Treatment of wagering profits as business income: profits and losses from wagering contracts are taxable for income tax purposes.

Profits and losses from wagering contracts are to be treated as income from business or vocation for income tax assessment; the illegal, speculative or gaming character of the activity does not exclude it from being a business or vocation. The statement applies the principle that taxability follows the characterisation of receipts as business/vocational profits, and places on the tax authority the burden of probing the genuineness of losses or concealment of gains. Consequently wagering profits are assessable and must be accounted for in income tax returns.

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Issues: (i) Whether profits or losses arising from wagering contracts are to be taken into account in an assessment for income-tax purposes.

Analysis: Section 6(4) identifies income chargeable under the head of business; Section 11 addresses tax payable under professional earnings for profits of a vocation. The character of a business as illegal, speculative, gaming, or wagering does not exclude it from the definition of business or vocation for tax purposes. Authoritative decisions and text-book treatment treating activities such as bookmaking, singing, or prostitution as vocations/businesses support treating profits from wagering as assessable. Practical difficulties in distinguishing speculative commercial transactions from gaming do not imply exemption; the burden of investigating genuineness of losses or concealment of gains lies with the tax authority.

Conclusion: Profits arising from wagering contracts are taxable and must be taken into account for income-tax assessment; this conclusion is in favour of Revenue.

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