2020 (10) TMI 778 - HC - VAT and Sales Tax

Levy of Entertainment Tax - online booking charges charged by a Cinema Hall Owner besides the cost of ticket for entry into the cinema hall and enjoy the entertainment in the form of a movie - HELD THAT - It is well, say, settled legal position that unless all the following four components are satisfied and clearly defined, the levy of tax would fail viz., (i) taxable event; (ii) object of taxation; (iii) rate of taxation; (iv) measure or value on which rate will be applied for computing the tax liability . Unless all the four parameters are clear and unambiguous and uniformly applied to the taxable event chargeable under a taxation enactment, the levy is bound to fail. Entertainment Tax was a State subject and before the said levy of Entertainment Tax being subsumed under the GST Laws enforced in the country with effect from 1 July 2017, was the payment for admission, which as per the definition given in the Tamil Nadu Entertainment Tax Act, 1939, as amended from time to time in Section 3(7)(c) of the Act is that the payment should be necessary condition to be complied with for gaining entry into the place for entertainment - The payment made for any other purpose connected with such entertainment will be taxable under the said Act, only if the person concerned is required to make such payment as a condition for entry. Obviously, the online booking charges or internet handling charges, as the name given by some other cinema theater owners is not a mandatory payment for gaining entry into the cinema hall. It is an additional payment for extra or other facility provided by the Cinema hall owner. With the advent of internet, much after the said enactment of 1939, even though amended from time to time, the said Act could not have provided for levy of tax on the service of internet provided by the cinema owner. The same could be a subject matter of levy of Service Tax by the Parliament in the erstwhile law regime, prior to GST, with effect from 1 July 2017. But the Entertainment Tax being a tax collected by State for the Local Administration or Municipal Administration, is leviable only on cost of ticket which entitles a person to gain entry into the cinema hall or theatre. There is considerable force in the submission made by Mr.Easwar, learned Senior counsel appearing on behalf of the Assessee. Unless such internet charges or online booking charges are uniformly charged from all the customers for having entry into the cinema hall, such extra service charges taken by the cinema owner to the extent of ₹ 30/- per ticket could not be made subject matter of Entertainment Tax. Even though such payment along with the cost of ticket at the rate of ₹ 190.78 in particular illustration, was part of the overall cost to the customer. The test is attending the entertainment or continuing to attend the entertainment. The mandatory requirement to fall within Section 3(7)(c) of the Act is that a person is required to make, as a condition to attend or continue to attend the entertainment - the words in the clause 3(7)(c) of the Act, any payment for any purpose whatsoever connected with an entertainment , in addition to the payment for any for admission to entertainment in clause (c) , will have to be read in conjunction and not without the context of the words, which a person is required (mandatorily) to make as a condition of attending or continuing to attend the entertainment . These words are not superfluous or without meaning and in fact, they provide the bedrock condition for applying Section 3(7)(c) of the Act. Unless such a conditional payment for any purpose is integrally connected with the entertainment is uniformly and mandatorily chargeable from all, who want to have entry in the place of cinema hall, in our opinion, Section 3(7)(c) cannot cover such payment made by the customer, for availing the facility of online booking of tickets. The measure of taxation, viz., the ticket cost of ₹ 190.78 for both the types of customers could only be held exigible to the Entertainment Tax. ₹ 30/- separately paid for online booking facility, is not sine qua non for having entry in the cinema hall and therefore, falls outside the scope of the term, 'payment for admission', defined in Section 3(7)(c) of the Act - Assessee has paid Service Tax under Finance Act 1994 on such 'online booking charge' for the period from 01.07.2012. The Assessing Authority has also dealt with the definition of Section 3(7)(c) of the Act and has emphasized the words any payment for any purpose in addition to the payment for admission to the entertainment . The said reassessment order was passed exercising the powers under Section 7(2) of the Act 1939, and the Assessing Authority not only imposed tax at the rate of 30% on the online booking charges to the extent of ₹ 41,96,277/- but imposed penalty @ 150% under Section 7(3) of the Act to the extent of ₹ 62,94,416/- vide Assessment order dated 21 September 2015, for AY 2010-11. The said reassessment orders for all the years in question for AY 2007-08 to 2014-15 (upto December 2014) cannot be sustained and are hereby quashed - Appeal allowed.

Summary

Issues Involved:

1. Whether the "online booking charges" charged by a cinema hall owner besides the "cost of ticket" for entry into the cinema hall are part of taxable receipt for the purposes of the Tamil Nadu Entertainment Tax Act, 1939.

Issue-wise Detailed Analysis:

1. Definition and Scope of "Payment for Admission":

The court examined the definition of "payment for admission" under Section 3(7) of the Tamil Nadu Entertainment Tax Act, 1939, which includes any payment for any purpose connected with an entertainment that is required to be made as a condition of attending or continuing to attend the entertainment. The court emphasized that this definition must be read as a whole, and each part must be satisfied to levy the charge of Entertainment Tax.

2. Arguments by the Appellant:

The appellant argued that the online booking charges are an additional fee for the convenience of booking tickets online and are not a condition for attending the entertainment. This fee is optional and not uniformly applicable to all cinema-goers. Therefore, it should not be included in the taxable receipt under the Act. They cited the Gujarat High Court's decision in Ramanlal B. Jariwala vs. District Magistrate, Surat, where lift charges were not considered part of the entertainment tax as they were optional and not uniformly applicable.

3. Arguments by the Respondent:

The respondent contended that the definition of "payment for admission" is broad and includes any payment connected with entertainment. They argued that once a customer opts for online booking and pays the additional charge, the entire sum, including the online booking charge, should be subject to Entertainment Tax. They relied on the Supreme Court's decision in Drive-in Enterprises, where the court held that the levy on admission of vehicles in a drive-in theatre was valid as it was connected to the entertainment.

4. Court's Analysis:

The court noted that the Tamil Nadu Entertainment Tax Act, 1939, is a pre-Internet legislation and did not originally account for online booking charges. The court emphasized that the payment for admission must be a mandatory condition for attending the entertainment. The online booking charges are not mandatory for all customers and are an additional service provided by the cinema owner. Therefore, these charges do not fall within the definition of "payment for admission" under Section 3(7)(c) of the Act.

5. Distinguishing Case Laws:

The court distinguished the present case from the Drive-in Enterprises case, noting that the online booking charges are not uniformly applicable and are an optional service. The court also found the Gujarat High Court's decision in Ramanlal B. Jariwala to be more relevant, as it dealt with optional charges for additional services.

6. Conclusion:

The court concluded that the online booking charges are not a mandatory condition for attending the entertainment and are not uniformly applicable to all cinema-goers. Therefore, these charges cannot be included in the taxable receipt under the Tamil Nadu Entertainment Tax Act, 1939. The court quashed the reassessment orders for the years in question and allowed the appeals filed by the assessee.