Supreme Court: Video parlours for video games are subject to entertainment tax

The Supreme Court clarified that the term "entertainment" under the Uttar Pradesh Entertainment and Betting Tax Act, 1937 encompasses video parlours where payment is made to operate video machines. The Court held that such video shows are subject to entertainment tax, even if no admission fee is charged. The Court upheld the Allahabad High Court's decision, ruling that entertainment tax applies to video games, and overruled conflicting decisions from the Madhya Pradesh and Gujarat High Courts. The writ petitions were dismissed, affirming the tax liability on video shows under the Act.

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Issues Involved:
1. Interpretation of the term "Entertainment" u/s 2(3) of the Uttar Pradesh Entertainment and Betting Tax Act, 1937.
2. Applicability of entertainment tax on video parlours.

Summary:

1. Interpretation of "Entertainment" u/s 2(3) of the Act:
The Supreme Court addressed the divergence of judicial opinion between the Allahabad High Court and the Madhya Pradesh High Court regarding the interpretation of the term "Entertainment" as used in section 2(3) of the Uttar Pradesh Entertainment and Betting Tax Act, 1937. The Court examined various definitions and concluded that "entertainment" is used in a very wide sense to include any exhibitional, performance, amusement, game, or sport to which persons are admitted for payment. The Court emphasized that even if the video show had some educational value, it still fell within the ambit of "entertainment" as defined in the Act.

2. Applicability of Entertainment Tax on Video Parlours:
The petitioners contended that their video parlour did not charge an admission fee and thus should not be subject to entertainment tax. However, the Court noted that the mechanism of inserting a coin to operate the video machine constituted a payment for entertainment. The Court held that the video show provided amusement and entertainment to the viewers, making it subject to entertainment tax. The Court further clarified that the manner of payment (inserting a coin) and the fact that no admission fee was charged at the entrance did not alter the nature of the entertainment provided.

The Court upheld the decision of the Allahabad High Court, which had ruled that entertainment tax was leviable on video games, and overruled the contrary decisions of the Madhya Pradesh High Court and the Gujarat High Court. The Supreme Court concluded that the video show in question was clearly exigible to tax u/s 3 of the Act and dismissed the writ petitions with no order as to costs.

Conclusion:
The Supreme Court affirmed that the term "entertainment" u/s 2(3) of the Act includes video parlours where payment is made to operate video machines, and such shows are subject to entertainment tax u/s 3 of the Act. The decisions of the Madhya Pradesh and Gujarat High Courts were overruled, and the Allahabad High Court's interpretation was upheld.

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