All Kinds Of Musical Programmes, Even If Performed For Commercial Purpose, Exempted From Gujarat Entertainment Tax, Holds SC [Read Order]

‘The High Court could not have imposed the requirement of the entertainment to be for educational, cultural or charitable purpose when the form of entertainment in question is included in Schedule III to the Act’

Disagreeing with the interpretation of Section 3A of the Gujarat Entertainments Tax Act by the Gujarat High Court, the Supreme Court in Gypsy Pegasus Ltd. Vs. State of Gujarat has held that all kinds of musical programmes are exempted from payment of entertainment tax, even if they are performed in a commercial manner and for profit making.

A three-judge bench comprising Justice Ranjan Gogoi, Justice R Banumathi and Justice Navin Sinha observed that high court could not have imposed the requirement of the entertainment to be for educational, cultural or charitable purpose, to claim exemption from tax.

Background

Gypsy Pegasus Ltd. arranged a live musical concert in Ahmedabad. Entertainment tax on the gate receipts of the musical program was sought to be levied. The event organizer approached the high court contending that Section 3A of the Act takes out of the purview of the charging s“All kinds of musical programmes including musical nights and opera”.

The Law

Section 3 of the Gujarat Entertainments Tax Act is the charging section and Section 3A was introduced by an amendment later. It says that tax will not be levied and paid to the state government on any payment for admission to entertainments specified in the Schedule III. First item in Schedule III is “All kinds of musical programmes including musical nights and opera”.

The High Court view

The high court, though observed that Schedule III exempts all kinds of musical programmes, Section 29 of the Act has also to be taken note of. Section 29 of the Act provides for exemption from payment of entertainment tax by issuance of notification in the Official Gazette and upon fulfilment of the conditions specified therein, one of which is that the entertainment must be provided for educational, medical, cultural, charitable, or such other purpose.

It observed: “If they are performed in commercial manner and for profit making and which has no element of educational, medical, charitable, philanthropic or such other purposes, are not entitled to exemption from payment of entertainment tax like musical concert performed in the present case which has commercial element and the sole purpose is for profit making and all those activities mentioned in Schedule III shall be entitled to exemption from entertainment tax if there is an element of educational, medical, charitable, philanthropic or such other purposes and element is non-commercial and non-profit making. Therefore, the submission on behalf of the petitioner that for all the activities / entertainment mentioned in Schedule III irrespective of whether they are performed for any educational, medical, charitable, philanthropic or such other purposes or irrespective of fact whether they are performed for commercial purpose or not and / or there is a commercial element on such activities / entertainment, they shall be exempted from payment of entertainment tax cannot be accepted.”

The high court then dismissed the writ petition.

Apex Court view

Before the apex court bench, it was contended by the state that the purport of Section 3A was to fast track the exemptions available under Section 29 of the Act. Another contention was that a musical concert would not be a musical event as it is not a “musical work”.

The apex court bench observed: “A perusal of the order of the High Court would go to show that the primary ground for rejection of the appellant’s claim is that the musical concert organized by the appellant was not for the purposes of promotion of cultural activities and was for commercial purposes.

Rejecting state’s contention, the bench observed: “Section 3 of the Act is the charging section whereas Section 3A of the Act makes certain forms of entertainments non-taxable. If a form of entertainment is not taxable under Section 3A of the Act we do not see how the requirement of exemption and necessity to conform to the requirement of exemption can apply to a non-taxable form of entertainment.”

The bench also took note of the Finance Minister’s speech while introducing amendment to the Act,  and observed that all kinds of musical programmes, without any qualification, have been sought to be taken out of the purview of the charging section.

“If that is so, we can find no substance in the arguments advanced on behalf of the State; neither can we agree with the reasoning of the High Court. The High Court could not have imposed the requirement of the entertainment to be for educational, cultural or charitable purpose when the form of entertainment in question is included in Schedule III to the Act,” the bench said setting aside the high court order'