TaxTMI 
TaxTMI 
2026 (10) TMI 179
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....sessment 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 f....
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....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 Finan....
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....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....
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..../s. 40(a)(ia) on account of alleged noncompliance 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....
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....elating 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....
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....come 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 su....
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....rary, 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 non-deduction 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 t....
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....t 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 dire....
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....mitted 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 ....