Tax liability for gaming income must be determined based on gross receipts; retrospective application of amendments requires explicit legislative intent.

आदेश/ORDER

Per Vijay Pal Rao, Vice President This appeal by the assessee is directed against the order dated 06/09/2024 of the learned CIT (A)-NFAC Delhi, for the A.Y.2022-23.

2. The assessee has raised the following grounds of appeal:

3. The assessee has also filed a petition for admission of additional ground which reads as under:

“Without prejudice to the grounds, the learned CIT (A) is not justified in confirming the addition of Rs.1,86,60,850/- made by learned Assessing Officer being gross receipts from gaming activity u/s 115BB, ignoring the fact that the amendment made vide insertion of section 115BBJ w.e.f. 01/04/2023 is clarificatory in nature and Hence, the net receipts only can be brought to tax”.

4. The assessee is a private sector salaried employee stated to have an annual income less than five lakh rupees and no other income than salary. The assessee filed his return of income for the year under consideration on 26/07/2022 declaring total income of Rs.4,27,850/-. The Assessing Officer noted that in the return of income, the assessee has not disclosed any income winning from M/s. Gameskraft Technologies (P) Ltd platform. The assessee filed his reply and submitted the statement of transactions with the Gameskraft Technologies (P) Ltd (Rummy Culture) which shows a gross winning amount during the year of Rs.1,86,60,852/- against which the assessee claimed setting of loss from the game to the tune of Rs.2,01,37,400/- and thereby claimed a net loss of Rs.14,94,548/- from online gaming activities. The Assessing Officer denied the setting of the loss against the winning amount while passing the assessment order in view of the provisions of section 58(4) r.w.s. 115BB of the I.T. Act and held that in case of the income from other sources, no deduction in respect of any expenses and allowances is allowable in computing income by way of winning from inter alia card games and other games and gross receipt is taxable @ 30% as per section 115BB of the Act.

5. The assessee challenged the action of the Assessing Officer before the learned CIT (A) but could not succeed.

6. Before the Tribunal, the learned Counsel for the assessee has submitted that the assessee produced the profit and loss account statement issued by the Gameskraft Technologies (P) Ltd placed at page 50 & 51 of the paper book which shows the net result of the online gaming activity is loss of Rs.14,94,548/-. Thus, the learned Counsel for the assessee has submitted that only the net result of the gaming activities has to be taken into consideration and therefore, the provisions of section 58(4) of the Act cannot be pressed into service for taking only the gross winning amount to tax @ 30% as per the provisions of Section 115BB of the Act. Before the Tribunal, the learned Counsel for the assessee has given much emphasis on the amended provisions of the Act vide the Finance Act, 2023 whereby Section 115BB J has been introduced w.e.f. A.Y 2024-25 and corresponding section 194BA for TDS effective from 01/04/2023. He has submitted that these 2 provisions specifically govern the taxation of the income from online game. This newly introduced regime replaced the earlier arbitrary framework that provide charging of tax on the gross winning amount without recognizing the loss or entire cost. Section 115BB J introduced the concept of new net winning which more accurately reflects the true economic income accruing to a player. The learned Counsel for the assessee has further submitted that the explanatory memorandum to the Finance Bill 2023 acknowledges that the earlier provisions were inadequate to address the unique transactional nature of online games where th