Tax/Taxation – Scheme to boost tourism sector, granted tax holiday for 5-10 years to entities (including multi-cinema theatre complexes or multiplexes) in respect of exemption from sales tax, turnover tax, electricity duty, luxury tax, and entertainment tax upto 100% capital investment – No discerning method or mechanism of calculating exemption limits mentioned in scheme – Assessee contended that it was based on notional exercise, revenue contended that element of tax had to be added to actual amount collected – Held: High Court had rightly considered the issue and developed a reasonable workable method of notional calculation of quantified limit – Since assessee was not collecting any amounts as tax, no question of addition of further amount – Notional determination based on actual ticket collection for relevant period to be used to determine whether specified ceiling limit in scheme for exemption was achieved.
Tax/Taxation – Tax exemption notification unambiguous w.r.t grant of exemption, and the terms of such relief (in terms of time, and monetary limits), but clear gap in the manner how tax exemption limits can be discerned, which if not construed appropriately, would defeat the intention of the notification – Interpretation of – Discussed.
Doctrines/Principles – Doctrine of ‘substantial compliance’ – Discussed.
Interpretation of Statutes – Rules of procedure are meant to facilitate and not supplant justice.
Dismissing the appeal, the Court
HELD: 1.1 Neither the package nor the scheme (as embodied in the exemption notification) indicated the mechanism for calculating how the exemption limits (100% capital investment) was calculable. The rate of tax at the relevant time was 50% of the entrance or ticket value. The assessee contended that calculation of total exemption was to be done based on a notional exercise, while the state’s contention was that since the assessee had the benefit of tax exemption, the element of tax had to be added to the actual amount collected. [Para 6-7 and 9][119-C; 120-G-H]
1.2 The High Court held that as multiplexes which availed of the exemption had in fact not collected amounts as tax, there was no question of addition of any further amount but rather that to reckon whether the ceiling limit in the scheme for exemption (100% capital investment) was achieved, was to be done by notional determination based on actual ticket collection for the relevant period. [Para 10][122-B-C]
1.3 It is evident from the terms of the Scheme and exemption notification that the exemption is fixed to limits i.e.
(1) a time limit and (2) quantification. The latter could be subject to the first i.e., in the event, the amount reached the exemption limit were achieved, before the expiry of the period in question (5-10 years), no further exemption could be claimed. The state, however, omitted to provide any mechanism to determine how the exemption limits could be worked out for the purpose of notional calculation of the quantified limit. This meant that a reasonable workable method of calculation had to be applied. [Para 14][125-B-D]
1.4 The state’s contention is founded on the assumption that the amount collected during the exemption period by the multiplex owners, also included in element of tax. This assumption is flawed because there could have been no collection which amounted to tax. Furthermore, multiplex/theatre-owners were under an obligation to file monthly returns in terms of the enactment. This would have taken care of any allegation of abuse. The state’s additional argument was that since the element of tax was notionally included in the collections – by multiplexes, during the exempted period, a further amount equivalent to the tax collectable had to be added. High Court rightly held that this contention was illogical and unreasonable. [Para 15-16][125-DF]
1.5 There is concededly, a gap in the manner how tax exemption limits can be discerned. The law is now settled (by two constitution bench decisions) that exemption notifications have to be interpreted strictly, and against assessees in case of ambiguity. [Para 16][125-F-G]
Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal [2010] 13 SCR 820: (2011) 1 SCC 236; Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company & Ors. [2018] 7 SCR 1191:
(2018) 9 SCC 1 – followed.
1.6 In the present case, the situation is peculiar, because the grant of exemption, and the terms of such relief (in terms of time, and monetary limits) are unambiguous. However, the procedure for calculation of the monetary limit is not prescribed at all. Therefore, the present case is not one of ambiguity, but instead, one of a clear gap, which if not construed appropriately, would defeat the intention of the notification. It has often been held – in the context of rules of procedures that they are meant to facilitate, not supplant justice and the court must lean towards substantial justice when faced with a complaint of procedural law. [Para 17-20][125-D-E; 127-D-E]
Sangram Singh v. Election Tribunal, Kotah & Anr. [1955] 2 SCR 1; Ghanshyam Dass v. Dominion of India [1984] 3 SCR 229: (1984) 3 SCC 64; Sugandhi v. P. Rajkumar (2020) 10 SCC 706 – relied on.
1.7 A reasonable method of calculating benefit of tax exemption, for the purpose of considering whether the 100% limit equivalent to capital expenditure was reached or not is to notionally determine the tax amounts payable during the relevant period, when the multiplexes enjoyed tax exemption. This is possible, having regard to the returns filed by them during the time when they sought and were granted exemption. The outer limit (100% investment) is a discernible amount, which the units would be able to furnish, with appropriate proof in their books of accounts, and valuations furnished by them. Clearly enunciating this principle and applying to the facts of this case, the High Court followed a reasonable method which cannot be faulted. [Para 22][128-C-E]
Devi Multiplex & Anr. v. State Of Gujarat & Ors. (2015)
9 SCC 132 : [2015] 6 SCR 1 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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