Supreme Court upholds Madras High Court ruling to exclude online movie booking charges from Entertainment Tax

The Supreme Court on Tuesday upheld a Madras High Court ruling that had held that online booking charges levied by cinema hall owners which do not form part of the ticket cost, cannot be subjected to entertainment tax under Tamil Nadu Entertainment Tax Act, 1939 (1939 act) [Commercial Tax Officer v. PVR Limited (formerly known as SPI Cinemas Private Limited].

A Division Bench of Justice BV Nagarathna and Justice N Kotiswar Singh upheld the 2020 order passed by the Madras High Court which had said that the 1939 Act can in no manner include such online service charges as part of entertainment tax.

"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. Petrol/Diesel saved, parking fees etc. This is the convenience charge that is being taken. How can it be under entertainment tax?," the apex court observed while dismissing the appeals against High Court order.

When the matter was last heard, the Court had expressed its disinclination to accept the proposition that such convenience provided by the cinema theatres when tickets are booked via digital means, would come under the head of entertainment tax. 

When the matter was taken up today, Justice Nagarathna said that the charge was being levied for a service and cannot fall under the purview of entertainment tax. 

"So instead of going directly to cinema theatre where I can get the ticket directly, I am buying it from my home, so that is the charge you are taking for your service. How will that come under entertainment tax? I am getting a ticket through luxury instead of going to talkies or theatres. Will this be under entertainment tax? This is extra convenience that is being provided to me. It has no link with the movie or entertainment part."

However, the counsel for the Tax department argued that extra charges that are paid online is to watch the movie and should, therefore come under the head of entertainment tax.

However, the Court refused to accept the argument and dismissed the appeal.

"We are not inclined to interfere with the decision of Division Bench of Madras High Court. Dismissed," the Court said.

Senior Advocate K Radhakrishnan appeared on behalf of the appellant.

Senior Advocate RV Easwar appeared on behalf of respondents.