TaxTMI 
TaxTMI 
2011 (1) TMI 1268
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....submitted that entry 62 of the State List in the Seventh Schedule to the Constitution specifically omit the use of expression 'sport', which authorises the State Legislature to levy taxes on entertainments, amusements, betting and gambling. They have also drawn our attention to entry 33, which in addition to other things, used the expression 'sports', 'entertainments' and 'amusements'. They have also submitted that the intention of the framers of the Constitution is to restrict the power of legislation concerning imposition of tax, which has been saved by entry 97 of List I for framing of legislation by the Parliament. The necessary intendment by omission of expression 'sports' from entry 62, is leaving the subject of taxing sports to the Parliament under residuary entry 97 of List I. They have also submitted that if clubs like the petitioners are taxed then educational institutions, universities and colleges where sport is played, would also be hit by the duty. Another argument raised is that in the Division Bench judgment of this court in Chrysalis International (P) Ltd. v. State of Haryana [2011] 37 VST 413 (P&H) [App] (C. W.P. No. 19345 ....
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....h: "(A) Whether 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? (B) Whether the Division Bench judgment of this court in Chrysalis International Pvt. Ltd. v. State of Haryana [2011] 37 VST 413 (P&H); [2008] 4 PLR 323, has been correctly decided by applying the law laid by the honourable Supreme Court in Geeta Enterprises v. State of U. P. [1983] 4 SCC 202; AIR 1983 SC 1098. The question is 'does the Homer nod'?" Facts In order to put the controversy in its proper perspective leading to the legal issues carved out in the preceding para, it would be necessary to notice the facts in brief, which for the sake of illustrative convenience are taken from C.W.P. No. 9476 of 2009 (DLF Golf Resorts Ltd. v. State of Haryana). The petitioner therein, which is a registered company, is managing and running a club in Gurgaon. The club is owned by DLF Commercial Developers Ltd., ....
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....eplies stating that by virtue of rule 18 of the Rules, notice of demand must have given a clear period of thirty days from the date of its receipt. Therefore, it has been urged that the notices were illegal. They further submitted that the matter was sub judice and, therefore, it must await the disposal of various petitions. In their written statements the respondents have taken the stand that the petitioner has been admitting the general public as members on payment of membership fee although on monthly, yearly or lump sum basis which is in addition to other charges like cart fee, caddie fee, green fee and subscription money. Such members visit the club premises, play golf and are entertained; and the whole activity is covered by the exclusive definition of the expression "entertainment" as used in section 2(d) of the Act. According to the respondents a Division Bench of this court in the case of Chrysalis International (P) Ltd. or in Wet-N-Wild Resort v. State of Haryana [2011] 37 VST 413 (P&H) [App], has held that the activities of bowling alley, video games, billiards, pool table and swimming pool though restricted to members who have paid the subscription either in lum....
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..... State of Mysore AIR 1959 SC 894, while dealing with a challenge to the validity of the Mysore Cinematograph Shows Tax Act, 1951, considered the scope of entry 62, List II, which deals with "taxes on luxuries " including taxes on entertainments, amusements, betting and gambling corresponding to entry 50, List II of the Seventh Schedule to the Government of India Act, 1935. The Constitution Bench has held that the words "entertainments " and "amusements" are wide enough to include theatres, dramatic performances, cinemas, sport and the like and it is complete answer to the case set up by the petitioner. Therefore, the force of the Act and the Rules framed thereunder has no basis as the State Legislature is fully competent to frame taxing laws on "sports" as well and that the writ petition is liable to be dismissed. The other factual position concerning raising of demand has been admitted. It is significant to highlight that entertainment duty in the instant case is not on any particular sport or even on sports but it is on "sports clubs". The activities of sports clubs are ordinarily expanded to mean more ancillary activities than confining itself to sports. During the course of ....
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....lature to frame law for regulating "theatres", "dramatic performances" and "cinemas" subject to the provisions of entry 60 of List I; sports, entertainments and amusements in contra-distinction confer competence on State Legislature to tax "sports" because the subject of sports has been deliberately excluded from entry 62. Mr. Sorabjee has referred to other taxing entries 52 to 66, which confer competence on the State Legislature to frame law concerning imposition of tax on various subjects. According to the learned counsel there has to be express power conferred on the State Legislature for acquiring competence to tax particular subject and it cannot be assumed by implication. It has been emphasised that the tax by State Legislature could be levied on luxury, entertainment, amusement, betting and gambling but no tax could be imposed on "sports" as there is intentional and pointed omission of expression "sports" from entry 62 of List II. It has, therefore, been urged that subject of "sports" for the purposes of levying of tax has been reserved for Parliament to frame law under the residuary entry 97 of List I of the Seventh Schedule. Mr. Sorabjee has then referred to para 3 of the....
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....racted if there is any performance of entertainment for others and shown to others. Once the members of the club come for playing a game of golf to entertain themselves, no entertainment duty would be attracted. Mr. Sorabjee has also placed reliance on the provisions of section 10 of the Act and argued that no person on payment is permitted to enter to any entertainment without a duly stamped ticket issued by the Government for the purposes of revenue denoting that entertainment duty has been paid. Referring to rule 9 of the Rules, learned counsel has drawn our attention to the form of the ticket in "form PED-I" and argued that the admission to entertainment has to be by issuance of ticket which is duly stamped by the Government whereas in the present case neither issuance of a ticket nor any payment of duty thereon is involved. The learned counsel has further elaborated his submission by urging that in order to have amusement and entertainment there have to be viewers who would be entertained and such a situation would arise if the members are playing a match to which general public is invited to view the same on payment. The learned counsel has pointed out that without payment ....
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....ople are invited to an entertainment which is conceptually incorporated in the Act. The learned counsel has referred to rule 6 of the club and argued that a sum of Rs. 4,00,000 for four years is prescribed to use the facilities in this private club. In a public entertainment no attire can be prescribed which could be done in a private club like the petitioner. Mr. Arvind K. Nigam, learned senior counsel appearing in some other petitions, has argued that those petitioners are the members of the clubs and the burden of tax is clearly felt by them who play golf. The activities of the members who play golf is not exposed to public exhibition to entertain others. The learned counsel has drawn our attention to the long title of the Act where the expression "public entertainment" has been used and has argued that the incidence of duty is on the payment for "public entertainment". Mr. Nigam has supported his submission by placing reliance on para 104 of the judgment rendered in the case of Vasu Dev Singh v. Union of India [2006] 12 SCC 753, and argued that preamble of a statute is a key to understand it. According to the learned senior counsel, a member of the club does not entertain any....
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....objective outside the person amused or entertained and with regard to the tax on entertainment and amusement, the tax is also on the spectator who witnesses some amusement or entertainment and, therefore, although a person who solves a crossword puzzle is amusing or entertaining himself but this is not the amusement which the Constitution contemplates in placing the topic of entertainments and amusements in the relevant entries. The argument of Mr. Diwan, learned senior counsel, is that entertainment could only be possible if it is perceived by the viewers and the subjective entertainment confined to the person who solves a crossword puzzle is not covered by the constitutional scheme. Mr. Diwan has submitted that the Division Bench judgment was though reversed by the Constitution Bench in the case of State of Bombay v. R.M.D. Chamarbaugwala AIR 1957 SC 699, but this part of the judgment was not reversed or differed from. Mr. Diwan has then submitted that the Division Bench judgment in Chrysalis International (P) Ltd. [2011] 37 VST 413 (P&H) [App] has been wrongly decided on account of complete misapplication of the judgment of the honourable Supreme Court in the case of Geeta Ente....
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....of Madhya Pradesh AIR 1982 MP 171, was overruled. It is on the aforesaid premises learned counsel has urged that the judgment in Chrysalis International (P) Ltd. [2011] 37 VST 413 (P&H) [App] proceeds on an incorrect assumption. Mr. H.S. Hooda, learned Advocate-General, Haryana, has vehemently argued that once expression "sport" has been employed by the framers of the Constitution amidst expression entertainment and amusement in entry 33 of List II then it cannot be concluded that expression "entertainment" would not include sport as per entry 62 of List II. According to the learned Advocate-General the expression "entertainment" is wide enough to include "sport" under entry 62 of List II of the Seventh Schedule. Mr. Hooda has placed firm reliance on paras 3 and 4 of the Constitutional Bench judgment of the honourable Supreme Court rendered in the case of Y.V. Srinivasamurthy AIR 1959 SC 894 and argued that the Constitution Bench has interpreted the word "entertainment" to include "sports" and, therefore, the State Legislature has been clothed with full competence to frame tax law under entry 62 of List II of the Seventh Schedule to the Constitution. Mr. Hooda has supported the v....
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.... State. Article 246 of the Constitution puts it beyond any doubt that the Parliament has the exclusive power to make laws with respect to any of the "fields" enumerated in List I in the Seventh Schedule, which is known as "Union List". The Parliament has also been clothed with the power to make laws on any of the "fields" enumerated in List III in the Seventh Schedule, which is known as "Concurrent List". The States also have the power to make laws in respect of any of the "fields" of "Concurrent List", which is subject to the power of the Parliament under clause (1) of article 245. However, the State Legislature has exclusive power to make laws with respect to any of the fields enumerated in List II in the Seventh Schedule, which is described as the "State List". However, in any of the residuary field, Parliament has been given the power to frame laws which again makes the Parliament more powerful. After referring to a wealth of Indian as well as foreign cases, a three-Judge Bench of the honourable Supreme Court in paras 71, 74, 75 and 76 of the judgment rendered in the case of Hoechst Pharmaceuticals Ltd. v. State of Bihar [1984] 55 STC 1 (SC); [1985] 154 ITR 64 (SC); [1983] 4 S....
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....iament to enact a law, the question one has to ask is whether the legislation relates to any of the entries in List I or III. If it does, no further question need be asked and Parliament's legislative competence must be upheld. Where there are three Lists containing a large number of entries, there is bound to be some overlapping among them. In such a situation the doctrine of pith and substance has to be applied to determine as to which entry does a given piece of legislation relate. Once it is so determined, any incidental trenching on the field reserved to the other Legislature is of no consequence. The court has to look at the substance of the matter. The doctrine of pith and substance is sometimes expressed in terms of ascertaining the true character of legislation. The name given by the Legislature to the legislation is immaterial. Regard must be had to the enactment as a whole, to its main objects and to the scope and effect of its provisions. Incidental and superficial encroachments are to be disregarded. (6) The doctrine of occupied field applies only when there is a clash between the Union and the State Lists within an area common to both. There the doctrine of pith....
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....that the measure employed for assessing a tax must not be confused with the nature of the tax. In Kesoram Industries Ltd. [2004] 2 RC 298; [2004] 10 SCC 201, the Constitution Bench has held that ". . . a tax has two elements: first, the person, thing or activity on which the tax is imposed, and second, the amount of tax. The amount may be measured in many ways; but a distinction between the subject-matter of a tax and the standard by which the amount of tax is measured must not be lost sight of. These are described respectively as the subject of a tax and the measure of a tax. . ." For these principles reliance may also be placed on the judgment of the honourable Supreme Court rendered in the case of Union of India v. Bombay Tyre International Ltd. [1983] 4 SCC 210. It is in the aforesaid backdrop that the issue raised before us needs to be considered. Firstly, entries 33 and 62 in the State List of the Seventh Schedule to the Constitution needs to be read in juxtaposition, which are as under: On the aforesaid entries, learned counsel for the parties have advanced several pleas but their fundamental submission is that omission of word "sports" from, and retention of expre....
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....ds 'entertainments' and 'amusements' are wide enough to include theatres, dramatic performances, cinemas, sports and the like. If his argument is correct, then, on a parity of reasoning, the State Legislature will have no competence to enact a law imposing a tax on theatres or dramatic performances or sports, for none of those words is mentioned in entry 62. This is sufficient to repel this argument. The truth of the matter is that 'cinema' had to be specifically mentioned in entry 33 of List II in order to avoid any possible conflict between it and entry 60 in List I." (emphasis(1) added) A perusal of the aforesaid position of law laid down by the Supreme Court would show that the Constitution Bench proceeded to interpret the "fields" of legislation, namely, entertainments and amusements to be wide enough to include theatres, dramatic performances, cinemas, sports and the like. In the cases of Hoechst Pharmaceuticals Ltd. [1984] 55 STC 1 (SC); [1985] 154 ITR 64 (SC); [1983] 4 SCC 45 and Kesoram Industries Ltd. [2004] 2 RC 298; [2004] 10 SCC 201 it has been categorically laid down that entries in the Lists are merely "topics" or "fields" of legislation and....
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....article confers power on the Supreme Court to punish for contempt of itself and in addition, it confers some additional power relating to contempt as would appear from the expression 'including'. The expression 'including' has been interpreted by courts, to extend and widen the scope of power. The plain language of article 129 clearly indicates that this court as a court of record has power to punish for contempt of itself and also something else which could fall within the inherent jurisdiction of a court of record. In interpreting the Constitution, it is not permissible to adopt a construction which would render any expression superfluous or redundant. The courts ought not to accept any such construction. While construing article 129, it is not permissible to ignore the significance and impact of the inclusive power conferred on the Supreme Court. Since the Supreme Court is designed by the Constitution as a court of record and as the founding fathers were aware that a superior court of record had inherent power to indict a person for the contempt of itself as well as of courts inferior to it, the expression 'including' was deliberately inserted in the arti....
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....itution Bench judgment of the honourable Supreme Court in the case of Y.V. Srinivasamurthy AIR 1959 SC 894 would be fully applicable and we are bound by and reiterate what the above judgment has held that the words "amusements" and "entertainments" would include "sports" as well. The argument to the contrary advanced by the learned counsel for the petitioners would not require any serious discussion in view of the dicta of the judgment in Y.V. Srinivasamurthy's case AIR 1959 SC 894. The judgment cannot necessarily be overlooked merely as judgment because it is based on a concession and it is not being read like we read a statute. In fact, a full-dressed argument was raised, as is evident from the perusal of para 3 extracted above and the same was repelled. Likewise, the other argument adopting paras 23 and 24 of the Division Bench judgment of the Bombay High Court in the case of R.M.D. Chamarbaugwalia AIR 1956 Bom 1 would also not be acceptable to conclude that the State Legislature lacks competence to tax sports, in view of the Constitution Bench judgment rendered in Y.V. Srinivasamurthy's case AIR 1959 SC 894. The view expressed in para 3 of the judgment in Y.V. Srinivas....
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....x on participation in a show which is screened in a video parlour by accepting that the definition of "entertainment" given in section 2(3) of the United Provinces Entertainment and Betting Tax Act, 1937 (for brevity, "the United Provinces Act") was wide enough to include video parlour where video games were played. The Division Bench also referred to the general meaning of entertainment derived from various legal and English language dictionaries. On the contrary, a Division Bench of the Madhya Pradesh High Court in the case of Harris Wilson AIR 1982 MP 171 had taken the opposite view holding that no entertainment tax was leviable by virtue of participation in playing the video games in a video parlour. However, the honourable Supreme Court in Geeta Enterprises' case [1983] 4 SCC 202; AIR 1983 SC 1098 overruled the view taken by the Madhya Pradesh High Court as also a similar view taken by the Gujarat High Court in the case of H.T. Gursahaney v. State [1982] (2) 23 Guj LR 526. The Division Bench of this court in the case of Chrysalis International (P) Ltd. [2011] 37 VST 413 (P&H) [App], has also upheld the imposition of entertainment tax on the sports clubs, which has been qu....
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....d which can be watched by interested spectators". Another argument that no admission fee was charged, also failed to find favour with the Supreme Court. The learned counsel for the petitioners in these matters have laid stress that when a number of people enter the hall for entertainment and enjoy the game then it becomes a public hall for a public show, which element is missing in the instant cases. However, we are unable to subscribe to the aforesaid argument for the reasons to follow. The classical examples of theatre performance, shows in cinemas, entry to cricket matches are not necessarily the only events providing entertainment to the audience which enter the theatre or halls or the play grounds, respectively. In those cases highly skilled performers display their talent and entertain the public at large, yet, that is not the only by way of entertaining oneself. The modern scientific advances have now provided ways and means when a person can entertain oneself by use of his own skill. Therefore, in the present time it is not possible to lay down any general principles that a person cannot amuse himself and entertain himself by his own skill and playing game or that he can....
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....holly irrelevant in judging the actual meaning of the word 'entertainment' as used in section 2(3) of the Act. So also the fact that the income derived from the show is shared by one or more persons who run the show." After extracting the aforesaid four tests, the honourable Supreme Court quoted the following para with approval from the Division Bench judgment of the Allahabad High Court in Gopal Krishna Agarwal's case [1982] All LJ 607, which reads thus: "The context in which the word 'includes' has been used in the definition clauses of the Act does not indicate that the Legislature intended to put a restriction or a limitation on words like 'entertainment' or 'admission to an entertainment' or 'payment for admission.' With the advance of civilization and scientific developments new forms of entertainment have come into existence. Video games are probably the latest additions to the means of entertainment. These games require skill and precision as so many other games do. They are a source of amusement and enjoyment to those who participate in the games. Others who stand by and watch also derive some pleasure and amusement though not....
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....he honourable Supreme Court in the case of State of M.P. v. Smt. Abha Sethi [1999] 4 SCC 32, but the Constitution Bench reiterated the view taken in Geeta Enterprises' case [1983] 4 SCC 202; AIR 1983 SC 1098 and approved the same. From the aforesaid discussion, following principles are deducible: (a) The video games are subject to entertainment tax. Even if a person is entertained in a video parlour by his own performance, there is no legal requirement that the owner of the video parlour should organise some entertainment programme like performance in theatre, amusement, games or any sport. In other words, it is no longer sine qua non that performance by a third party organised at the instance of the assessee is imperative in order to attract entertainment tax; (b) The mode of payment is wholly immaterial whether made at the entry or at the time of playing games. Therefore, a lump sum amount paid in the beginning or annual subscription given year after year would hardly make any difference; and (c) A performance becomes public in character when people come to play the game by displaying their own skill for consideration at a place where the members of the public are invited....