TaxTMI 
TaxTMI 
2016 (4) TMI 1059
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.... Tax (hereafter "ET") for the activities it offered in its amusement park. The second batch of writ petitions [W.P.(C) 7589/2012, W.P.(C) 2424/2013, W.P.(C) 2425/2013, W.P.(C) 2450/2013 & W.P.(C) 2451/2013] is been preferred by Polo Amusement, aggrieved by the Notification dated 07.06.2007 (hereafter referred to as "the impugned 2007 notification") and the consequent assessment order dated 15.11.2012. 2. The brief facts are that Polo Amusement, through its letter dated 28.08.1992 sought permission to set-up an amusement/fun park "Fun 'N' Food Village" (hereafter referred to as "the Fun Village") at Plot Nos. 1279-1280 to 1283-1284 at Village Kapashera, Mehrauli, New Delhi. The Fun Village was initially designed to include well-developed lawns, music and a set of amusements. The entry charges were Rs. 30/- for adults and Rs. 20/- for children. Originally, the ticket holders were to enjoy all rides except for "bumpy beats" for which separate rates were to be charged. The rates proposed included Entertainment Tax (hereafter referred to as "ET"). Permission was granted to Polo Amusement by the GNCTD. The rates of entry fees were increased and also regulated depending on the da....
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....or charging guests one time daily fees of Rs. 2000/- for adults and Rs. 150/- for children was to independent customers by issuing receipts shown against guests of some unknown members on random basis. Such membership numbers were used commonly for several independent customers without any relation to those members. The management was asked to furnish explanation and details. It held meetings with the officials of the ET Department and pursuant to personal appearance, it wrote a letter dated 19.04.1999, stating the details of the water sports activities in its Club which according to it was operational during April-October. The relevant part of the explanation, reproduced from its letter, dated 19.04.1999 is as follows: "1. Sea Wave: This is a water pool starts from the shallow level with the maximum depth of seven feet. Other dimension and sketch of the pool is enclosed. This pool is basically meant for non-swimmers, weak swimmers and also for the perfect swimmers. One can witness waves while swimming. This facility was started in April 1996. 2. Lazy River: Lazy River pool is again meant for the non and weak swimmers. Sketch along with the dimensions of this pool is enclosed. In....
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....ainment Tax Officer [hereafter "ETO"] by his Order dated 12.11.1999, made under Section 15 of the ET Act held that the ET of Rs. 1,46,090/- calculated on the basis of 20% of the gross proceeds of gate money were payable. The order reads as follows: "The assessee has consistently contended that the activity is swimming and hence should not be taxed unless swimming is taxed. The assessee also submitted that the activity is exempted from the Entertainment Tax in the states of UP, Rajasthan, Gujarat and Maharashtra with provisions/grounds of exemption varies from state to state and submitted notifications related to various States. The Department felt that the case has litigation potential and accordingly the advice of the Law and Finance Department was sought. Subsequent to the advice of the Law Department and the Finance Department, a decision was taken by the Department to levy Entertainment Tax on the activity and an order was passed accordingly on 21.9.98, directing the establishment to apply for a No Objection Certificate from the Department as per Section 8 of the Delhi Entertainment and Betting Tax Act and Rule 11 of the Rules framed thereunder. Despite this order, the assess....
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....hi Entertainment Tax Rules." 5. Polo Amusement appealed to the appellate authority, i.e. the Deputy Commissioner, under Section 15(3) of the ET Act, aggrieved by the order of the ETO on 12.11.1999. Polo Amusement contended that the visitors to the Club were participants in swimming and badminton, which did not call for levy of ET and that swimming, related activities were carried on in the Club. According to Polo Amusement, these did not fall within the purview of the expression "entertainment" under Section 2(i) of the ET Act. Polo Amusement, however, argued that people involving and participating themselves in sports activities like football and cricket are not taxed and that in any event sports tax is leviable on spectators and not participants. The Appellate authority was of the opinion that the relevant provisions of the ET Act [Sections 6(2), 6(6) and 7] read with Section 2(m) pre-supposed that entertainment, amusement purposes etc. were liable to ET subject to the condition that there was an element of payment for admission to such activities. 6. The appellate authority was of the opinion that the activity carried on at the Club was mere swimming was not established from t....
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....tivities of the appellant basically have amusement/entertainment character and admission is against the payment for admission which may be in the form of membership fee, maintenance charges or entry tickets from other visitors. The fact remains that those seeking admission to the facility have to pay for the same and the purpose of their visit is entertainment/enjoyment and not swimming. The appellant is, therefore, liable to pay the Entertainment Tax as the charges for admission being obtained by the Appellant are very well covered under the definition for payment for admission under Section 2(m). The purpose behind creation of various pools of the appellant is commercial and receipts are reflected in Schedule 8 of Audited Accounts under Sales and Identical Revenue." The appellate authority later concluded as follows: "In view of the above discussions, I am of the view that the activities of the appellant in the Village Club fall within the definition of Entertainment as the water park is run by the appellant on a commercial basis and is designed to provide entertainment and amusement to the visitors. Since the appellant is charging payment for admission for entry and enjoyment ....
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.... on 20.02.2001, the question as to the liability of Polo Amusement to pay ET for the relevant period became final. The ETO issued notices to deposit ET based upon the calculations worked out from the books of accounts and receipts made during the relevant period. The assessee was given a final opportunity on 07.09.2001 to deposit ET and books of accounts for the period up-to 31.03.2001. It did not comply with the directions and instead furnished a letter dated 18.09.2001, claiming that it had filed a petition before the Financial Commissioner [hereafter referred to as "the FC"]. The ETO, by order dated 15.10.2001 proceeded to assess the ET @ 25% of the gross proceeds from the membership fees and maintenance charges from the guests totalling Rs. 1,13,65,455/-. The amount of ET was assessed at Rs. 28,41,364/-; the interest liability was calculated at Rs. 20,47,948/-, and Rs. 49,89,312/- was directed to be deposited. 8. Polo Amusement had preferred a further appeal to the FC under Section 15(4) of the ET Act on 20.03.2001. By his order, the FC upset the concurrent findings of the assessment/ETO/AO and the appellate authority on 04.01.2002. The FC was of the opinion that swimming pool....
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....ks and other place of amusements licensed or liable for obtaining license under the Regulations for Licensing and Controlling places of public Amusement (other than Cinemas) and performances for public amusement, 1980; and (b) Any other sports activities organized by schools or colleges or gymnasiums." 11. Polo Amusement also challenges the consequential assessment orders made for various years and periods. It is submitted that during pendency of W.P.(C) 1896/2002, the FC's order was not stayed. Therefore, it operated in rem. The order had the effect of ruling out levy of any ET on the Club's swimming and sports activities. The impugned 2007 notification, it is contended, substantially exempts from payment of ET on swimming and other sports activities organized by schools, colleges and gymnasiums, and is under Section 14 of the ET Act. It is argued that this notification, in differentiating between the same activities carried on in different places, is discriminatory. Polo Amusement contends that exempting one set of organizations such as schools, colleges and gymnasiums from carrying out the same activities, but carried on in different premises has no rational basis with....
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....in the activities offered, it cannot be said that he has attempted to an entertainment for the simple reason that the premises and the entertainment have to be different from the spectator. In the context of swimming or water sports, it is submitted that the expression "held" in the context of entertainment has two meanings. Polo Amusement does not hold entertainment as understood either logically or legally. "Amusing onself", urges counsel, does not amount to being entertained - intrinsically different since the entertainment would be shown or activity other than that of the spectator, passively observing it. Reliance is placed on the decision in Associated Hotels of India v. UOI (1961) 1 ILR (P&H) 66, where it was held that, "the persons who go to the pool to bathe there do not go to a place of entertainment. After all a common sense view of the matter must be taken. It is impossible to say that the bather on payment of admission charges when entering the pool is entering a place where entertainment is being held." 14. The assessee's interpretation is supported by the expression "payment for admission" under Section 2(m)(iv) which includes "any payment for any purpose whatsoever....
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....purporting to issue the impugned order/notification, differentiating between swimming activities in institutions, Clubs etc. and other places and thus seeking to tax the amusement parks, the GNCTD exceeded its powers. So long as the FC's order remained unaltered, the question of seeking to recover any amount on the basis of such notification did not arise. It was argued that on the strength of the decision in Union of India v. Kamlakshi Finance Corporation 1992 Supp. (1) SCC 443 that having found that once the FC determined that the activities in the Polo Amusement were not liable to ET, the Govt. of NCT, issued a Notification illegally. In the absence of a stay or eventual setting-aside of the FC's order, in fact, no tax could be levied for the intervening period. It is argued next that the notification and the subsequent assessment orders as well as the recoveries are unlawful because Section 6(1) authorizes the levy of tax not on the proprietor of the establishment providing the amusement or enjoyment but on the person who pays for admission. The establishment offering entertainment merely collects the tax. If the law as it stood after the FC's order was that collect....
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....in a club hall amounts to entertainment although the playing of tombola does, to some extent, involves a little skill. 3. that even if admission to the hall may be free but if the exhibitor derives some benefit in terms of money it would be deemed to be an entertainment. 4. that the duration of the show or the identity of the person who operates the machine and derives pleasure or entertained or that the operator who pays himself feels entertainment is wholly irrelevant in judging the actual meaning of the word 'entertainment' as used in s. 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." 19. It was argued that the Supreme Court approved the view that games, which require skill and precision where the participants also derive amusement and enjoyment and further, provided by the organizer or event owner. Similarly amusement too but not to the same degree would amount to entertainment. The Supreme Court also approved the decision of the Madhya Pradesh High Court in Harris Wilson v. State of Madhya Pradesh AIR 1982 MP 171. It was argued that the FC completely overlooked the factual findings of the a....
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....members of public. Given these and the very nature of the activities, which members of the public were allowed access to in the Fun Village, i.e. different kinds of pools, which did not involve any swimming skills at all, the classification between swimming activities and amusement and fun parks was entirely well-founded. 23. It is argued that in matters of tax and levy of duties, the State has wider latitude in classifying goods, services, activities and articles as compared with activities that fatally affect the fundamental rights of individuals. Learned counsel argued that sporting activities carried on in educational institutions and schools, such as swimming is schools, is designed to promote the well-being, health and sports generally. Likewise, the State recognizes that commercial establishments, such as hotels charge their guests who avail of the facilities in the form of room tariff. These were subject to taxation. However, the facilities at the Club were exclusively given for the pure amusement and enjoyment of those seeking it. Consequently, they could be treated differently. 24. It is argued that once it is held that availing facilities in the Fun Village and the Clu....
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....ribution received or donation collected in connection with an entertainment, where admission is partly or entirely by tickets/invitation specifying the amount of admission or reduced rate of ticket shall be deemed to be payment for admission." ***************** **************** "Section 6 Tax on payment for admission to entertainment. (1) Subject to the provisions of this Act, there shall be levied and paid on all payments for admission to any entertainment, other than an entertainment to which Section 7 applies, an entertainment tax at such rate not exceeding one hundred per cent of each such payment as the government may from time to time notify in this behalf, and the tax shall be collected by the proprietor from the person making the payment for admission and paid to the government in the manner prescribed. (2) Nothing in sub-section (1) shall preclude the government from notifying different rates of entertainment tax for different classes of entertainment or for different payments for admission to entertainment. (3) Where the payment for admission to an entertainment together with the tax is not a multiple of fifty paise, then notwithstanding anything contained in sub-s....
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.... proprietor, prohibit the holding of such entertainment and may also take all reasonable steps to ensure that order of prohibition is complied with, if he is satisfied that- (a) the proprietor has given any false information which is likely to result in the evasion of tax; (b)the proprietor has failed to deposit the security due; (c) the proprietor has committed breach of any of the provisions of this Act or the rules made thereunder." ***************** **************** "Section 14-Exemption (1) The government may, for promotion of arts, culture or sports, by general special order, exempt any individual entertainment programme or class or entertainments from liability to pay tax under this Act. (2) The government may, by general or special order, exempt in public interest any class of audience or spectators from liability to pay tax under this Act. (3) Without prejudice to the generality of the provisions of sub-section (1) where the government is satisfied that any entertainment,- (a) is wholly of an educational character; or (b) is provided partly for educational or partly for scientific purposes by a society not conducted or established for profit; or (c) is provide....
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....d in writing grant export facto exemption from payment of entertainment tax in respect of any programme." 26. Geeta Enterprises (supra) is conclusive on what kind of activity is "entertainment". The four pronged test: Public nature (as opposed to private, through invitation or restricted entry to guests etc); deriving of amusement by the person seeking it- whether by sport, performance or other entertainment; deriving of profit (i.e commercial element) to the provider of entertainment and the irrelevance of whether actual amusement is derived from the particular given form of entertainment, is all embracing. The statute in this case clearly states that entertainment is "exhibition, performance, amusement, game, sport or race (including horse race).." (Section 2 (i)). "Admission to entertainment" is defined as (See Section 2 (a)) "includes admission to any place in which the entertainment is held.." 27. The charging provision, Section 6 (1) enacts that tax is to be levied and paid on all payments for admission to any entertainment. Section 2 (m)(iv), in the Court's opinion, covers the payment made by visitors to the petitioner's club as charges since they are connected wit....
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....f Tamil Nadu (WP 1614/1999 and connected cases, decided on 23.10.2008). The Madras High Court held as follows: "By relying upon certain English decisions, it was sought to argue that there is a distinction between ''amusement" and ''entertainment". When the petitioners are providing only facilities and the persons are enjoying such facilities, the same thing cannot be subjected to an entertainment tax. The legislative entry should not have any meaning from common parlance, but it should have a legislative definition. The definition ''amusement" introduced by the Amending Act was an arbitrary definition. ************* **************** In fact, more or less a similar contention, which had been raised in respect of entertainment tax regarding cinemas, was repelled by the Supreme Court Y.V. Srinivasamurthy & Ors v The State of Mysore & Anr reported in AIR 1959 SC 894. Para 3 of the said judgment may be usefully extracted below:- ''3. It is only necessary here to refer to an additional argument that was advanced by learned counsel for the appellants before us in support of his contention. He drew our attention to Entry 33 of List II of the Seventh ....
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.... held that the classification made for the purpose of banning dance bars was irrational. This Court finds that the judgment has no relevance to the context here; the Court there was of opinion that an improper distinction on grounds of classes of establishments or classes of persons, who frequent the establishment had been made by the State, which was discriminatory and that there was no rationale to justify the conclusion that a dance that leads to depravity in one place would get converted into an acceptable performance by a mere change of venue. The Court held that morality and depravity cannot be pigeon-holed by degrees depending upon the class of the audience. Thus, activities which are obscene or which are likely to deprave and corrupt those whose minds are open to such immoral influences, cannot be distinguished on basis of whether they are performed in five-starred hotels or in dance bars. The Court held that it could give credence to a notion that high morals and decent behavior is the exclusive domain of the "upper" classes, whereas vulgarity and depravity are limited to the "lower" classes. 30. It is consequently held that there is no merit in the petitioners' argument ....
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....within the definition of payment for admission and shall be liable to tax in addition to charge on account of entry tickets." 32. This Court does not see how the GNCTD can justify the additional imposition by the Commissioner. It is true that the Deputy Commissioner (i.e. the authority named as the appellate official under Section 15 (3)) is empowered suo motu revision to modify, annul, reverse or otherwise revise the assessment authority's decision. However, that power-to modify or revise any assessment or demand can be invoked only if a separate show cause notice is issued, by virtue of proviso to Section 42 of the ET Act. That apart, the Deputy Commissioner could not have enlarged the scope of the proceedings before him, which was an appeal from the decision seeking to recover a much smaller amount. In this respect the submission of the petitioner and its reliance on State of Kerala v. Vijaya Stores is well founded. 33. The next question is regarding validity of the notification dated 07.06.2007- the subject matter of W.P.(C) 7589/2012. The other writ petitions relate to the imposition of liability, based on the demands for different periods, the interest levied and the penalt....
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....ernment. It is a recognised fiscal tool to achieve fiscal and social objectives. The differentia of classification presupposes and proceeds on the premise that it distinguishes and keeps apart as a distinct class hotels with higher economic status reflected in one of the indicia of such economic superiority." 34. The Court also does not find any merit in the submission of the petitioners, because the legislature is deemed to have taken into account the circumstance that those hotels and other establishments offering swimming as an option to their guests do so as part of their normal facilities and services. This is taken into account by the State, which then imposes tax on a wide array of services, offered to guests and visitors (i.e restaurant facilities, hotel room facilities, purchase of articles, etc, all of which are subjected to taxation in one form or the other). The room tariff would then comprehend in sum, the value and cost charged for these services. Thus, to say that such establishments are privileged even while taxing fun park and services offered by the petitioner is unmerited. As far as swimming facilities offered for sports purposes go, the Court holds that the com....
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.... Union of India 1997 (3) SCC 262). Therefore, the submission that the GNCTD could not have issued the impugned notification is without merit. Furthermore, we notice that there was no impediment in the form of any interim order (nor could there have been one such, since the vires of the provision enabling exemption was not in issue) forbearing the issuance of any exemption. The notification was in exercise of statutory power. Polo Amusement is here mixing two issues: the correctness of the decision of the FC on the one hand (which is the subject matter of the State's petition) and the vires of the notification. So long as the order of the FC stood - there is no dispute that Polo Amusement could not- in the absence of any decision in W.P.(C) 1896/2002, have been subjected to taxation for the period covered in that writ petition. However, whether the activities in question were eligible or not for taxation were certainly a matter for the State to decide, in the exercise of its statutory power. There was no impediment of any kind, whatsoever, for the State to exercise that power. Thus, the issuance of the notification could not have been faulted. 36. As far as demands for tax, interes....