2020 (5) TMI 607 - HC - VAT and Sales Tax

Levy of Entertainment tax - online booking charges - Section 3(7) (c) of the Tamil Nadu Entertainment Tax Act, 1939 - whether the online ticketing charges quoted by the petitioners would have to be included in the payment for admission liable to tax? - HELD THAT - The petitioners levy an additional charge upon a consumer only when he opts for the online facility and these charges are necessary to defray the expenses incurred by the petitioner for offering this facility to a consumer. They point out that the online booking facility is hosted by third party service providers, such as, BookMyShow and other similar portals, which charge the petitioners a fee for hosting the booking portal. This has to be re-compensated and hence the online booking charge - Each will be rendered meaningless without the other and thus it is only the two events together that render the lottery composite and whole. Applied in the context of the present case, the distinction sought to be made by the petitioner between seating charge and online booking charge is clearly artificial and a distinction without a difference. By purchase of a ticket online the petitioner obtains only a single vested right that of entry to the theatre and the amounts collected from the petitioners, the seating and booking charges are both relatable to the same entertainment event. A vehicle is part of the facilities offered and serves to improve or enhance the experience of the entertainment provided as compared to a squatter who could well walk into a drive-in theatre and sit on the seating provided to watch the film. The experience is rendered more pleasurable and the facility offered becomes intrinsic to the process of watching the film itself. Thus, the receipts from such additional facility/benefit should stand encompassed within the charge - Extending this reasoning to the case before me, the access to online booking again indisputably facilitates and smoothens the access to the entertainment. Though there are other modes of booking available, a customer, when he opts for the online booking facility makes a conscious choice as opposed to standing in a queue before a booking counter or deputing another who would purchase the tickets on his behalf. The facility of booking a ticket with the click of a button, seated in the comfort of one s home is a conscious choice that comes at a cost and without doubt, enhances the experience of watching a film. The petitioners have also pointed out that the internet and online facility of booking could not have been envisaged in 1939 when the Tamil Nadu Entertainment Tax Act was enacted as a result that a charge in this regard will necessarily stand outside the ambit of entertainment - the enactment provides for the State to levy a tax on entertainment and such an enactment is expected to be dynamic and take within its stride all progress in avenues of entertainment including facilities incidental and ancillary thereto, such as, in the present case, ticketing and booking facilities. Petition dismissed.

Issues Involved:
1. Taxability of online booking charges under the Tamil Nadu Entertainment Tax Act, 1939 (TNET Act).
2. Interpretation of "payment for admission" under Section 3(7)(c) of the TNET Act.
3. Applicability of precedents and legal principles to the case of multiplexes and online booking charges.

Detailed Analysis:

1. Taxability of Online Booking Charges:
The primary issue was whether online booking charges for movie tickets should be included in the "payment for admission" under the TNET Act. The petitioners argued that these charges were for the facility of booking and not intrinsically connected to the entertainment itself. They contended that online booking is just one mode of booking tickets, and these charges are to defray the expenses incurred for providing this facility, often hosted by third-party service providers.

2. Interpretation of "Payment for Admission":
The court examined the definition of "payment for admission" under Section 3(7)(c) of the TNET Act, which includes any payment required as a condition of attending or continuing to attend the entertainment. The petitioners argued that the phrase "connected with" should not be equated with "in relation to," suggesting a narrower interpretation. However, the court referred to the Supreme Court judgment in Doypack Systems Pvt. Ltd. V. Union of India, which equated various phrases like "in relation to" and "in connection with" as being synonymous, thereby rejecting the petitioners' argument.

3. Applicability of Precedents:
The petitioners relied on the Gujarat High Court judgment in Fun World and Tourism Development Ltd. V. State of Gujarat, which dealt with amusement parks and rides, arguing that only charges directly connected to the entertainment event should be taxed. However, the court found this precedent irrelevant as it dealt with a different context (amusement parks vs. multiplexes).

The court found merit in the revenue's reliance on the Supreme Court judgments in Sunrise Associates V. Govt. of NCT of Delhi and others, and State of Karnataka V. Drive-in-Enterprises. In Sunrise Associates, the court rejected the artificial distinction between different components of a lottery ticket, emphasizing that the right to participate and the chance to win are inseparable. Similarly, in Drive-In Enterprises, the court upheld the levy of entertainment tax on the admission of cars into drive-in theatres, emphasizing that the tax was on the person entertained, not the vehicle.

Conclusion:
The court concluded that online booking charges are indeed connected with the entertainment and fall within the ambit of "payment for admission" under the TNET Act. The facility of online booking enhances the experience of watching a film and is a conscious choice made by the consumer. Thus, such charges are liable to entertainment tax.

The impugned orders confirming the pre-assessment proposals were upheld, and the writ petitions were dismissed. The court also provided the petitioners with time to avail statutory remedies, considering the stay enjoyed during the litigation period.

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