submitted that such bonuses were intended to incentivise players to continue playing on the platform and to increase their engagement with the assessee’s business. It was categorically submitted that the bonus was not an outcome of any game or competition between players and that the player did not win such bonus as a consequence of the result of a game. He submitted that bonus was granted by the assessee only on fulfilment of specified promotional conditions, such as making a deposit or referring another person.
7.1. The Ld.Sr.Counsel submitted that such bonus payments could not be regarded as “winnings from card games or other games of any sort” as contemplated under section 2(24)(ix) of the Act, and therefore, provisions of section 194B, which is otherwise applicable to income by way of winnings from lottery, crossword puzzle, card game and other game of any sort, cannot not be invoked. The Ld.Sr.Counsel further submitted that the bonus payments could not be characterised as winnings from a lottery. Referring to Explanation (1) to section 2(24)(ix), he submitted that the essential elements of a lottery are:
1. prize or some advantage in the nature of a prize;
2. distribution thereof by chance; and
3. consideration paid or promised for purchasing the chance.
7.2. According to the Ld.Sr.Counsel, these essential ingredients are absent in the case of the assessee. He submitted that bonus was not distributed by chance and there was no consideration paid or promised by the player for purchasing a chance to receive the bonus. The bonus was granted pursuant to specified promotional conditions. Reliance was placed on the decision of Hon’ble Kerala High Court in case of Sampanna Kuries (P.) Ltd. v. CIT, reported in (2004) 141 Taxman 615, it was held that unless the essential elements constituting a lottery are satisfied, a prize scheme cannot be regarded as a lottery for the purposes of section 2(24)(ix) of the Act. The Ld.Sr.Counsel submitted that, the same principle would apply to the bonus payments made by the assessee.
7.3. The Ld.Sr.Counsel referring to section 194B submitted that the statutory liability to deduct tax arises only where the payment constitutes income by way of winnings from the specified activities. Since the bonus payments made by the assessee did not constitute winnings from any lottery, card game or other game of any sort, the basic condition for invoking section 194B was absent. It was also submitted that section 190 of the Act contemplates collection of tax in accordance with the provisions of Chapter XVII, and that the obligation to deduct tax at source must arise from a specific provision contained in Chapter XVII-B. The Ld.Sr.Counsel, submitted that there was no provision under Chapter XVII-B, as applicable to the year under consideration, requiring deduction of tax at source on such promotional bonuses.
7.4. The Ld.Sr.Counsel submitted that the issue was not whether the assessee furnished sufficient player-level information to establish compliance with section 194B, but whether section 194B was applicable to the nature of payments in the first place. He submitted that since the payments were promotional bonuses and not winnings, no obligation to deduct tax at source arose.
7.5. Without prejudice to the above, the Ld.Sr.Counsel relied on his arguments advanced in respect of Grounds 1-2 herein above. He submitted that for the year under consideration, liability to deduct taxes would occur “at the time of payment” of the relevant amount. And the obligation to withhold taxes would arise only when the payment crosses the threshold limit of Rs.10,000/-. He submitted that in the present facts, bonuses paid to the players have not exceeded Rs.10,000/- at any point of time.
7.6. On the contrary, the Ld.DR relied on the orders passed by the authorities below and reiterated his arguments advanced for Grounds 1-2 herein above.
We have perused the submissions advanced by both sides in light of records placed before us.
8. It is noted that the assessee incurred online promotional expenditure comprising bonus expenses, tournament promotional expenses and reward points. The Ld.AO accepted assessee’s explanation in respect of the reward points amounting to Rs.11,31,255/- as well as tournament promotional expenses amounting to Rs.4,51,22,380/-. The dispute, therefore, is confined to the bonus payments of Rs. 2,45,68 166/- made to the players, by invoking provisions of section 40(a)(ia) on the ground of nondeduction of tax at source.
8.1. The first question that needs to be considered is, whether, the bonus payments made by the assessee to the players constitute “income by way of winnings” as contemplated under section 194B of the Act. The Ld.Sr.Counsel submitted that the impugned payments comprises of deposit-linked bonuses and referral bonuses, which were granted to players on fulfilment of specified promotional conditions. Such bonuses are not dependent on the result of any game or competition between the players and does not amount to any winning by the players as a consequence of the outcome of any game.
8.2. Therefore in our view, the fact that the individuals who received such bonuses from the assessee were players on the assessee’s online gaming platform cannot, by itself, cannot lead to the conclusion that such bonuses were “winnings” for the purposes of section 194B. The character of the payment has to be examined with reference to the event or condition pursuant to which the payment became due. In the present case, the material placed on record indicates that the impugned bonuses were granted on specified promotional activities, such as making deposits or referring other persons to the assessee’s platform, and were not determined by the outcome of any game.
8.3. We also find significance in the fact that the Ld.AO, after examining the nature of the online promotional expenditure, accepted the assessee’s explanation in respect of reward points and tournament promotional expenses. The Ld.AO, however, proceeded to make the impugned disallowance only in respect of the bonus payments. Therefore, the issue before us is required to be examined specifically with reference to the nature and character of such bonus payments and the statutory provision under which the Ld.AO alleges a withholding obligation.
8.4. In this factual background, we find merit in the contention of the Ld.Sr.Counsel that the impugned bonus payments cannot be equated merely because the recipients are players with winnings arising from a game within the meaning of section 194B. The bonus was an incentive offered by the assessee pursuant to its promotional scheme and became available upon fulfilment of the stipulated conditions; it was not a prize determined by the result of a game. Consequently, the basic condition for invoking section 194B is not satisfied.
8.5. The subsequent contention of the assessee regarding the monetary threshold under section 194B, therefore, becomes an alternative contention. Since we have held that the impugned bonus payments do not constitute winnings within the meaning of section 194B, the question of applying the threshold prescribed under the said provision does not arise. Nevertheless, we also note that, for the assessment year under consideration, section 194B contemplated deduction at the time of payment where the amount of winnings exceeded Rs.10,000/-, and the provision as then applicable did not contain the subsequent requirement of aggregating separate winnings during the financial year.
8.6. Accordingly, in the absence of any statutory provision requiring deduction of tax at source on the impugned promotional bonuses, the assessee cannot be treated as being in default merely because player-level information was not furnished in the manner expected by the Ld.AO. The obligation to deduct tax must arise from the provisions of Chapter XVII-B and cannot be founded merely on an apprehension that some of the payments may represent winnings. Since the impugned payments, on the facts placed before us, are promotional bonuses and not winnings from any game, the assessee was not liable to deduct tax under section 194B. Consequently, the disallowance of Rs.2,45,68,166/- made under section 40(a)(ia) of the Act is not sustainable and is directed to be deleted.
Accordingly, Ground No.3 raised by the assessee is allowed.
We now take up Revenue’s appeal for A.Y. 2015-16 in ITA No.7074/Mum/2025
9. The Revenue has raised three grounds arising from the direction of the Ld.CIT(A) to give effect to the appellate orders and compute the correct income. The grievance is that, while issuing such direction, the Ld.CIT(A) referred to the original assessment order dated 29/12/2017 but did not take into account the subsequent assessment order passed u/s. 143(3) r.w.s. 263 r.w.s. 254 on 23/03/2024 and the rectification application stated to have been filed on 11/08/2025.
10. Both sides submitted that the controversy is confined to the correct computation of income while giving effect to the relevant orders. Since the issue requires verification of the assessment and appellate orders in their chronological sequence, we set aside the impugned direction on this limited issue and remit the matter to the Ld.AO. The Ld.AO shall verify the computation after considering all subsisting orders applicable to A.Y. 2015-16 and determine the correct total income in accordance with law, after granting reasonable opportunity of being heard to the assessee.
The grounds raised by the Revenue are allowed for statistical purposes.
Assessee’s appeal for A.Y. 2020-21 in ITA No.8301/Mum/2025
11. Ground No.1 challenges the disallowance of Rs.29,20,84,360/- u/s. 40(a)(ia) in respect of payments towards winnings arising from sponsored prizes. Ground No.2 challenges the finding that section 194B had to be applied by aggregating the winnings of a player during the financial year.
11.1. The assessee admitted before the Ld.AO that the amounts sponsored by it towards prizes were routed through the Profit and Loss Account. The Ld.AO observed that the consolidated figure of sponsored prizes exceeding Rs.10,000/- on a single day, in respect of which tax was not deducted, had not been furnished. The Ld.AO therefore adopted 1% of the winnings payout considered for A.Y. 2017-18 as the base, computed a disallowance of Rs.8,22,77,287/- for that year, and enhanced the amount by 355% with reference to the growth in returned income. On that basis, the Ld.AO made the impugned disallowance of Rs.29,20,84,360/- for A.Y. 2020-21.
11.2. The Ld.CIT(A) sustained the disallowance by holding that tax was deductible on the aggregate winnings exceeding Rs.10,000/- during the financial year.
12. Before this Tribunal, the Ld.Sr.Counsel submitted that the core controversy is identical to that decided by the Co-ordinate Bench for A.Y. 2017-18. He submitted that section 194B, as applicable to A.Y. 2020-21, fastened the obligation at the time of each payment and did not authorise aggregation of separate winnings during the financial year. It was further submitted that the Ld.AO made ad hoc estimate without identifying any individual sponsored-prize payment exceeding Rs.10,000/- on which tax had not been deducted.
12.1. The Ld.DR relied on the orders passed by the authorities below.
We have perused the submissions advanced by both sides in light of the record placed before us.
13. The language of section 194B applicable to A.Y. 2020-21 is the same material language considered by the Co-ordinate Bench for A.Y. 2017-18. The findings reproduced in paragraph 3.3 hereinabove, particularly paragraphs 6 to 6.6 and 6.8 of the said order, therefore apply mutatis mutandis. The threshold of Rs.10,000/- had to be examined with reference to each individual payment at the time of payment and not by aggregating separate payments made during the financial year.
13.1. We are conscious that, unlike the player-funded payouts considered in A.Y. 2017-18, the sponsored-prize contribution in the present year was routed through the Profit and Loss Account. The alternative finding in paragraph 6.7 of the earlier order therefore does not, by itself, govern this component. Nevertheless, a disallowance u/s. 40(a)(ia) can arise only if tax was deductible under Chapter XVII-B. The Ld.AO did not identify any individual payment exceeding Rs.10,000/- on which tax was required to be deducted but was not deducted. Instead, the disallowance was estimated by applying a percentage to figures of another year and scaling the result with reference to growth in returned income. Such an estimate cannot establish a default under section 194B.
13.2. In these circumstances, the disallowance of Rs.29,20,84,360/- made u/s. 40(a)(ia) is unsustainable and is directed to be deleted.
Accordingly, Grounds Nos.1 and 2 raised by the assessee are allowed.
14. Ground No.3 alleges non-application of mind in the impugned order. In view of our adjudication on the substantive grounds, this ground has become academic and does not call for separate adjudication.
Revenue’s appeal for A.Y. 2020-21 in ITA No.7077/Mum/2025
15. Ground No.1 raised by the Revenue challenges the deletion of the disallowance of Rs.48,45,000/- claimed u/s. 80G in respect of CSR expenditure. The assessee paid Rs.96,90,000/- to the Centre for Social Responsibility and Leadership and claimed 50% thereof as deduction u/s. 80G. The Ld.AO disallowed the claim on the ground that the payment was made in discharge of the statutory obligation u/s. 135 of the Companies Act, 2013 and was therefore not voluntary.
15.1. On an appeal the Ld.CIT(A), after verifying the receipt and the eligibility of the donee, deleted the disallowance.
16. Before this Tribunal, the Ld.DR relied on the assessment order.
16.1. The Ld.Sr.Counsel supported the order of the Ld.CIT(A) and submitted that Explanation 2 to section 37(1) restricts deduction of CSR expenditure as business expenditure but does not impose a general embargo on deduction u/s. 80G where the statutory conditions of that provision are fulfilled. We have perused the submissions advanced by both sides in light of the record placed before us
17. Section 37(1) and section 80G operate in distinct fields. Explanation 2 to section 37(1) excludes CSR expenditure from deduction while computing business income; it does not render an otherwise eligible donation inadmissible u/s. 80G. The exclusions specifically provided in section 80G in relation to CSR contributions cannot be enlarged into a general prohibition covering every donation made in discharge of CSR obligations. This view is also supported by the decisions of the Co-ordinate Benches referred to by the Ld.CIT(A), including Dalal & Broacha Stock Broking (P.) Ltd., American Express (India) Pvt. Ltd. v. PCIT [2024] 166 taxmann.com 91 (Delhi – Trib.) and Gabriel India Ltd. v. DCIT [2025] 173 taxmann.com 219 (Mumbai – Trib.).
17.1. The Revenue has not controverted the finding that the recipient institution was eligible u/s. 80G or that the payment was supported by the receipt produced by the assessee. We therefore find no infirmity in the order of the Ld.CIT(A) deleting the disallowance of Rs.48,45,000/-.
Accordingly, Ground No.1 raised by the Revenue is dismissed.
18. Ground No.2 raised by the Revenue challenges the deletion of the disallowance of Rs.12,22,63,689/- relating to Employee Stock Option Plan (ESOP) expenditure.
18.1. The Ld.CIT(A) followed the order of the Tribunal in the assessee’s own case for A.Y. 2013-14 dated 31/05/2022 and the decision of the Special Bench in Biocon Ltd. v. DCIT, as affirmed by the Hon’ble Karnataka High Court in CIT v. Biocon Ltd., ITA No.653/2013.
18.2. The Ld.DR relied upon the assessment order, whereas the Ld.Sr.Counsel submitted that the issue is identical to that considered in the assessee’s own case for the earlier years.
We have perused the submissions advanced by both sides in light of records placed before us.
19. This issue is no longer res integra. It is noted that no distinguishing feature or subsequent decision taking a contrary view has been brought to our notice. Respectfully following the orders of the Co-ordinate Bench in the assessee’s own case for A.Ys. 2013-14 and 2016-17, we do not find any infirmity in the view adopted by Ld.CIT(A) and the same is upheld.
Accordingly, Ground No.2 raised by the Revenue is dismissed.
In the result, the assessee’s appeals in ITA Nos.8300/Mum/2025 and 8301/Mum/2025 are allowed; the Revenue’s appeal in ITA No.7074/Mum/2025 is allowed for statistical purposes; and the Revenue’s appeal in ITA No.7077/Mum/2025 is dismissed.
Order pronounced in the open Court on 25-09-2026.
