The online booking charge of ₹30, collected by theatres over and above the cost of each ticket, cannot be subjected to entertainment tax by the Commercial Taxes Department, under the Tamil Nadu Entertainment Tax Act of 1939, the Madras High Court (HC) ruled on Thursday.
Justices Vineet Kothari and M.S. Ramesh held that online booking charges, collected by cinema halls, were for the additional service provided to customers, and they were not mandatory for gaining entry into theatres. Therefore, such a charge could not be subjected to entertainment tax, they said.
The ruling was passed while allowing a batch of writ appeals preferred by PVR Limited, formerly known as SPI Cinemas Private Limited, of New Delhi. The Bench quashed the entertainment tax reassessment orders, with respect to the appellant, from the assessment years 2007-08 to 2014-15.
The judges agreed with senior counsel R.V. Easwar, representing the appellants, that only payments required to be made mandatorily, as a condition for attending an entertainment event, could be subjected to entertainment tax, and not the additional payments collected for other services.
The senior counsel said that the online booking charge of ₹30 per ticket was collected from customers for providing them the premium facility of booking tickets on their mobile phones and computers, without having to visit cinema halls and stand in queues to purchase tickets.
Such a charge could not be subjected to entertainment tax, he argued, and the judges concurred with him. Though Mohammed Shafiq, Special Government Pleader (Taxes), contended that all payments connected to entertainment could be subjected to tax under the 1939 Act, the Bench did not agree with him.
Authoring the verdict, Justice Kothari also pointed out that the Tamil Nadu Entertainment Tax Act of 1939 was a colonial legislation, enacted at a time in history when nobody had even conceived the idea of Internet, a web portal or the concept of booking cinema tickets online or through apps.