HC upholds ₹71.87 lakh entertainment duty for 2006 Apsara awards

The court upheld the order passed by revenue authorities regarding payment of duty but exempted FGPI from paying a penalty of an equal amount

MUMBAI: The Bombay high court has directed the Film and Television Producers Guild of India (FPGI) to pay the government an amount of ₹71.87 lakh towards entertainment duty for the 2006 Apsara awards. The court upheld the order passed by revenue authorities regarding payment of duty but exempted FGPI from paying a penalty of an equal amount.

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Although the award function, held on January 21, 2006 at the Jamshedji Bhabha Auditorium, was invite-only and no tickets were sold, it was liable for entertainment tax because sponsors made payments to the organisers, the court held.

The event was sponsored by several companies, including Reliance Communications, Sony TV, NDTV, and Hungama Events. Among them, Reliance Communications informed authorities that their sponsorship agreement with FPGI was valued at ₹4.90 crore, with ₹2.87 crore directly attributed to the sponsorship. A government flying squad also observed advertisements and dance performances during the event, leading to scrutiny.

On March 7, 2006, the additional collector demanded an entertainment duty of ₹71.87 lakh along with a penalty of ₹1.43 crore from FPGI. This penalty was later reduced by the appellate authority to match the duty amount.

Additionally, FPGI argued that the amount received from Reliance Communications could not be considered “payment for admission” and the temporary nature of activities exempted it from payment of duty. It also claimed it was exempt from payment of duty as it was incorporated under section 25 of the Companies Act.

On the other hand, the respondent-state argued that the award function fell within the definition of “entertainment” and the sponsorship amount constituted “payment for admission” since sponsors paid to advertise their brands during the event. They asserted that the decision of the adjudicating and appellate authorities was justified and that the writ petition should be dismissed.

A bench of justices KR Shriram and Jitendra Jain reviewed the definition of “entertainment” under the Maharashtra Entertainments Duty Act, which includes any exhibition, performance, amusement, game, or sport to which persons are admitted for payment. The APSARA awards, with its performances and advertisements, fit this definition, the court held. It also interpreted “payment for admission” to include payments for programs or advertisements connected to an event. Therefore, the sponsorship amount from Reliance Communications was deemed as “payment for admission”.

The court dismissed the argument regarding the absence of pro rata assessment, finding that the intermittent performances and advertisements were part of a continuous entertainment event. Furthermore, the court clarified that the 2010 amendment to include “award function” within the definition of entertainment was intended to reduce the duty rate, not exclude such events from taxation.

The court justified the penalty as per the Act’s provisions, noting that the appellate authority had already considered the petitioner’s arguments and reduced the penalty amount. The court also rejected FPGI’s claim for exemption based on their incorporation under Section 25 of the Companies Act, stating that the nature of the event and the financial transactions did not warrant such an exemption.