1982 (4) TMI 289 - HC - VAT and Sales Tax

Summary

Issues Involved
1. Whether the coins inserted in the slot of video game machines constitute "payment for admission to entertainment" under the Gujarat Entertainments Tax Act, 1977.
2. Interpretation of the terms "entertainment," "admission to an entertainment," and "payment for admission" as defined in the Act.

Issue-wise Detailed Analysis

1. Whether the coins inserted in the slot of video game machines constitute "payment for admission to entertainment" under the Gujarat Entertainments Tax Act, 1977.

The petitioners installed video game machines in parlours with unrestricted and free admission. Players could use the machines by inserting two fifty-paise coins, which activated the machine for gameplay. The petitioners argued that the coins were hire charges for using the machine, not for admission to the parlour.

The Mamlatdar (Entertainment Tax) concluded that the use of the video game machines fell within "payment for admission" under Section 2(g)(iv) of the Act, making the proprietors liable for entertainment tax. The petitioners challenged this under Article 226 of the Constitution of India.

The court examined whether the coins inserted in the video machines amounted to "payment for admission to entertainment." The definitions in Sections 2(a), 2(e), and 2(g) of the Act were analyzed. The court found that "payment for admission" typically refers to payment for entering a place where entertainment is held, not for using a machine within that place.

2. Interpretation of the terms "entertainment," "admission to an entertainment," and "payment for admission" as defined in the Act.

The Act defines "entertainment" as any exhibition, performance, amusement, game, or sport to which persons are admitted for payment. "Admission to an entertainment" includes admission to any place where such entertainment is held. "Payment for admission" includes various types of payments related to gaining entry or additional access within an entertainment venue.

The court referenced several precedents, including the Division Bench's interpretation in Liberty Talkies v. State and the Madhya Pradesh High Court's ruling in Calico Mills Ltd. v. State of Madhya Pradesh. These cases emphasized that "entertainment" involves an organized activity providing amusement or gratification to spectators, and "payment for admission" pertains to entry fees for such activities.

In the current case, the court noted that the video game machines did not provide organized entertainment by the proprietors. The players' thrill from gameplay was subjective and not the type of entertainment envisaged by the Act. The court agreed with the Madhya Pradesh High Court's view in Harris Nelson v. State of M.P., which held that activities requiring personal performance by visitors do not constitute entertainment provided by proprietors.

Conclusion

The court concluded that the proprietors of the parlours were not liable to pay entertainment tax on the coins inserted into the video game machines. The machines did not provide organized entertainment as defined under the Act, and the payments were for playing the game, not for admission to an entertainment.

The court quashed the orders demanding entertainment tax from the petitioners and directed the respondents to desist from recovering such tax. The rule in each petition was made absolute, and the respondents were ordered to pay the petitioners' costs.