A PROJECT REPORT ON

Taxation of Media
(Media Law)

Submitted to

Submitted by

Asst .Prof. Priya Mohod

Shubham Patel
BBA LLB (5th Semester)

Faculty of Law

DECLARATION
I hereby declare that the project work entitled Taxation of Media submitted on the MATS
University is the original work done by me under the guidance of Priya Mohod Mam ,Asst.
Prof., MATS Law School, Gullu, Arang and this project has not performed the basis for the
award of any Degree or Diploma and similar project if any.

ACKNOWLEDGEMENT

I am deeply indebted to Priya Mohod, Asst. Professor, MATS Law School, MATS University,
Raipur for constantly guiding and encouraging us to undertake and complete this project. We are
thankful for his patient disposition.
I am also thankful to Dr G.P. Tripathi , Director, and all other staff of the MATS Law School,
MATS University, Raipur for giving me opportunity and facility to complete this work.

Shubham Patel
5th Semester, B.B.A.-LLB

Research Methodology
The study of conducting research is known as research methodology. The word research is
composed of two words re and search in whatre means again or over again or a new and search
means to examine closely and carefully or to test and try.
Methodology is the systematic, theoretical analysis of the methods applied to a field of study, or
the theoretical analysis of the body of methods and principles associated with the branch of
knowledge.
Therefore, research methodology means the methods for doing a research.
There are two ways of conducting research
1. Empirical method
2. Doctrine method
Empirical method
It means relying solely on observations and experiment not on theory. The empirical research is
carried out by collecting and gathering data or information relating to universe by a firsthand
study. It is an enquiry that attempts to discover and verify general rules allowing us to
understand why human beings behave the way they are behaving. They do interviews;
questioner, surreys and case study are used to discover the human conduct.
Doctrinal Research
It is carried out by anal sing the theories. It is not concerned with the people but with the
documents. The scope is narrower because it studies about the doctrine or the authority says. In
this type of research there is no need for any type of training or of any field work. This type
research contains library research etc...
In this project doctrine research method is used, for analyzing the subject theoretically.

Table of Content

1. Introduction
2. What is Media..?
3. Taxtion
4. Taxes on entertainment
5. Tax on the provider of entertainment
6. States power to tax cinema
7. Taxes on cinema theaters based on collection capacity
8. Compulsory fee for screening of educational film is not a tax
9. Some current issues
10. Conclusion

Introduction
News, entertainment, education, data, and promotional messages are sent world-wide through
this type of communication channels. Every broadcasting and narrow casting medium, like
newspapers, magazines, TV, radio, billboards, direct mail, telephone, fax, and internet are part of
what is the Media. depending on the sense intended, Media can take a plural or singular verb as
Media is the plural of medium.
Three broad recognized categories of data storage material are divided by recording method:
(1) Magnetic, as in diskettes, disks, tapes,
(2) Optical, as in microfiche, and
(3) MagnetoOptical, as

in

CDs

and

DVDs.

What is media?
A group When referring to the mass media as a group, it's to say that newspapers, movie
studios, television networks, radio stations, and so called media conglomerates are all a part of
this group of people and companies related to the collective we call the media.

Taxation
The process whereby charges are imposed on individuals or property by the legislative branch of
the federal government and by many state governments to raise funds for public purposes.
The theory that underlies taxation is that charges are imposed to support the government in
exchange for the general advantages and protection afforded by the government to the taxpayer
and his or her property. The existence of government is a necessity that cannot continue without
financial means to pay its expenses; therefore, the government has the right to compel all citizens
and property within its limits to share its costs. The state and federal governments both have the
power to impose taxes upon their citizens.

Taxes on entertainment: meaning of "entertainment"

The meaning and scope of the expression "entertainment" was discussed by the Court inGeeta
Enterprises v State of Uttar Pradesh, (1983) 4 SCC 202. The petitioners opened video parlor by
installing electronic machine with video screen and permitted persons to enter the premises
without any charge to view a show on the video which consisted mainly of sports, games etc.
played on the screen of the video. The show lasting upto 30 seconds was operated by inserting 50
paise coin into the video machine by an operator from the audience who wanted to operate the
video machine. While one High Court was of the view that-the video games were included in the
definition of entertainment and were liable to entertainment tax, two other High Courts were of
the opposite view. The petitioners filed the present writ petitions contending that in view of the
manner in which the video games were shown and also in view of the fact that these games,
sports etc. involved a great amount of skill for the operator, the video games would not be an
entertainment within the meaning of sub-sec, (3) of sec. 2 of the Uttar Pradesh Entertainment and
Betting Tax Act, 1981.
The court upheld this contention on the following ground that on a consideration of the legal
connotation of the word 'entertainment' as defined in various books, and other circumstances of
the case as also on a true interpretation of the word as defined in s.2 (3) of the Act, it follows that
the show must pass the following tests to fall within the ambit of the aforesaid section (which it
did in this case):
1.That the show, performance, game or sport, etc. must contain a public colour in that the show
should be open to public in a hall, theatre or any other place where members of the public are
invited or attend the show.
2. That the show may provide any kind of amusement whether sport, game or even a
performance which requires some amount of skill.
Although the admission to the hall was free, if the exhibitor derives some benefit in terms of
money, it would be deemed to be entertainment'. Here the service provider was given a share by
the manufacturer who maintained the box which collected the money in terms of a percentage.
The judgment was later followed subsequently in Standard Games v State of Uttar Pradesh,
(1996) 4 SCC 467, State of Madhya Pradesh v Abha Sethi, (1999) 4 SCC 32, State of Madhya
Pradesh v Home Decorators and Finance (P) Ltd., (1990) 3 SCC 560 and State of Karnataka v
Drive-in Enterprises, (2001) 4 SCC 55.

Tax on the "provider" of entertainment

As will be discussed below in the context of current aspect of taxation, in the case of Purvi
Communications (infra) that the Supreme Court held the performances, films or programmes
shown to the viewers through the cable television network (cable service) as falling within the
meaning of "entertainments" and therefore within the legislative competence of the State
Legislature under Entry 62 of List II of the Seventh Schedule to the Constitution to make law for
the levy and collection of tax on such entertainments.

State's power to tax cinema

The Apex Court in the case of Y V Srinivasamurthy v State of Mysore, AIR 1959 SC 894 in a
challenge to the Karnataka Cinematograph Shows Act, 1951, held that the legislation being a law
with respect to matters enumerated in Entry 62 of List II to the Seventh Schedule of the
constitution and not a law being made under Entry 60 of the same list , it could not be contented
that the amount of tax imposed could not exceed the amount permitted under Article 276 (2) of
the Constitution.

Taxes on cinema theaters based on collection capacity

In Venkateshwar Theatre v State of Andra Pradesh, (1993) 3 SCC 677, the Supreme Court
dismissed a challenge to an amendment to the Andra Pradesh Entertainment Act, 1939, whereby
a consolidated levy based on estimated gross collection capacity was imposed on the cinema
theatres depending on the type of theatre and its location, but without reference to the actual
amount collected or the actual tickets sold or persons permitted. The court held that although the
mode of levy of tax was changed by the amendment, it was not such that it changed the subject
matter as enunciated under Entry 62 of List II and therefore was valid this was also reiterated
in cases such as Shankar Video v State of Maharashtra, (1993) 3 SCC 696, Entertainment Tax
Officer v Ambae Picture Palace, (1994) 1 SCC 20, and others.
Finally, in the case of State of Uttar Pradesh v Vinay Kumar Jain , (1997) 1 SCC 195, in the
context of compounding of payment of tax under Rule 24-A (3) of the Uttar Pradesh
Entertainment and Betting Tax Rules, 1981, the Court held that the proprietor of a theatre could
not enter into a composition agreement indicating a lesser capacity than the maximum mentioned
under his license under the Rules. A proprietor who wishes to reduce his tax liability must in
such cases first approach the licensing authority to reduce his capacity as indicated in the license
first.

Compulsory fee for screening of educational films is not a tax

In the case of Union of India v Motion Pictures Association, (1999) 6 SCC 150, exhibitors of
films challenged the levy of 1 % on net recoveries by the Film Division for the supply of films
approved by the Films Division. The exhibitors who were being forced to screen documentaries
and educational films along with the screening of films that they chose to exhibit in the cinema
hall contented that the recovery was of a compulsory nature in the form of a tax not stipulated
under the Cinematographers Act or Rules framed thereunder. However, the court rejected this
contention and held that the levy was in the nature of a fee and not a tax, under the individual
contract entered into between the Films Division and the exhibitors.

Some Current issues - Taxation of different types of media

Taxation Regime for Digital distribution players
Digital cable service providers and DTH (Direct to Home) service provides are required to pay
service tax, entertainment tax, VAT and certain excise duty, import charges (on equipment
imported, if any) and Octroi. Some decisions in this regard are discussed below.
The Hon'ble the Apex Court in State of West Bengal v. Purvi Communication (P.) Ltd., (2005)
140 STC 154 - (2005-TIOL-56-SC-ET-LB), upheld the levy of entertainment tax on cable
television by the State of West Bengal on the basis that cable operators had direct and close
nexus with the entertainments made available to the viewer through their cable television
network. The Court opined that the performance, film or programmes shown to the viewers
through the cable television network came within the meaning of entertainments and therefore
within the legislative competence of the State Legislature under Entry 62 of List II of the
Seventh Schedule to the Constitution to make law for the levy and collection of tax on such
entertainments.
In 2011, in the decision reported in Tata Sky Ltd. v State of Punjab & Anr. , (2011) 38 PHT 160
(P& H), the Punjab and Haryana High Court considered held that levy of service tax on the
providing of service and levy of entertainment tax covered by Entry 62 List II of VII Schedule to
the Constitution of India can co-exist and can be harmonized on being different aspects. The
transaction of providing broadcasting services and entertainment cannot be treated as an
indivisible contract so as to include the aspect of entertainment by holding that the predominant
transaction is broadcasting and not entertainment. It further observed that only when the
transaction is treated as a composite one, the need for splitting up entertainment from
broadcasting would arise. Referring to the aspect theory, the High Court held that tax is on
entertainment aspect and the levy of service tax is on the providing of the service. This decision
seems to be in tune with the earlier decision reported in State of West Bengal v. Kesoram
Industries Ltd. , (2004) 10 SCC 201, which referred to the aspect theory. Here the Supreme Court
pointed out that the transaction may involve two or more taxable events in its different aspects.
Merely because they overlap, the same does not detract from the distinctiveness of the aspects.
Thus, there could be no question of a conflict solely on account of two aspects of the same
transaction being made a subject matter of legislation by two legislatures falling within two
fields of legislation respectively available to them. So long as the essential character of the levy
is not departed from within the four corners of the particular Entry, the measure of tax or the
manner of levying the tax would not have any vitiating effect.
Currently, the Digital Cable and DTH sectors is reeling under multiple taxation structure. The
taxation applicable on Cable and DTH, currently are as follows:
Service Tax: 12% of the subscription amount
Entertainment Tax On average 30% of the subscription amount
Cumulative tax burden Up to 42%

Taxes on Customer Premise Equipment (CPE')

Customs Duty on Set Top Boxes (STB') 5% of the Assessable value
Excise/CVD 8.24%
(i) VAT on Sale - 12.5%
(ii) VAT on Rental of CPE (Right to Use)- 12.5%
Entry/Octroi - Up to 12.5%
Cumulative tax burden Up to 33.24%
Source- Deloitte, ASSOCHAM, "Media and Entertainment: Digital Road Ahead", September
2011.
Considering the above cumulative burden on the service providers, one must bear in mind the
decision of the Apex Court reported in Indian Express Newspapers (Bombay) (P.) Ltd. v. Union
of India , AIR 1986 SC 515, particularly paragraph 45, in support of the fact that right to
entertainment is also included in the content of Article 19(1)(a) of the Constitution of India, that
a citizen has a right to use the best means of imparting and receiving information. The tax levied
must also respect the right guaranteed under Article 19(1)(a) of the Constitution of India.
Therefore even as recently before the release of this year's budget (2013-2014), the CII and
FICCI in its pre-budget memorandum suggested that the service tax applicable to the DTH
industry be reduced by 4 percent for three years in order for it to sustain amid the multiple
taxation regime afflicting the sector as some States have levied entertainment taxes on such
services.
Before concluding this portion, it would be pertinent to mention the recent Supreme Court
judgment in Tata Sky Ltd v State of Madhya Pradesh and Ors., ( Civil Appeal No. 3882 OF
2013), where in a major relief to direct-to-home operators in the state, the court held that the
Madhya Pradesh government cannot demand entertainment tax on DTH services under the
Madhya Pradesh Entertainment Duty and Advertisements Tax Act, 1936. This was, inter alia, on
the ground that neither the provision of section 4(1) of the Madhya Pradesh Entertainment Duty
and Advertisement Tax Act nor any of the modes provided under section 4(2) of the Act can be
made applicable for collection of duty on DTH operations. Further, it is noted above that section
8 provides rule making powers. In exercise of the powers under that provision, the Madhya
Pradesh Entertainment Duty and Advertisement Tax Rules 1942 were framed. The court held
that a perusal of the Rules make 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.

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Taxation of Film Production & Multiplexes

As per Section 285B, producers of a cinematography film are required to furnish a statement in
form 52A to assessing officer per film per year within 30 days from end of the financial year or
completion of the film whichever is earlier stating the details of persons to whom the aggregate
payments exceeding Rs.50, 000 made in a year. Section 272A provides for penalty of Rs.100 per
day if the above statement is not furnished vide CBDT circular No. 204, 1976 it has been
clarified that object of this provision is to check inflation of expenditure by film producers and
enable the tax authorities to get information about the recipients for necessary action in their
cases.

Conclusion
After perusing the above sections, what becomes clear is that although several Apex court
judgments have helped cleared certain ambiguous but otherwise important areas of taxation
connected with the media, there are certain lacunae that need to be addressed by the legislature
urgently.
Presently, myriad taxes in various forms and diverse statutory compliances have plagued the
growth of the Media and Entertainment (M&E) industry. Those associated with the industry
hopes for simplification of the "onerous" tax laws and resolution of some of the long standing tax
controversies impacting this sector and a strong sentiment seems to be building up in favour of
the same. Onerous taxes on the media would not only lead to extra expenditure that could make
it unfavourable with the players in the sector but would invariably be passed on to the consumer
to whom information would be become more expensive and difficult to obtain. This result would
only be counter-productive to the rights of free speech and information envisaged under Article
19 (1) (a) and must be avoided in the best interests of all concerned.

References :
Website
www.indiankanoon.com
www.westlaw.com
www.wikipedia.com

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