TN Entertainment Tax Act Not Applicable To Online Cinema Ticket Booking Charges : Supreme Court

Justice BV Nagarathna orally marked that the extra charge is for booking the ticket from home. This, in turn, is the service that allows the customers to book the tickets by sitting at home and also saves on travel.

“See the transaction, for sitting at home and buying a ticket, a service is provided…object is that you are saving energy time, petrol…for the service of online you are charging 30 rs extra.,” the Court added.

The Bench, also comprising Justice Nongmeikapam Kotiswar Singh, wondered how such a service could be subjected to an entertainment tax. The Court also invited attention to the gold class seats where food and drinks are provided, and the tickets for the same seats are more expensive than those for other seats.

The Court refused to accept the comparison drawn by the petitioner to driving theatres where the charges are optional. The court said that this is the case of online booking and termed the comparison as erroneous.

Accordingly, the Court dismissed the SLP arising out of the order passed by the Madras High Court, observing that the Tamil Nadu Entertainment Tax Act, 1939 could not have provided for the levy of tax on the internet service provided by the cinema owner.

Previously,Justice BV Nagarathna orally remarked that this extra charge is not for entertainment but it is for the convenience of the people who can book the ticket online without having to travel all the way to the cinema theatres.

In the impugned order, the High Court reasoned that the payment made for any other purpose connected with such entertainment would be taxable under the said Act only if the person is required to make such payment as a condition for entry. Opining that the online booking charges or internet handling charges are not a mandatory payment for entering a cinema hall, the Court said:

“It is an additional payment for extra or other facility provided by the Cinema hall owner. With the advent of internet, much after the said enactment of 1939, even though amended from time to time, the said Act could not have provided for levy of tax on the service of internet provided by the cinema owner.”

It said that Entertainment Tax is a tax leviable only on cost of ticket which entitles a person to gain entry into the cinema hall or theatre.

“The mandatory requirement to fall within Section 3(7)(c) of the Act is that a person is required to make, as a condition to attend or continue to attend the entertainment. There is no doubt that booking of a cinema ticket on online basis is not a mandatory condition for all cinema goers, and this is not only optional but altogether a separate facility provided to all on the Web portal of the cinema hall owner.”

Case Details: THE COMMERCIAL TAX OFFICER VS. PVR LIMITED., SLP(C). - .4312-4316/2022