No Entertainment Tax on DTH services - Supreme Court

The Supreme Court on 16 April 2013 held that the Madhya Pradesh government cannot demand entertainment tax on DTH services provided to customers of Tata Sky under the state Entertainment Duty and Advertisements Tax Act. The revenue department had demanded 20 per cent entertainment duty on subscription payment from the DTH operator. 

Tata Sky had moved the High Court vide WP 10148 of 2009 challenging the demand of entertainment tax by the State Government. There were three writ petitions filed by the company. The High Court dismissed the writ petitions, upholding the demand by the State Government vide judgment and order dated August 20, 2010. 

Tata Sky in their appeal had contended that DTH broadcast is a notified service under the Finance Act and it is chargeable to service tax. For the purpose of levy of service tax on broadcasting, the expression “broadcasting” has been defined specifically under section 65(15) of the Finance Act. The broadcasting services were brought within the purview of the service tax under section 65(105)(zk) of the Finance Act, 1994 as amended with effect from July 16, 2001. Later on, DTH service was brought within the purview of the service tax with effect from June 16, 2006. 

Company further stated that on March 24, 2006, it got a licence from the Government of India under section 4 of the Indian Telegraph Act, 1885 and the Indian Telegraphy Act, 1933 to establish, maintain and operate DTH platform for a period of 10 years on the terms and conditions stipulated in the licence agreement. 

Allowing the appeal of the company the Supreme Court passed a judgment stating that the Act cannot be extended to cover DTH operations. The state law imposes duty only if an entertainment takes place in a specified place or location and persons are admitted there on payment of a charge to the proprietor providing the entertainment. In the case of DTH, the operation is not a place-related entertainment. Therefore, the law is not applicable to DTH. 

The Judgement also stated that a perusal of the Rules makes it absolutely clear that the collection mechanism under the 1936 Act is based on revenue stamps stuck to the tickets issued by the proprietor for entry to the specified place where entertainment is held. The machinery for collection of duty provided under the 1936 Act has no application to DTH. It is well settled that if the collection machinery provided under the Act is such that it cannot be applied to an event, it follows that the event is beyond the charge created by the taxing statute. 

If one goes by the present judgment, even cable TV cannot be levied an entertainment tax under the same argument of an entertainment in a specified place where entry is made after receiving the charges including taxes. However, many high courts have dismissed petitions from cable operators on the subject earlier. 

The present Judgment may prove a landmark judgment where all broadcast service providers including Cable TV, DTH, IPTV, Mobile TV, Internet etc are exempted of collection of entertainment tax from the subscribers and the tax is levied directly on the broadcasters who actually provide entertainment to subscribers, based on their viewership numbers.

Source: http://cablequest.org/news/national-news/item/2261-no-entertainment-tax-on-dth-services-supreme-court.htmlSource: http://cablequest.org/news/national-news/item/2261-no-entertainment-tax-on-dth-services-supreme-court.html