Delhi High Court Quashes Order Exempting Indian Trade Promotion Org. From Entertainment Tax On Trade Fairs

The Delhi High Court has quashed the order of the Financial Commissioner exempting the Indian Trade Promotion Organization from entertainment tax on trade fairs.

The bench of Justice Yashwant Varma and Justice Dharmesh Sharma has observed that entry to the Pragati Maidan is regulated and the visitors are allowed entry on payment of an admission fee. Once they are inside the complex, they can visit not only stalls or pavilions with regard to trade and commerce, but they could also access movies, exhibitions, plays, and fashion shows inside the complex besides enjoying meals and refreshments, which may or may not be free.

The respondent, Indian Trade Promotion Org., is an authority organizing trade fairs in the area commonly known as Pragati Maidan, New Delhi. The respondent charges an admission fee in the form of a ticket to allow people to visit fairs and also levies a separate fee for other events such as fashion shows, theatre shows, and movies conducted within the same complex by individual organizations.

The grievance of the petitioners/department was that the respondent was initially exempted from paying entertainment tax for several years. However, a policy decision was taken on November 18, 1996, by the Competent Authority, and the exemption from payment of entertainment tax was withdrawn.

For the assessment years 1997–98, 1998–99, and 1999–2000, assessment proceedings were initiated against the respondent for non-payment of tax, and a tax was payable on various other entertainment activities during the years 1996–97 with interest. The total demand for the years 1996–97 was assessed, and for the assessment year 1997–98, the tax payable came to Rs 21,19,294 out of which Rs 13,32,790 was entertainment tax and Rs 7,86,504 was interest. Likewise, 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, to which a reply was filed by the respondent, and a personal hearing was afforded. Three assessment orders were passed. The appeal filed by the respondent was dismissed by the Appellate Authority. The respondent filed a second appeal under Section 15(4), in which the main challenge was with regard to the inapplicability of Section 2(i) of the Act that defines the word “entertainment”.

The Financial Commissioner (FC) held that entry tickets were solely for the objective of restricting the entry of visitors within the trade fair grounds, and the fee did not automatically permit the visitors to gain entry into individual entertainment centres, providing entertainment through a separate admission fee. The order also shows that there was a sale of tickets for the fashion shows and film shows, as distinct from the entry fees. The order suffers from the infirmity that it has not analyzed in detail how entry tickets to the fairgrounds attracted entertainment tax as distinct from that leviable on tickets for film shows, fashion shows, etc. The order has concluded that any person gaining entry to the trade fair was being provided entertainment or amusement on the basis of that entry fee, since the entry fee did not restrict entry to bona fide purchasers nor adjusted the fee against any purchases.

The department contended that Section 2(a) defines the expression “admission to entertainment” and Section 2(i) defines the word “entertainment”. It was vehemently urged that the impugned decision was unsustainable in view of the plenary powers of the assessing authority under Section 15.

The respondent contended that section 2(a) is inapplicable since there is no question of entertainment when people visit Pragati Maidan Complex, and the requirement of payment of the admission fee by way of tickets is done to control the crowd. The entry to the Pragati Maidan Complex regulated by the respondent is a business-to-business facility and does not provide any entertainment.

The court, while allowing the petition, held that there are regulated hours for the purposes of trade and commerce, where the main purpose apparently is promotion of trade and business. However, there is no challenge to the fact that entry by the general public is not restricted, and people of all ages and genders visit the site for a variety of purposes, including gratification, entertainment, or amusement, with the payment of additional or higher charges or fees. The assessee may also be imposed with a levy of entertainment tax wherever people are allowed free of charge inside the complex by virtue of Section 14.

The court held that the order of the FC cannot be sustained in law. The respondent is liable to pay entertainment tax for the assessment years in question.

Counsel For Petitioner: Satyakam

Counsel For Respondent: P.K. Sahu

Case Title: Govt. Of NCT Of Delhi & Ors. Versus M/S Indian Trade Promotion Org. & Ors

Citation: 2023 LiveLaw (Del) 937

Case No.: W.P.(C) 8664/2009

Click Here To Read The Order