BUSINESS

Income from betting

My query relates to income by way of betting on the winning side of each match in the last Twenty 20 IPL Cricket series held in India. The series involved about 40 matches. I had initially contributed a lumpsum for joining the group, which conducted the bet in a pool. The dividend amount in each match in the series was less than Rs. 5,000 but the aggregate was much more. I am informed by my tax advisor that this income is liable to tax at 30 per cent flat negating my plea of not being liable to tax as I have not actually taken any part in the game series at all or in the bet. Alternatively, my point is that, it is not a bet simpliciter and the same was carried out in a series. Could it not be said to be income from business and subjected to tax as such, since such liability as business income will be significantly less in my case. Kindly advise.

Definition of income under Clause (ix) of Sec. 2(24) would include “any winnings from lotteries, crossword puzzle, races, including horse race, card games and other games of any sort or from any gambling or betting of any form or nature whatsoever”. Explanation 1 to the clause would include in the definition of lottery any winnings “by draw on lots or by chances or in any other manner whatsoever, under any scheme or arrangement by whatever name called”. Explanation 2 would cover “card games and any other game of any sort”. In the light of such wide definitions, there is no scope for avoiding tax as it can be income from “lottery” falling under “other game of any other sort” or “from betting of any form or manner whatsoever”. Gambling and betting or participation in lotteries could probably be a business in rare cases for a professional gambler and not for a person who participates in a game of cricket forecast as a matter of hobby or interest in the game. Even for a professional gambler, it may probably be understood that in view of the special clause requiring income from lotteries and the like to be assessed under Sec. 56(2)(ib), it cannot be business assessable under Sec. 28.

Sec. 115BB clearly provides that the applicable tax rate is 30 per cent of the winnings from lotteries. It is in respect of total winnings so that no exemption is possible with reference to each winning. It is only for the purposes of tax deduction at source under Sec. 194B, the limit of Rs. 5,000 is prescribed at the time of payment so that the limit for deduction can be taken to be for each payment. Liability, however, is on the aggregate of winnings.

Incidentally, any amount of contribution for participation or any other loss in such games is not deductible because Sec. 57 which provides for deduction from incomes assessable under Sec. 56 makes no provision for any deduction as for other classes of income taxable under the section. On the other hand, Sec. 58(4) bars any deduction for any expenditure or allowance in respect of “income from winnings from lotteries.” The result is that, the winnings are taxed with losses being out of reckoning. It is under the circumstances, advice obtained by the reader, that the tax at 30 per cent on the aggregate winnings is unavoidable, accords with law.

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