Summary
Under Gujarat's 1995 tourism incentive scheme, multiplexes enjoyed an entertainment tax holiday capped at 100 per cent of eligible capital investment, but the scheme and the 1997 notification said nothing about how exhaustion of the cap was to be computed. The State contended that, since no tax was collected, the 50 per cent tax must be notionally added to each ticket before set-off; the Gujarat High Court held that only the tax element at the applicable rate within the actual collection could be set off. The Supreme Court dismissed the State's appeal: its assumption was illogical since nothing collected was tax, the omission was a gap rather than an ambiguity attracting strict construction, and the High Court's method was reasonable and workable.
Issues
- How the ceiling of 100 per cent of eligible capital investment on the entertainment tax exemption granted to multiplexes under Gujarat's New Package Scheme of Incentives for Tourism Projects, 1995-2000 is to be computed where the scheme prescribes no method.
Provisions considered
- Section 3 (charge on payment for admission) and Section 29; paragraphs 8 and 8.1 of the 1995 Scheme, Gujarat Entertainments Tax Act, 1977 and exemption notification dated 14.02.1997 under Section 29(1)Tax under Section 3 is levied on the gross payment received for admission; the scheme fixed a time limit and a monetary cap but no mechanism for notional calculation, so the tax notionally payable on actual collections at the applicable rate is set off against the cap, without adding a further tax element to amounts that never included tax. (¶¶ 4, 5, 6, 14, 15, 22)
Held
- The State's contention that collections during the exemption period included a tax element to which a further equivalent amount must be added is bereft of logic, as there could have been no collection amounting to tax, and monthly returns guarded against abuse. (¶¶ 15, 16)
- Exemption notifications are strictly construed against the assessee in case of ambiguity under Hari Chand Shri Gopal and Dilip Kumar, but here the terms of relief are unambiguous and the omission of a calculation method is a clear gap which must be construed so as not to defeat the notification; procedure facilitates rather than supplants justice, and the doctrine of substantial compliance supports the High Court's reasonable method of notionally determining tax on actual collections against the discernible investment ceiling. (¶¶ 16, 17, 18, 19, 20, 21, 22)
Result
Appeal dismissed without costs; Gujarat High Court judgment dated 26.06.2009 in Special Civil Application No. 5391 of 2004 on the method of computing the entertainment tax exemption limit affirmed.