The High Court of Delhi allowed a writ petition as Section 2(m) of Delhi Entertainment and Betting Tax Act, 1966 does not contain a mechanism for assessing and collecting tax on sponsorship.

The Delhi High Court allowed the Writ Petition as Section 2(m) of Delhi Entertainment and Betting Tax Act, 1966 did not contain a mechanism for assessing and collecting entertainment tax on sponsorship. The petitioner, the Fashion Design Council of India ( FCDI ), was established to promote the growth and development of the fashion industry regarding the manufacture, design, marketing, and distribution of accessories, etc. It has been registered under the Societies Registration Act, 1860. FCDI conducts and finances shows through sponsorships, and they are usually conducted without issuing tickets. FDCI, the invites handed out to the sponsors are not correlated to the sponsorship amount they provide. Ready to Grow? Choose a Course That Fits Your Goals! In this case, there are twenty-two writ petitions in total, and there are five petitioners, and they are the Fashion Design Council of India, GMR Sports Private Limited, the Board of Control for Cricket in India, Den Soccer Private Limited, and Pro Sportify Private Limited. There are four  issues raised by the writ petitioners, and the main issue includes whether the Delhi Entertainment and Betting Tax Act, 1966 contains a mechanism for assessment and collection of tax on such sponsorships. Another major issue raised was whether the pre-amended Section 2 (m) of the Delhi Entertainment and Betting Tax Act, 1966, cover  sponsorship of fashion shows and other related events like sports events to extend the incidence of tax under Section 6 of the Delhi Entertainment and Betting Tax Act, 1966. Ready to Grow? Choose a Course That Fits Your Goals! The high court was of the opinion that Section 2(m) of the Entertainment Act aims to increase the scope of taxation by including any and every kind of payment, irrespective of the purpose as long as it is “connected with an entertainment” event and that such payment forms a “condition of attending or continuing to attend” the said event. The bench was also of the view that in a taxing legislation, there should be a link between the taxable event and the measure of tax. But by looking at the amendment, in this case, the legislature had no intention to tax sponsorship amounts. The Court further added that the writ petitions should be allowed on the sole ground that the Legislature did not carry out necessary amendments to bring sponsorship amounts within the remit of the Entertainment Tax Act.  Ready to Grow? Choose a Course That Fits Your Goals! The single bench consisting of Justice Rajiv Shakdher held that the unamended Section 2(m) of the Entertainment Tax Act does not include sponsorship of fashion shows and sporting events, making it taxable under Section 6.   The bench thus held that the Entertainment Tax Act does not contain a mechanism for assessing and collecting tax on sponsorships due to the absence of a specific charging provision.