08 March 2013
I participated in an international software contest in which the organiser company awarded the money based on how many times a participant's software was downloaded by people worldwide. The contest lasted 4-5 months and my software was downloaded most no. of times worldwide by general public so I was awarded the money by the organiser company.
Now my questions are:
1. Will the money I receieved be considered under lottery? (Since there was no lucky draw, there was no judging panel, only lakhs of common people determined who wins and it took lots of efforts from my side to market the software worldwide so I think it should not be considered a lottery).
2. If we consider this as a professional service and pay professional tax then do I have to pay income tax also?
3. In any case, can I get tax exemptions (based on my costs of developing the software, equipment, marketing cost etc.)
I'm an Indian citizen and am self employed. The organiser company is Korea based but they do have their office in India. I developed the software in India and received the money in India.
Since your resident status is Resident & Ordinary Resident your global income is taxable irrespective of its source of income.
Question is it winning from lottery : Ans is no.
Case study: Madras High Court decision in CIT v. G.R. Karthikeyan [1980] 124 ITR 85.
The expression " winnings " has acquired a connotation of its own. It means money won by gambling or betting, the prize was won in a competition where use of intelligence and skill was paramount and therefore it cannot be held that the prize.
Now question is about deduction of exp incurred : In this case income earned falls under income from other sources & under Sec. 57(iii) you can claim expenses incurred in that financial year w.r.t earning that portion of income.
So in my view Income is taxable & exp. may be reduced from income & net income be offered for taxation.
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