Though Indian society has always seen gambling as an immoral activity and vice that deserves to be prohibited, ever since the advent of the British in India who viewed horse racing as a sport and past-time, betting on horses has been an exception to the criminal sanctions imposed on gambling and wagering activities. Lotteries and betting on horses with a licensed bookmaker in a race-course are ordinarily exceptions to the comprehensive ban on gambling (except the two states of Goa & Sikkim and Union territory of Daman which have amended their gaming Acts to allow casinos). In this post, I shall analyse the provisions relating to race courses and exceptions in statute allowing betting there. [For an introduction on the gambling laws in India see this post.]

Provision in Gambling Acts

Many states in India have their own state gaming Acts or have the option of adopting the Central Public Gambling Act of 1867. Several states have enacted their own gaming statutes but have in the process exempted betting on horse races. At present, such exempting provisions exist in at least eight state legislations. The states of Andhra Pradesh, Assam, Delhi, Karnataka, Meghalaya, Tamil Nadu, Maharashtra and West Bengal have created specific exceptions in their statues allowing betting on horse races in a specified format on the day of the horse-race with licensed bookmakers in the format and rules that may be prescribed.

These specific rules and conditions are generally found in a separate statute such as the Bombay Race Courses Licensing Act, 1912 (applicable to the state of Maharashtra) or under the Gambling Rules framed under specific state gaming statutes (such as the West Bengal Gambling Rules, 1958).

Due to this exception to the general prohibition of betting and gambling activities, popular race clubs regularly organise horse races and derby in several cities such as Mumbai (Bombay), Delhi, Chennai (Madras), Kolkata (Calcutta), Bengaluru (Bangalore) and licensed bookmakers in such clubs regularly accept bets on horse-races.

Supreme Court on such betting on horse courses

The Supreme Court of India had the opportunity of looking into the legality of horse racing and betting conducted thereof in the landmark case of Dr. KR Lakshmanan v. State of Tamil Nadu (AIR 1996 SC 1153) where the three-judge bench of the Supreme Court observed as follows:

Racing is really a test of equine speed and stamina, the horses are trained to run and their form is constantly watched by expertsBetting on horse racing or athletic contests involves the assessment of a contestant’s physical capacity and the use of other evaluative skills… Horse racing is an organized institution. Apart from a sport, it has become a huge public entertainment business. According to The New Encyclopaedia Britannica the occasion of certain races are recorded as public holidays There is nothing illegal in horse racing: it is a lawful sport. There is nothing illegal in betting per seThere is all the difference in the world between a club sweepstakes on the result of the Derby and a sweepstakes horse race as defined in the Rules of Racing. In each no doubt the winner is ascertained by the result of an uncertain event, but in the case of the former the winner is ascertained by chance, i.e., the luck of the draw not the result of the race (for the result is the same whether the draw is made before or after the race);in the case of the latter the winner is ascertained not by chance, but by merit of performance. The former is a lottery; the latter is not

We have no hesitation in reaching the conclusion that the horse-racing is a sport which primarily depends on the special ability acquired by training. It is the speed and stamina of the horse, acquired by training, which matters. Jockeys are experts in the art of riding. Between two equally fast horses, a better trained jockey can touch the winning-post.

In view of the discussion and the authorities referred to by us, we hold that the horse-racing is a game where the winning depends substantially and preponderantly on skill.

Thus, the highest court of the country (citing with approval various foreign decisions, sources and dictionaries) laid to rest any doubt about the legality of institutionalised horse racing by terming it an entertainment activity and a game involving a substantial and preponderant degree of skill separate from gambling activities. Though one may not agree with the rationale of the Supreme Courts verdict and its justification in allowing betting on horse racing to continue, the decision has allowed the horse-racing industry in India to flourish without further questions about its legality.

Tax implications

It is abundantly clear that horse-racing was an extremely popular activity that even the Income Tax Act of 1961 (as amended from time-to-time) had to create provisions for winnings from horse races. The provision in Section 115BB of the Income Tax Act pegs the rate of tax for winnings from all forms of betting, wagering activities, lotteries, contests or horse-racing winnings to be thirty (30) per cent. Along with education cess and other surcharges this comes to 30.90%. Further, as per Section 194BB of the same Act on any winnings of above Rs. 5,000/- with a licensed bookmaker in a registered race-course; tax of the prevailing rate of 30.90% has to be deducted at source by the licensed bookmaker and forthwith be paid to the government before releasing the winnings.

Conclusion

Though betting on horse racing is considered to be a gambling activity as such, the legislature has created specific exceptions in many Indian states to allow this activity on the grounds that it is a done for recreation and entertainment in race-courses. Courts and society have also justified and legitimized this activity on these considerations and horse racing is considered an important recreational activity in India and is regularly portrayed in popular culture.