The Supreme Court of India has ruled that entertainment tax cannot be levied on the direct-to-home (DTH) satellite TV service provided by Tata Sky by the state Government of Madhya Pradesh.
The recent decision follows an appeal by Tata Sky against the High Court ruling that DTH operators should pay the 20% entertainment tax on imposed by the Madhya Pradesh Government's Entertainment Duty and Advertisements Tax Act 1936.
The ruling by Supreme Court judges Aftab Alam and R M Lodha – issued on 16 April – states that the Entertainment Duty and Advertisements Tax Act cannot be extended to cover Tata Sky's DTH operations. Tata Sky's service encompasses India; it is not solely available in specified places within the state of Madhya Pradesh where admission is required, such as in a cinema. Furthermore, the mechanisms for collecting revenue as stated in the 1936 Act are not relevant to DTH operations, said the court.
Tata Sky has been broadcasting under license all over India since August 2006 from its single broadcasting centre at Chhattarpur, Delhi. This centre downlinks the signals from satellite and then uplinks those signals to the designated transponders for their transmission in Ku band. These encrypted signals are received by the dish antenna and set-top box installed at the subscribers' premises, point out the judges.
"A perusal of the rules makes it absolutely clear that the collection mechanism under the 1936 Act is based on revenue stamps stuck to the tickets issued by the proprietor for entry to the specified place where entertainment is held," explains the ruling.
It goes on to state "we are clearly of the view that the 1936 Act cannot be extended to cover DTH operations being carried out by the appellants."
The Madhya Pradesh Government had been requesting that Tata Sky and its rival DTH operators be taxed 20% of subscription revenues garnered in the state.
Since June 2006 all private DTH operators have also been subject to service tax from the central Government of India as they provide a notified broadcasting service under the Finance Act, 1994.