LI Network
Published on: October 10, 2023 at 00:15 IST
The Delhi High Court has reversed the decision to exempt the Indian Trade Promotion Organization from entertainment tax for trade fairs.
Justices Yashwant Varma and Dharmesh Sharma noted that while entry to Pragati Maidan is regulated and involves admission fees, visitors can access various forms of entertainment within the complex, including movies, exhibitions, plays, and fashion shows.
The respondent, the Indian Trade Promotion Organization, organizes trade fairs in the Pragati Maidan area in New Delhi. The organization charges admission fees in the form of tickets to allow people to attend fairs and also imposes separate fees for other events like fashion shows, theater shows, and movies held within the complex by individual organizations.
The petitioner’s contention was that the respondent was initially exempt from paying entertainment tax for several years. However, on November 18, 1996, the Competent Authority made a policy decision to withdraw this exemption.
For the assessment years 1997–98, 1998–99, and 1999–2000, assessment proceedings were initiated against the respondent for non-payment of tax, including entertainment tax on various activities during the years 1996–97, along with interest.
The total demand for the years 1996–97 amounted to Rs 21,19,294, with Rs 13,32,790 as entertainment tax and Rs 7,86,504 as interest. Similarly, for the assessment year 1998–99, a sum of Rs 56,50,782 was payable, which included an entertainment tax of Rs 43,16,878 and interest of Rs 13,33,404.
A show cause notice was issued, and the respondent provided a reply and had a personal hearing. Three assessment orders were issued, and the respondent’s appeal was dismissed. In the appeal, the main challenge concerned the applicability of Section 2(i) of the Act, defining the word “entertainment.”
The Financial Commissioner (FC) held that entry tickets were primarily meant to restrict visitor access to the trade fair grounds, and the fee did not automatically grant access to individual entertainment centers that charged a separate admission fee.
However, the FC’s order did not sufficiently analyze how entry tickets to the fairgrounds were subject to entertainment tax distinct from that levied on tickets for film shows, fashion shows, etc.
The department argued that the impugned decision was unsustainable under Section 15 due to the assessing authority’s plenary powers. The respondent contended that Section 2(a) was inapplicable since there was no entertainment when people visited Pragati Maidan Complex, and admission fees were intended to control the crowd.
The court, in allowing the petition, held that the Pragati Maidan Complex had regulated hours for trade and commerce, but entry by the general public was not restricted, and people visited for various purposes, including entertainment. The court determined that the respondent was liable to pay entertainment tax for the relevant assessment years.
Case Title: Govt. Of NCT Of Delhi & Ors. v. M/S Indian Trade Promotion Org. & Ors.
Case No.: W.P.(C) 8664/2009