01 January 0001

Direct Tax Amicus: February 2019

Taxes on online gaming – Resolving the TDS anagram
by Neha Sharma

As per Section 194B of the Income Tax Act, the payer is to deduct TDS at the time of payment on the amount of winnings from any game.. In the context of online gaming, the operator of the game undertakes to mobilise the pay-in from the participants and pay-out the winnings to the winner. Hence, the operator would be regarded as the person responsible for paying and would be required to comply with Section 194B. This section does not distinguish between a resident and a non-resident, and hence a non-resident winner would also suffer TDS under said provisions. The place of accrual of such winnings has to be determined based on the facts of each case. Another question that arises is whether the income and losses across games could be set off against each other. The statute has given certain room to the operator to define when the liability to deduct tax would arise. The operator can define the terms ‘game’, ‘winnings’ and ‘payment’ in a manner that would pass the substance test and ensure compliance with the TDS provisions.


  • Scheme for centralised issuance of notice and processing of information
  • Official Assignee is an artificial juristic person and not a representative assesse

Ratio decidendi

  • Loan received by firm whose partners hold shares in individual names is not deemed dividend – ITAT Mumbai
  • Company can make a gift of shares to shareholder - Power to hold includes power to alienate – ITAT Bangalore
  • Loss arising outside India to RNOR cannot be set off against income offered to tax in India – ITAT Bangalore
  • Technical services rendered by professionals under contractual obligation does not dilute independence – IPS Article to apply – ITAT Ahmedabad
  • No recovery can be made from payee once tax has been deducted at source – High Court of Bombay
  • Slump sale – Transfer of shares is distinct from transfer of asset/undertaking – Bombay High Court

February, 2019/Issue-53 February, 2019/Issue-53

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