By TIOL News Service

NEW DELHI, DEC 26, 2017: THE issue is - Whether any payment in form of contributions or donations collected in connection with an entertainment, where admission is partly or entirely by tickets/invitation, shall be deemed to be "payment for admission". YES is the verdict.

Facts of the case

The Assessee ie., Fashion Design Council of India is a registered society created for the purpose of promoting and developing the Indian fashion industry especially in the areas of manufacturing, design, marketing and distribution. For these purposes, FDCI receives support through grants from the Union Ministry of Textiles as well as other government bodies. Such grants were used to fund travel and accommodation related expenses of foreign buyers and was also utilized towards FDCI's Market Access Initiative. Further to its objectives, FDCI, as a trade promotion council used to organise fashion shows which were styled as market business promotion events. Though, none of these events were ticketed and entry was strictly by invitation to potential domestic and international buyers and the media. However, as organizing such events required funds, the assessee entered into sponsorship/ partnership agreements with various parties. The amounts received were then disbursed for organizing the events and in return the sponsor/ partner gets certain rights, however these were towards organizing the event and did not guarantee the sponsor/ partner any assured invites to the event in exchange for their contribution to the event. In other words, the sponsor may or may not be given an invite to view the event and their role may be limited to advertising their products/ services. These events of FDCI were sought to be classified as entertainment events by the Entertainment tax Department to attract tax liability under the Delhi Entertainment and Betting Tax Act. Believing that its fashion shows were entertainment events, FDCI applied for exemption under the provisions of Section 14 of the Act. Thereafter, the then Joint Finance Secretary granted 100% entertainment tax exemption for events held from 2002-04 and 50% exemption for events held from 2008-09. However, later, no tax exemptions were given and FDCI was asked to deposit the requisite entertainment tax in respect of payments received from sponsors.

When the Assessee approached High Court, it was observed that the AETO had rested his conclusion merely on the statutory provisions without ascertaining the basic facts or examining the terms and conditions of the sponsorship agreement. The High Court accordingly quashed the order of AETO and directed that it was open to the AETO to examine the relevant facts including the terms and conditions of the sponsorship agreements and thereafter consider the applicability of the provisions of the Act and decide whether the assessee was liable to pay entertainment tax or not, by passing fresh orders of assessment. The GNCT of Delhi, in the meanwhile, amended Section 2(m) of the Entertainment Tax Act by adding two explanations and took the position that these provisions were clarificatory. These amendments which were inserted on 1 October 2012 but brought into force with effect from 01 April 1998, had been challenged under present petition.

In Writ, the HC held that,

++ it is seen that Section 2(m)(iv) of the Act includes within its ambit, any payment made by a person in any form, called by whatever name, may be made for any purpose, connected with the entertainment and if in lieu of that, a person is allowed to attend the entertainment or allowed to continue to attend it, then such payment by virtue of this provision, is payment for admission. Earlier, there was only one Explanation to Section 2(m) of the Act. By impugned amendment, Explanation 2 was added, as per which, any subscription raised, contribution received or donation collected in connection with an entertainment, where admission is partly or entirely by tickets/invitation shall be deemed to be payment for admission. This Explanation clarifies to some extent the expression "any payment", "by whatever name called for" and "made for any purpose whatsoever" used in Section 2(m), by stating that even where the payments received are termed as subscription, contribution or donation, it is payment for admission. This shows that even before the impugned amendment, Section 2(m) has postulated that payments by whatever name it may be called for, if it is made for entry to a place of entrainment, then such payments even if it is termed as subscription, donation or contribution shall be deemed payment for admission. The Legislature has used the expressions "payments for other accommodation in any form in a place of entertainment" in Section 2(m)(i) of the Act. Similarly, in Section 2(m)(iv), the language used by the Legislature, is any payments made, any name given to such payment and given for any purpose which is connected with an entertainment which a person is required to make in any form as a condition of attending or continuing to attend the entertainment, then such payment made in any form is taxable. It could be in the form of providing certain free services or other benefits or any other freebees. The said intention can also be seen, in the language used while defining "Admission to an entertainment" in Section 2(aa) of the Act. In this definition, the Legislature has again used the expression includes. The expression 'admission to entertainment' includes "admission to any place in which entertainment is held". Reading of this plain inclusive language suggests that admission to a place of entertainment could be of a person or by any other way like display of goods, brand names or logo or advertisement of one's product etc. at a place where entertainment is being held;

(See 2017-TIOL-2647-HC-DEL-MISC)