The Hindu : National : ``States can levy entertainment tax on MSOs''

Online edition of India's National Newspaper
Thursday, Mar 17, 2005

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National

``States can levy entertainment tax on MSOs''

By Our Legal Correspondent

NEW DELHI, MARCH 16. The Supreme Court today held that States had the legislative competence to levy entertainment tax on Multi System Operators (MSOs) distributing television signals to cable operators.

A three-Judge Bench comprising Justice S. N. Variava, Justice A.R. Lakshmanan and Justice S. H. Kapadia gave the ruling while upholding the validity of certain clauses of the West Bengal Entertainment-cum-Amusement Tax Act providing for such a tax on MSOs and not on cable operators.

Writing the judgment, Justice Lakshmanan said ``the Cable Television Network (Regulation) Act, 1995 enacted by Parliament does not fetter the legislative power or competence of the State to levy tax on luxuries including taxes on entertainments, amusements, betting and gambling falling under Entry 62 of List II of Seventh Schedule of the Constitution.'' The Bench said a tax under this List might be imposed not only on the person spending on entertainment but also on the act of a person entertaining or the subject of entertainment. The MSOs had challenged before the Calcutta High Court the levy of entertainment tax by the West Bengal Government. The High Court held that the levy should be on cable operators who transmitted the link and signals to the households for viewing of different programmes. The West Bengal Government filed a special leave petition to set aside this order.

Upholding the West Bengal legislation, the Bench said it was the MSO, engaged in the business of providing or offering entertainments, including showing of films, serials, cricket matches and dramatic performances to the subscribers and the tax was imposed for providing such entertainment to viewers. It noted that the MSOs had direct and close nexus with the entertainments made available to viewers through their network.

The judges said the MSO was the source of entertainment to individual subscribers as it was the MSO, which decided the channel and the programme content. The sub-cable operators were mere franchisees that received signals for transmission to viewers only on payment of price promised or paid in terms of the agreements entered by and between them.

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