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2011 (1) TMI 1268 - HC - VAT and Sales TaxWhether exclusion of sport as a subject from taxing entry 62, and inclusion of the same in non-taxing entry 33 of the State List of the Seventh Schedule to the Constitution is intentional so as to deprive the State Legislature of their competence to tax sport and leave that competence to Parliament under the residuary entry 97 of the Union List? Whether the Division Bench judgment of this court in Chrysalis International Pvt. Ltd. v. State of Haryana 2011 (1) TMI 1267 - PUNJAB AND HARYANA HIGH COURT , has been correctly decided by applying the law laid by the honourable Supreme Court in Geeta Enterprises v. State of U. P. 1983 (9) TMI 319 - SUPREME COURT . The question is does the Homer nod ? Held that - We hold that the State Legislature is competent to impose entertainment duty/tax on entertainments and amusements, which include sports and accordingly question (A) is answered in favour of the Revenue and against the assessee. The learned judge then went on to observe that We, in the Supreme Court, do nod despite great care to be correct, and once a clear error in judgment is revealed, no sense of shame or infallibility complex obsesses us or dissuades this court from the anxiety to be ultimately right, not consistently wrong. We are happy to notice that we are saved of Homer s nod. Accordingly, the second question is also answered against the petitioners and in favour of the Revenue.
Issues Involved:
1. Legislative competence to tax sports under Entry 62 of the State List. 2. Correctness of the Division Bench judgment in Chrysalis International Pvt. Ltd. v. State of Haryana. Issue-wise Detailed Analysis: Issue 1: Legislative Competence to Tax Sports under Entry 62 of the State List The court examined whether the exclusion of "sport" from Entry 62 and its inclusion in Entry 33 of the State List was intentional to deprive the State Legislature of the competence to tax "sport" and leave that competence to Parliament under residuary Entry 97 of the Union List. The argument was that the omission of the word "sports" from Entry 62 indicated an intention to reserve taxation on sports for Parliament. The court referred to the Constitution Bench judgment in Y.V. Srinivasamurthy v. State of Mysore, which held that the words "entertainments" and "amusements" in Entry 62 are wide enough to include "theatres, dramatic performances, cinemas, sports, and the like." This interpretation was reaffirmed, rejecting the argument that the omission of "sports" from Entry 62 excluded it from the State's taxing power. The court emphasized that the word "including" in Entry 62 implies that the expressions following it are illustrative and not exhaustive. Therefore, "sports" can be included under "entertainments" and "amusements." The court also highlighted that the activities of sports clubs often extend beyond sports to include partying, dining, and other social activities, which fall under the purview of entertainment and amusement. Issue 2: Correctness of the Division Bench Judgment in Chrysalis International Pvt. Ltd. v. State of Haryana The court examined whether the Division Bench correctly applied the law laid down by the Supreme Court in Geeta Enterprises v. State of U.P. The petitioners argued that the Division Bench in Chrysalis International had incorrectly applied the tests laid down in Geeta Enterprises, which required all four tests to be satisfied for entertainment duty to be imposed. The Supreme Court in Geeta Enterprises had laid down four tests for determining whether an activity falls under "entertainment": 1. The show must contain a public color and be open to the public. 2. The show may provide any kind of amusement, including sports or games requiring skill. 3. Even if admission is free, if the exhibitor derives monetary benefit, it is deemed entertainment. 4. The duration of the show or the identity of the person deriving pleasure is irrelevant. The court found that the Division Bench in Chrysalis International correctly applied these tests. The first test was satisfied as the sports clubs invite the general public to become members. The second test was met as playing sports involves skill and provides amusement. The third test was satisfied because the clubs derive monetary benefits from membership fees and other charges. The fourth test was also met as the players pay to play the game and entertain themselves. The court concluded that the Division Bench judgment in Chrysalis International was correctly decided, and the State Legislature is competent to impose entertainment duty on sports clubs. Conclusion: The Full Bench upheld the legislative competence of the State to tax sports under Entry 62 of the State List, including sports within the ambit of "entertainments" and "amusements." The court also affirmed the correctness of the Division Bench judgment in Chrysalis International, applying the principles laid down by the Supreme Court in Geeta Enterprises. The matter was directed to be listed before a Division Bench for further consideration of other submissions regarding the application of the Act's provisions. The court granted a certificate of fitness to file an appeal before the Supreme Court under Article 133 of the Constitution of India.
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