TMI Blog2016 (4) TMI 1059X X X X Extracts X X X X X X X X Extracts X X X X ..... vidual has to make as a condition of attending the entertainment. This condition is satisfied in the case of all those entering inside the Petitioner's club. If they want to use the water sports facilities, they have to make the payment for the entrances. Thus the requisite conditions are fulfilled. It is consequently held that there is no merit in the petitioners’ argument that participation in the activities provided by Polo Amusement to its subscribers’ guest, i.e. Sea Wave, Lazy River, Fun Slide, Kiddies Pool, Aqua Shute, Aqua Ball, Super slide, are not covered within the definition “entertainment” or that its facilities do not constitute places of entertainment, for the entry of which the amounts collected are liable to ET. Whether the order of the Appellate Authority (not the FC) could have resulted in imposition of liability greater than what was found by the ET Department at the stage of assessment - The assessing authority held that “As such the Entertainment Tax constitutes 20% of the total gate money received for any determination of ticket..” and directed that Entertainment Tax is levied on the facility @ 20% of the gross proceeding of gate money. Held that:- T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elated books of account. If for any reason, the petitioner is unable to or does not produce complete records, the assessing authority can use any reasonable method, to estimate the receipts, and issue demands. It is clarified that the Court is not quashing the assessments and demands impugned; they shall be kept in abeyance and, having regard to the decision of the assessing authority, be appropriately modified or altered, while working out the final demands. Therefor, the order of the FC, holding that the assessee’s activity was not entertainment and not liable to Entertainment Tax, is set aside. At the same time, the Court holds that without properly invoking power under Section 42, the Deputy Commissioner (first appellate authority) could not have enhanced the demand made by the assessing officer. Accordingly, the order of the assessing authority is restored. - Decided partly in favour of revenue - W. P. (C) 1896/2002 & C. M. No. 8767/2012 - - - Dated:- 22-4-2016 - S. Ravindra Bhat And Deepa Sharma, JJ. W.P.(C) 7589/2012 C.M.No.19267/2012, W.P.(C) 2424/2013 C.M.No.4611/2013, W.P.(C) 2425/2013 C.M.No.4612/2013, W.P.(C) 2450/2013 C.M.No.4646/2013, W.P.(C) 2451/2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amusement asking it about the Club and to explain the circumstances why this was not intimated prior to the starting of the Club. Polo Amusement was asked to furnish all details. The letter was issued on 21.06.1996. On 16.07.1996, it responded to the letter, claiming that it had a separate identity and the premises of the Club were adjacent to the Fun Village and its facilities were available to its members and accompanying guests and the activities and facilities were exempted from Entertainment Tax. It, therefore, stated that there was no need to report this to the Department. The letter further went to state that the Club had swimming facilities in different form for all its members and guests on all seven days of the week. Polo Amusement also claimed that several other clubs in Delhi extended swimming facilities to their members who were exempted from ET. Its facilities were no different from those given by other clubs. The ET Department thereafter carried out an inspection on 13.06.1997. This time, the management of the Polo Amusement did not produce any records relating to the life memberships clubbed to the fees collected from the life members of its Club who had paid ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de which gives a diving experience. The depth of the pool is three feet. Other dimensions are enclosed along with the sketch of the pool. This facility was started in April 1997. 5. Aqua Shute: One can feel surfing experience after landing in the pool from the top of the slide by sitting on a floating mat. For dimensions you can see the enclosed sketch of the pool. Depth of this Pool is 2 to 4 feet and this facility was started in April 1997. 6. Super Slide: The depth of the pool is one and half feet only and is specially made for the non-swimmers as the non-swimmers can come down from the top of the slide in a zig-zag manner and can enter into the water without any fear. Dimensions are enclosed. This facility was made operational in September 1996. 7. Aqua Ball: This pool was recently started in June 1999 having different types of showers. Your goodself must be aware of the fact that our Country with appx. 800 million people could not achieve a single medal in swimming at the international level because this sport has been ignored and no initiatives has been taken by anyone to promote this sport. We have designed our swimming pools to attract the people of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 49 of the Delhi Sales Tax Act and it stands to reason that tax may be levied only from the date when Department issued an order to this effect after seeking legal opinion and not from retrospective effect. I have carefully examined assessee contention in a number of meanings from January 1999 and have taken on records the documents submitted by the assessee. It has been submitted that the facility terrified closed from 1.11.98 to 20.3.99 on account of winter season and the facility being water pours as per certified accounts the gross receipts of gate money from 21.9.98 to 31.3.99 were ₹ 7,30,450/- only excluding the period of closure i.e. 1.11.98 to 20.3.99. The Entertainment Tax together constitute gate money. As such the Entertainment Tax constitutes 20% of the total gate money received for any determination of ticket. Accordingly, Entertainment Tax is levied on the facility @ 20% of the gross proceeding of gate money to ₹ 1,46,090/-. Further, interest is being levied as per Section 40 of the Delhi Entertainment Tax Act @ for one month and 24% p.a. For following months on the amount of the tax. As the tax is payable weekly on weekly receipts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese facilities visitors or the patron enters the pool with the help of some instruments/slides instead of swimming through movement of pars of the body like hands and feet. The facilities are basically for the enjoyment of those entering into the Village Club after having paid for admission. The appellate authority clearly held that the activities on offer were not swimming and amusement activity: The activity, however, in view of the above facts is not swimming, but entertainment/amusement activity. The allegation of, discrimination in taxing the appellant, therefore, does not hold good. The activity of swimming as provided in hotels, clubs, etc. is not for amusement or entertainment. The members of the club go to the swimming pool either with the purpose of learning swimming or for regular swimming in case of those persons who already know swimming. In these cases, the basic purpose of the participants is physical fitness/exercise not entertainment or amusement as is the case with the activities in Fun-N-Food Village/Village Club of the appellant. Moreover, the membership charges in the clubs are generally refundable at the time of resignation etc. because the clubs ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the date of liability is apparently bad in law. The Appellant has himself submitted in his letter dated 19.4.99 to ETO that the activities/facilities known as Sea-wave, Lazy River and Kiddies Pool were started in April, 1996. Fun Slide and Aqua-shute were started in April 1997. Superslide was started in Sept. 1998. Aqua Ball was started in June 1999. Section 8 of the Delhi Entertainment and Betting Tax Act, 1996 provides that no entertainment on which tax is leviable shall be held without prior information being given to the Commissioner. Thus it was the responsibility of the proprietor/applicant to give prior information to the Commissioner (Entertainment Tax) regarding entertainment being held by him from April 1996 onwards, as per his own admission, in the Village Club. The liability to pay the tax is therefore, to be determined with reference to the above said provisions of the Act from the date of commencement of business, i.e. Entertainment/Amusement activities in the water park at the Village Club. As regards the taxability during the year 1998-99 the receipts from the charges collected from the visitors to the Village Club have been reflected by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese materials, it was concluded that the activities at the Club were swimming activities. The FC ruled out the respondent/GNCTD's argument that swimming pools in five-star hotels were mandatory and essential to retain their star-rating, by stating that they were neither relevant nor paramount to the issue. The FC held that: 15. Thus, I hold that activities undertaken at the village club are swimming activities/sports activities and the entertainment tax as contended by the appellant can only be levied/collected from the spectators/audiences and not from those who actually participate in such sports activities. 16. I am also in agreement with the contention of the appellant that since the department is not collecting any entertainment tax from persons who are club members or guests staying in hotels in Delhi and who pay for swimming facilities in such clubs and hotels, it is not justified in levying entertainment tax on the village club. 9. The FC faulted the ETO's subsequent order of 20.02.2001, holding that since the earlier assessment order upheld in appeal had been accepted, the appellate authority could not enhance the tax liability when the ET Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empted, the condition imposed as to the premises where they are carried on, has no rational nexus with the object of granting exemption. 12. It is next contended that the Club also has a pool, which according to the ET Department's notification of 30.06.1999 were tax-free as it was basically meant for swimming for all age-groups. The assessee further relies upon the view of the Law Department of GNCTD, noting that tax should be collected uniformly from all the organizers and clubs/hotels etc. We are required to maintain uniformity in our actions. This opinion was even considered by the FC in the order, dated 04.02.2002. By the order dated 15.11.2012 (impugned in W.P.(C) 7589/2012), Polo Amusement was asked to deposit ₹ 5,63,16,858/- (being ET determined at ₹ 2,67,72,750/- and interest with further penalty of ₹ 1 crore). Similarly, the subject matter of W.P.(C) 2424/2013 is identical except that apart from questioning the notification-dated 07.06.2007, the assessed levy of ET of ₹ 2,67,72,750/- plus interest and penalty, i.e. total working out to ₹ 4,64,35,938/- for the period 2011-2012 is challenged. W.P.(C) 2450/2013 challenges an identical l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admission. The concept of someone amusing himself or herself is implicitly excluded in the expression attending entertainment . Reference is also made to Section 6(5) that explicitly talks of a place of enjoyment to which access is enabled upon payment. The assessee/Polo Amusement further relies upon Section 8 which states that no ET and entertainment on which tax is leviable shall be held without prior information to the Commissioner by suppressing that holding of an event other than someone participating in it is of the essence to the entertainment. Thus, swimmers who are given entry to the facility do not participate in amusing or entertainment held or organized by the management. 15. Learned counsel relies upon the decision reported as State of Maharashtra v. Indian Hotel and Restaurants Association 2013 (8) SCC 519 and states that the basic activity which the club undertakes, i.e. granting access to swimming and that merely because these activities include or involves slides etc. does not convert the swimming activity into entertainment. These remain identical to the activities of visitors and guests to hotels, clubs etc. It is also emphasized that the Fun Village an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/2002], recovering any amounts towards tax liabilities of the assessee would not be justified. Reliance is placed upon the decision ESI Corporation v. Hyderabad Race Club 2004 (6) SCC 191. 17. It is argued furthermore that the orders of assessment made are not based on any rational grounds since there is no material to substantiate the ad hoc determination that four tickets were issued on an average per day. Furthermore, the assessing authority assumed that the prices of tickets remained uniform and unaltered throughout the year whereas the prices actually varied from season to season. Other issues of fact, such as the school children being provided free admission on production of School Identity Cards were also ignored. It is also argued that the ET Act does not authorise recovery of interest or penalty. Contentions of the Govt. of NCT of Delhi 18. The GNCTD firstly contends that the FC fell into grave error in re-appreciation of factual material. It is argued that a combined reading of Section 2(a), Section 2(l) and Section 2(m) of the ET Act clearly discloses that the artificial distinction sought to be made between the participants and spectator in the context of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the FC interpreted the expression enjoyment narrowly by taking note only of the dictionary meaning and the view of the Sports Authority of India (SAI), which could not be held conclusive. 20. Learned counsel also relied upon the decision of this Court in East India Hotels Ltd. v. UOI 2004 (77) DRJ 274 which interpreted Section 2(3) of the U.P. Entertainment and Betting Tax Act, 1937 as applicable to Delhi. The Court had applied the law in Geeta Enterprises (supra) and in the context of another participating/activity, which involved both active and passive participation of the person seeking amusement, i.e. entry into a discotheque. It is submitted that the said judgment is conclusive on the issue that the entertainment or amusement activity has to be such that the spectator does not participate in it to be liable to ET. In other words, even activities that involve participation of the entrant can amount to amusement or enjoyment. 21. It was argued that as far as the validity of the Notification dated 07.06.2007 is concerned, although there was no stay of the order of FC, the independent power of the GNCTD to notify and classify exemption under Section 14 was in no way or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts from the guests who availed of its facilities and cannot now complain that it is not liable. Analysis and Findings 25. The two points which require to be decided in this case are whether the activities offered by Polo Amusement are liable to ET and the validity of the impugned notification dated 07.06.2007. Certain provisions of the ET Act are essential, for the decision in this case. They are set out below: Section 2(a) - admission to an entertainment includes admission to any place in which the entertainment is held and in case of entertainment through cable service each connection to a subscriber shall be deemed to be an admission for entertainment. ***************** **************** Section 2(i) - entertainment means an exhibition, performance, amusement, game, sport or race (including horse race) or in the case of cinematograph exhibitions, cover exhibition or news-reels, documentaries, cartoons, advertisement shorts or slides, whether before or during the exhibition of a feature film or separately, and also includes entertainment through cable service; ***************** **************** Section 2(m) - payment for admission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the aggregate of such payment for admission to entertainment and the tax is rounded off to the next higher multiple of fifty paise, and such increased tax shall also be collected by the proprietor and paid to the government in the manner prescribed. (4) If in any entertainment, referred to in sub-section (1), to which admission is generally on payment, any person is admitted free of charge or on a concessional rate, the same amount of tax shall be payable as if such person was admitted on full payment. (5) Where the admission to a place of entertainment is generally on payment, and if any entertainment is held in lieu of the regular entertainment programme without payment of admission or with payment of admission less than what would have been paid in the normal course, the proprietor shall be liable to pay tax which would have been payable in a normal course at full house capacity or the tax for the programme held in lieu of the regular entertainment programme whichever is higher. (6) Where the payment for admission to an entertainment, referred to in sub-section (1), is made wholly or partly, by means of a lump sum paid as subscription, contribution, donatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and established solely for the purpose of promoting public health or the interests of agriculture, or a manufacturing industry; and consists solely of an exhibition of articles which are of material interest in connection with questions relating to public health or agriculture or are the products of the industry for promoting the interest whereof the society exists, or the materials, machinery appliances or foodstuff used in the production of such products; it may, subject to such terms and conditions as it may deem fit to impose, grant exemption to such entertainment from payment of tax under this Act; PROVIDED that the government may cancel such exemption if it is satisfied that the exemption was obtained through fraud or misrepresentation, or that the proprietor of such entertainment has failed to comply with any of the terms or conditions imposed or directions issued in this behalf and thereafter the proprietor shall be liable to pay the tax which would have been payable had not the entertainment been so exempted. (4) Where the government is satisfied that the entertainment programme is not conducted for profit and the entire gross proceeds from payment for admis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainment, the water sports activities (and not mere swimming) provided in the petitioner's premises. Section 2 (m)(iv), in effect, is that payment should be connected with an entertainment; the nomenclature of the payment is irrelevant. The only condition is that the payment should be connected with the entertainment, which are water sport activities in the present case. The added condition is that the payment should be one that an individual has to make as a condition of attending the entertainment. This condition is satisfied in the case of all those entering inside the Petitioner's club. If they want to use the water sports facilities, they have to make the payment for the entrances. Thus the requisite conditions are fulfilled. 28. The Court perceives no merit in Polo Amusement s submission that the expression entertainment not comprehending activity where the visitor/ customer is a participant- in all these cases. Geeta Enterprises (supra) is itself an answer to this argument. The facts there were that the owner of a video parlor sought to question imposition of ET. The Court expressly rejected the submission. Furthermore, the decision in East India (supra) is conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II of the Seventh Schedule to the Constitution which runs as follows: _Theatres and dramatic performances; cinemas subject to the provisions of Entry 60 of List I; sports, entertainments and amusements._ He contends that that entry covers laws made with respect to each of the items as a separate subject, but points out that Entry 62, which has been quoted above, permits imposition of tax only on luxuries including taxes on entertainments, amusements, betting and gambling. Learned counsel concludes that law made with respect to Entry 62 cannot permit imposition of taxes on cinemas, for the word _cinemas_ mentioned in Entry 33 has been omitted from Entry 62. We do not thick there is any substance in this argument. Learned counsel agrees that the words _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 are mentioned in Entry 62. This is sufficient to repel this argument. The truth of the matter is that _cine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the petitioners argument that participation in the activities provided by Polo Amusement to its subscribers guest, i.e. Sea Wave, Lazy River, Fun Slide, Kiddies Pool, Aqua Shute, Aqua Ball, Super slide, are not covered within the definition entertainment or that its facilities do not constitute places of entertainment, for the entry of which the amounts collected are liable to ET. 31. The next issue is whether the order of the Appellate Authority (not the FC) could have resulted in imposition of liability greater than what was found by the ET Department at the stage of assessment. At the stage of assessment, it was held that the collections for the period in question, i.e 21.09.1998 to 31.03.1999, were ₹ 7,30,450/- (excluding the period of closure i.e. 01.11.1998 to 20.03.99). The assessing authority held that As such the Entertainment Tax constitutes 20% of the total gate money received for any determination of ticket.. and directed that Entertainment Tax is levied on the facility @ 20% of the gross proceeding of gate money to ₹ 1,46,090/- . The officer also levied interest under Section 40 @ for one month and 24% p.a. for following months on the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds for different periods, the interest levied and the penalty charged. The main argument with respect to vires of the notification is that no distinction can be made between swimming as a sporting event, swimming as an activity undertaken in a hotel or such establishment and swimming in a facility like the one owned by the petitioner, and its Fun Club. The Court finds this argument insubstantial. It is firstly well settled that in economic and fiscal matters, the legislative judgment is given greater deference than in areas where fundamental liberties are involved. This was spelt out in R.K. Garg v Union of India 1981 (4) SCC 675, in the following terms: ..another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J. that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrine or straight jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wimming facilities offered for sports purposes go, the Court holds that the comparison is inapt. It can safely be said that there is State interest in promotion of sport for the promotion of sport besides in the larger interest of health of the users. 35. The Court next proposes to examine Polo Amusement s argument that the State could not have, during the pendency of its writ petition, sought to recover amounts, by issuing the impugned notification. It was urged additionally, on the basis of the judgment of the Supreme Court, in Kamlakshi Finance Corporation (supra) that the notification was contrary to the GNCTD s final determination by the FC, who was the final appellate authority which ruled decisively that the petitioner was not liable to ET for the activities it offered in its club, to the guests of its subscribers. At the outset, the Court notices that the decision in Kamlakshi Finance Corporation (supra) is an authority for the proposition that a lower authority cannot challenge the correctness of a higher, quasi judicial appellate body before a Tribunal which has appellate oversight over the appellate body. There, the Assistant Commissioner had sought to appeal against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the notification could not have been faulted. 36. As far as demands for tax, interest and penalties in 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 preferred by Polo Amusement- in regard to the demands- are concerned, this Court is of the opinion that they were pursuant to the decision of the assessing authorities. These do not appear to have been based on detailed investigation of facts and record. There is some substance in the argument of Polo Amusement that assessment was made in respect of all days including holidays. To facilitate a better inquiry, the assessing authorities are directed to give one opportunity to Polo Amusement to establish the actual collections, based on their gate receipts and related books of account. If for any reason, the petitioner is unable to or does not produce complete records, the assessing authority can use any reasonable method, to estimate the receipts, and issue demands. It is clarified that the Court is not quashing the assessments and demands impugned; they shall be kept in abeyance and, having regard to the decision of the assessing authority, be appropriately modified or altered, while ..... X X X X Extracts X X X X X X X X Extracts X X X X
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