Taxability of Online Gaming Receipts: ITAT Agra Deletes Addition, Rules Net Loss Cannot Be Taxed as Winnings Under Section 115BB

The taxation of income derived from online gaming platforms has been a subject of intense debate and litigation in India. Prior to the introduction of specific provisions targeting net winnings, tax authorities often attempted to tax the gross receipts or the total volume of funds circulated in gaming wallets, ignoring the actual capital deployed by the users. This approach frequently resulted in exorbitant and mathematically flawed tax demands.

A significant judicial intervention in this domain was delivered by the Income Tax Appellate Tribunal (ITAT), Agra Bench, in the landmark case of Divyank Goyal Vs ITO. The Tribunal was tasked with determining whether the aggregate of winning hands in online card games could be taxed independently under Section 115BB of the Income Tax Act 1961, without setting off the corresponding amounts staked or lost during the same period. The judgment, dated 02.09.2026, provides critical clarity on the computation of gaming income for assessment years prior to the enactment of Section 115BBJ.

Factual Matrix of the Case

The dispute originated from the income tax return filed by the assessee for the Assessment Year (AY) 2022-23. On 23.06.2022, the assessee declared a total income of Rs. 15,60,160. Within this computation, the assessee proactively disclosed a sum of Rs. 4,44,717 as income derived from online gaming activities conducted on a platform operated by Gameskraft Technologies Pvt. Ltd.

Subsequently, the case was flagged under the Computer Assisted Scrutiny Selection (CASS) mechanism. The primary reason for this selection was the verification of high-value transactions, specifically pointing to an alleged gaming winning amount of Rs. 1,73,46,540 from the aforementioned portal.

The Section 133(6) Inquiry

To ascertain the veracity of the gaming transactions, the Assessing Officer (AO) invoked powers under Section 133(6) of the Income Tax Act 1961. A notice dated 05.10.2023 was issued directly to the gaming company, Gameskraft Technologies Pvt. Ltd., demanding comprehensive details regarding the assessee’s financial activities on their platform during the Financial Year (FY) 2021-22.

The gaming company responded on 15.11.2023, providing a detailed ledger and a categorical breakdown of the assessee's gaming history. The data supplied by the platform revealed the following financial dynamics:

  • Total Buy-In Amount: Rs. 2,94,47,047
  • Buy-In for Games Lost: Rs. 1,68,50,007
  • Buy-In for Games Won: Rs. 1,25,97,040
  • Gross Winnings Received: Rs. 2,62,68,314

When evaluating the overall financial outcome, the total amount received by the assessee (Rs. 2,62,68,314) was significantly lower than the total amount invested or staked (Rs. 2,94,47,047). Consequently, the assessee had actually incurred a net financial loss of Rs. 31,78,733 during the year.

The Assessing Officer's Flawed Computation

Despite the clear mathematical reality that the assessee had lost money overall, the AO adopted a highly selective approach to the data. Instead of evaluating the gaming account comprehensively, the AO isolated a single figure from the platform's report: the buy-in amount relating strictly to the games where the player emerged victorious, which stood at Rs. 1,25,97,040.