State of Karnataka vs Royal Challengers Sports Private Limited

N. Kumar, J.—The Revenue has preferred these revision petitions challenging the order dated 25-8-2012 passed by the Karnataka Appellate Tribunal, Bangalore (hereinafter referred to as ''the Tribunal'' for short) made in STA Nos. 1616 to 1622 of 2011, wherein the Tribunal partly allowed the appeals deleting the entertainment tax levied on Rs. 25/- and Rs. 49/- tickets and also deleting penalty levied under Section 6-A(4) of the Karnataka Entertainments Tax Act, 1958 on entertainment tax levied on Rs. 25/- and Rs. 49/- tickets. The assessee had organised DLF/IPL/2010 Cricket matches at Karnataka State Cricket Association Stadium, Bangalore on various dates and totally 7 matches were held in the Stadium. The spectators were admitted to different stands according to different denomination tickets. The subject-matter of controversy in this proceedings is tickets of Rs. 25/- and Rs. 49/- sold to KSCA as no tax is charged on such tickets. These tickets of Rs. 25/- and Rs. 49/- were pre-stamped by the Entertainment Tax Officer on depositing the requisite security amount.

The Deputy Commissioner of Commercial Taxes (Enforcement-I), Bangalore inspected the office premises of the assessee on 30-4-2010. According to him, in order to avoid/evade payment of tax, the value of the tickets were printed as Rs. 25/- and Rs. 49/- with facilities and seats were provided on par with the persons who had purchased the tickets having face value of Rs. 1,650/-. The assessment was concluded levying tax on tickets for Rs. 25/- and Rs. 49/-. Aggrieved by the said order, the assessee preferred an appeal before the Joint Commissioner of Commercial Taxes (Appeals-1), Bangalore (hereinafter referred to as ''the First Appellate Authority'' for short) who dismissed the appeals upholding the order of levy of penalty by the Assessing Authority. In the appeals before the Tribunal, the appeals were partly allowed deleting the entertainment tax levied on Rs. 25/- and Rs. 49/- tickets and consequent penalty. Aggrieved by the said order, the Revenue is in these revision petitions.

The learned Government Advocate assailing the impugned order contends that though the face value of the tickets is printed as Rs. 25/- and Rs. 49/- and the facilities provided to the persons to whom these tickets were provided were extended the benefits which are extended to the persons who purchased the tickets of Rs. 1,650/-. It is a means adopted to evade tax. Therefore, the authorities were justified in levying tax on Rs. 25/- and Rs. 49/- tickets and the Tribunal committed an error in interfering with the said order.

Per contra, the learned Counsel appearing for the assessee submits that, when once a particular amount is mentioned on the tickets and they are pre-stamped by the authorities, it is not open to the authorities to turn round and contend that the value of the tickets is Rs. 25/- and Rs. 49/-, they are in fact, really worth at Rs. 1,650/- and tax has to be levied on that basis. There is no legal basis for such levy of tax since Section 3 is a charging provision and do not support such levy.

In the light of the aforesaid facts and rival contentions, the following questions of law were raised:

"(a) In the facts and in the circumstances of the case, whether the Tribunal was justified in deleting levy of tax on the tickets of Rs. 25/- and Rs. 49/-, where the facilities of Rs. 1650/- tickets were provided?

(b) In the facts and in the circumstances of the case, whether the Tribunal is right in giving a finding that ticket holders of Rs. 25/49 were admitted only to the stands that were meant for Rs. 25/49 and re-fixing the value of the said tickets, is not justifiable?

(c) In the facts and in the circumstances of the case, whether tax is attracted on the tickets of Rs. 25/49 printed on the face value in order to just avoid payment of tax and are treated on par with Rs. 1650/- tickets?"

Section 3 is the charging section, which reads as under:

"3. Tax on payments for admission to entertainments.--(1) There shall be levied and paid to the State Government entertainments tax on each payment for admission excluding the amount of tax, to an entertainment--

(a) specified in sub-clause (i) of clause (e) of Section 2 at 70 per cent of such payment; and

(b) specified in sub-clause (ii) of clause (e) of Section 2 at 40 per cent of such payment.

TABLE

"Table missing in source file"

(1-A) In respect of entertainments referred to in sub-clause (iii) of clause (e) of Section 2, other than an entertainment on which tax is levied under Section 4-E or 4-F, there shall be levied and paid to the State Government on each payment for admission excluding the amount of tax, to such entertainment, entertainments tax at the rate of ten per cent, if such payment for admission, excluding the amount of tax, is not less than fifty rupees:

Provided that no tax shall be levied in the case of admission to a circus or drama or magic show or game or sport, where it involves no participation:

Provided further that admission to a game or sport involving proprietary teams, that is played for prize moneys and organised on commercial basis shall not be exempted from tax under the first proviso.

(2) Notwithstanding anything contained in sub-section (1) and sub-section (1-A) there shall be levied and paid to the State Government (except as otherwise expressly provided in this Act) on every complimentary ticket issued by the proprietor of an entertainment, the entertainments tax at the appropriate rate specified in sub-section (1) and sub-section (1-A) in respect of such entertainment, as if full payment had been made for admission to the entertainment according to the class of seat or accommodation which the holder of such ticket is entitled to occupy or use; and for the purpose of this Act, the holder of such ticket shall be deemed to have been admitted on payment:

Provided that where the seat or accommodation which the holder of such a ticket is entitled to occupy or use is different from the classes of seat or accommodation inside the auditorium or place of entertainment and for admission to the said seat or accommodation no payment is fixed, the holder of such ticket shall be deemed to be entitled to occupy or use the highest class of seat or accommodation and shall for purposes of this Act, be deemed to have been admitted on payment of the charges for such highest class of seat or accommodation.

(3) Notwithstanding anything contained in sub-section (1-A) there shall be levied and paid to the State Government on every admission made by the proprietor of an entertainment on payment as defined in sub-clause (iv-a) of clause (i) of Section 2, the entertainment tax at the rate specified in sub-section (1-A) in respect of such entertainment as if full payment had been made for admission to the entertainment according to the class of seat or accommodation which the person admitted occupies or uses; and for the purpose of this Act, the person admitted shall be deemed to have been admitted on payment:

Provided that where the admission made to an entertainment whether or not having different classes of seat or accommodation inside the place of entertainment is wholly on payment as defined in sub-clause (iv-a) of clause (i) of Section 2, the payment made to such entertainment shall be deemed to have been made by the person or persons admitted".

Section 3(1-A) provides for payment for admission excluding the amount of tax to such entertainment, entertainments tax at the rate of ten per cent, if such payment for admission, excluding the amount of tax is less than Rs. 50/-, no tax is leviable under Section 3. However, sub-section (2) of Section 3 makes it clear that every complimentary ticket issued by the Proprietor of an entertainment, even if no amount is received by the holder of such ticket, the Proprietor of an entertainment is deemed to have received the amount mentioned for admission to the entertainment according to the class of seat or accommodation which the holder of such ticket is entitled to occupy or use. Proviso to the said provision makes it clear that, if for admission to the said seat or accommodation no payment is fixed, the holder of such ticket shall be deemed to be entitled to occupy or use higher class of seat or accommodation and for the purposes of this Act, be deemed to have been admitted on payment of charges for highest class of seat or accommodation. In other words, what sub-section (2) tries to lay down is even if a complimentary ticket is issued and if the value of the ticket is above Rs. 50/- and even the holder of ticket did not make any payment, the payment is deemed to have been received by the Proprietor of the entertainment and the holder of the ticket is deemed to have been admitted on payment. The proviso makes it clear that if no amount is mentioned in the said complimentary ticket, the tax is payable under Section 3 depending upon the class of seat which was offered to him, but if the value of a ticket is less than Rs. 50/-, Section 3 is not attracted. If such a ticket is given as complimentary, even then, Section 3 is not attracted. Probably taking advantage of this loophole in the Legislature, the assessee got printed the tickets of Rs. 25/- and Rs. 49/-, got pre-stamped by the authorities and issued the said tickets to VVIP guests and members of the association as the case of the assessee do not fall within Section 3 even if the intention of the assessee is to avoid payment of tax. Looking at the statute and charging provision, if the assessee arranges his affairs in such a manner so as to attract no tax, no fault would be found with the assessee. In fact, after this order, it is submitted that in order to avoid such consequences in future, the assessee has given up giving complimentary tickets to the members and VVIP printing at the rate of Rs. 25/- and Rs. 49/- and they are printed at actual prices and paying taxes for the subsequent years. Therefore, it cannot be said that there is any intention much less the mala fide intention for avoiding payment of tax. The assessee would be entitled to this benefit only for the period 2010. That is precisely what the Tribunal has held. Hence, for the assessment year 2010, we do not find any error committed by the Tribunal in passing the impugned order. In the facts and circumstances of the case, the questions of law are answered in favour of the assessee and against the Revenue. Therefore, we do not see any merit in the revision petitions. Accordingly they are dismissed. However, it is made clear that this judgment would not be a precedent for the assessment years 2011 onwards.